The High ThreeThe High ThreeThe interest on a TSP loan goes back into your own account, so the real cost is what the borrowed money doesn't earn while it's out of the market. See your payment, the missed gains, and what cutting contributions or leaving early would cost.
TSP limits: $1,000 minimum, $50,000 maximum, and no more than your own contributions and earnings (agency money can't be borrowed). An existing loan lowers the max.
Shorter terms mean less time out of the market.
The G Fund rate. tsp.gov showed 4.875% on Oct 17, 2026. It's fixed for the life of the loan.
Not a forecast. Real returns swing year to year.
Missed gains keep compounding after payoff.
Default: 2026 GS-12 step 5, Rest of U.S.
FERS: 5% gets the full 4% match plus the automatic 1%.
Average for accounts assessed interest, Fed G.19, Aug 2026. Blank to skip.
| Assumed return | Missed gains at payoff | By retirement |
|---|
| Pay the cards | TSP loan |
|---|
The catch is behavior, not math: a TSP loan empties the cards but doesn't close them. If the balances creep back up, you have both.
After you separate you can keep paying (direct debit, check, or money order) or pay it off. If you don't by the deadline in the TSP's notice, the balance becomes a loan offset, taxed as a distribution. You can avoid the tax by rolling over an equal amount of your own cash into the TSP or an IRA by your tax-filing deadline, including extensions.
| Year | Paid | Interest to you | Balance left | Missed gains | Cost of cut |
|---|
Rules (tsp.gov, TSP booklet Loans 1/2026, 5 CFR 1655; verified Oct 17, 2026): general purpose loans run 1 to 5 years with a $50 fee; primary residence loans run more than 5 and up to 15 years with a $100 fee. You can borrow $1,000 to $50,000, limited to your own contributions and earnings (agency money can't be borrowed) and reduced by any existing loan. The rate is the G Fund rate, fixed for the loan. Payments come out of every biweekly paycheck (26 a year).
Missed gains: we compare the same money left invested at your assumed return with the loan, where each paycheck's payment is reinvested when it's made and the unpaid balance still counts as yours. The difference at payoff then keeps compounding at the same return until retirement. Returns compound smoothly; real returns don't, and in a falling market the loan comes out ahead.
Contribution cut: the contribution % you stop making plus the agency match you lose (100% of the first 3%, 50% of the next 2%; the automatic 1% continues), invested each paycheck for the loan term at your assumed return, then grown to retirement. Salary is held flat.
Leaving early: the unpaid balance at the point you choose is taxed as ordinary income at your rate, plus 10% if you leave before the year you turn 55 (50 or 25 years of service for public safety) and are under 59½.
Credit cards: a card balance equal to what the loan pays out (amount minus fee), paid in level monthly payments over the same term. Interest on both paths is paid with after-tax dollars.