Thread: Loan Repayment

Originally Posted by treshman2000

I recently left the Postal Service due to an injury, I have an outstanding loan of 6,000.00, I have a balance of 18,500.00. Will they deduct this loan and send me the balance? Thanks

No. You have to request to have your TSP account closed.

I guess they will take your monthly loan payment out of your balance.

You probably should give them a call.

Good luck.

I believe that if you close your account you'll be asked to pay back your loan or you will not recieve the matching funds. This means that you may be losing out on $12000 and not just $6000.

M_M

*EDIT*- Here's some more info: http://www.401khelpcenter.com/loans.html

I may not have been correct on losing out on the matching funds but you may have to pay taxes on the full amount.

This from another site:

Warning: Don't Default On Your Loan

This is crucial: if you leave your current employer, have no outstanding plan loans. Whether you find a new position or you are laid off, in most cases your plan loan will come due when employment ends. You will be given a limited amount of time to pay off your loan, and if you cannot repay it will be placed in default. "In default" means your employer will report to the government that you were unable to pay the loan, and the government will then treat the defaulted amount of your loan as a distribution. This most likely will lead to regular taxes on the defaulted amount plus for those under 59 1/2 the ten percent additional federal income tax penalty. Depending on your tax bracket and the tax rate of your state, you could be forced to pay the government as much as half of the defaulted amount. Some people take a cash advance on their credit card to pay off their plan loan when they change jobs, because 18 percent interest is still better than a 50 percent tax liability.