The Internal Revenue Service (IRS) regulations allow the TSP to suspend loan payments if you are in an approved nonpay status and you have provided the proper documentation to the TSP. Upon return to pay status, your payroll-deducted loan payments must resume. Your loan will be reamortized automatically when your agency or service notifies the TSP that you have returned to pay status.

For more information, please refer to the TSP Fact Sheet, Effect of Nonpay Status on Your TSP Account.


Suspension of Loan Payments

If you are in nonpay status due to active military service:

  • The suspension of loan payments may continue for the duration of military service.
  • You cannot repay your civilian TSP loan by making loan deductions from your uniformed services pay.
  • Interest on your loan accrues while your payments are suspended.
  • If you want to continue making loan payments while in nonpay status, you can do so by sending a personal check or money order to the TSP. Use Form TSP-26, Loan Payment Coupon when sending in your payments. Your payments will be taken into account when the loan is reamortized upon your return to pay status.

If you are in nonpay status for reasons other than active military service:

  • The maximum period that the TSP can suspend loan payments is one year.
  • If your nonpay period exceeds one year, your loan will be automatically reamortized and you must make payments from your personal funds to avoid being in default.
  • Interest on your loan accrues while your payments are suspended.
  • If you want to continue making loan payments while in nonpay status, you can do so by sending a personal check or money order to the TSP. Use Form TSP-26, Loan Payment Coupon when sending in your payments. Your payments will be taken into account when the loan is reamortized upon your return to pay status.

Notifying the TSP of Your Nonpay Status

When you begin your period of nonpay status, you or your agency must submit one of the following forms of documentation to the TSP:

  • Form TSP-41, Notification to TSP of Nonpay Status; or
  • Form SF-50, Notification of Personnel Action; or
  • A letter on agency or service letterhead, signed by an appropriate agency official or your commander or adjutant, that contains your name, date of birth, and Social Security number; the beginning date of the nonpay status; and the signature and title of the agency or service representative providing the information; or
  • A copy of your military orders.

Returning from Nonpay Status

When you return from nonpay status, you must notify the TSP of your date of return. You can use any type of documentation described in the above section. Notifying the TSP of Your Nonpay Status. Once your agency notifies the TSP of your return, your loan will be reamortized to place it in good standing.

Note: If your agency reports you as separated from civilian service to perform military service, you will be required to repay your loan in full within 90 days. If you don't, the outstanding loan balance and any unpaid interest will be reported to the IRS as a taxable distribution.

Leaving Federal Service

When you leave Federal service, you must repay your loan in full within 90 days after your separation is reported to the TSP. Your repayment must include any accrued interest on the outstanding principal balance.

If you do not repay your loan in full, a taxable distribution of the outstanding balance of your loan will be declared. You may be able to roll the amount of the distribution into an IRA or eligible employer plan within 60 days of it being declared to avoid taxes and penalties.

If any part of your loan is associated with tax-exempt contributions or Roth contributions, those contributions will not be subject to tax; however, Roth earnings that are not qualified will be subject to tax.

You will not be able to withdraw your TSP account until your loan is closed by either payment in full or taxable distribution.

For more information about loan repayments after leaving Federal service, refer to the TSP Tax Notice, Important Tax Information about Payments from Your TSP Account.