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Borrowing From Your NYSTRS Contributions

PLEASE NOTE: Due to IRS regulations, you could face severe tax consequences if you borrow from your NYSTRS contributions. We urge you to read this information carefully before making your decision.

Eligibility Requirements

Members who have contributed to the Retirement System are eligible to borrow against their contributions and interest earned. This includes Tier 3-6 members who have made mandatory required contributions, and a small number of Tier 1 and 2 members who have an Annuity Savings Fund (ASF). Members may borrow up to 75% of their own contributions but not from employer contributions.

You must have at least one year of service credit and you may not have an existing loan more than two months' delinquent or in default.

Tier 3-6 members must have a minimum of $1,334 in their member contributions fund and may borrow once per calendar year (Jan. 1-Dec. 31). Loans are made against your contributions, but you will continue to earn 5% interest on all contributions you made to NYSTRS. However, failure to fully repay a loan from NYSTRS will negatively impact your pension at retirement.

Tier 1 and 2 members must have a minimum of $400 in their ASF and may borrow once between Jan. 1 and June 30, and once between July 1 and Dec. 31.

You can find personal loan information in your annual Benefit Profile.

Important Considerations

If you're considering borrowing against your contributions, you should carefully weigh your options because a loan from NYSTRS may not be your best choice. The interest rate attached to a NYSTRS loan may be higher than that available through a private lender.

Additionally, IRS regulations require that the amount of a combined loan be added to the remaining balance of the original loan to test for taxable distributions. Therefore, members with an unpaid balance on a current NYSTRS loan who wish to borrow additional funds are cautioned that federal tax rules impose severe tax consequences on a new, combined loan.

This change has prompted NYSTRS to ensure members are fully informed before taking a loan. A taxable combined loan will not be issued until you affirm to NYSTRS that you are aware your loan estimate includes the taxable amount, along with your withholding election.

Furthermore, the IRS requires you to disclose to NYSTRS if you have an existing loan with a deferred compensation (457) or tax sheltered annuity (403(b)) plan. The System is required to consider these loan balances when calculating the taxability of a loan. Note that this may result in significant tax consequences on your loan from NYSTRS.

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How Much You Can Borrow

Generally, you can borrow up to 75% of the contributions and accrued interest in your member contributions fund. If you have an existing loan and request a new one, the combined total loan cannot exceed 75% of your fund.

What It Costs

By law, the fixed interest rates on loans are: 7% for Tiers 3-6; and, 5% for Tiers 1 and 2.

There is a $30 service charge added to your balance for each loan given.

A life insurance premium is charged at an annual rate of 0.10%. This means a loan is fully insured after 30 days (unless it is in default). If you die 31 days after the loan was issued, it is considered repaid, and will not affect the death benefit paid to your beneficiary(ies).

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How It's Repaid

Tier 3-6 loans must be repaid in five years or less. Loan terms of greater than five years are available to Tier 1 and 2 members. Call NYSTRS at (800) 348-7298, Ext. 6080 for further details.

Minimum monthly payments are either 2% of your current contract salary, divided by 10, or the amount needed to repay the loan within five years, whichever of the two amounts is greater.

Repayment is by payroll deduction unless you are not currently employed as a teacher by a NYS public school outside of New York City.

Repayment Example for a Tier 4 Member With a Contract Salary of $45,000:
A $5,000 loan to be paid back over five years would have a minimum monthly payment of $124.

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How To Apply

As explained in the Important Considerations above, you must disclose to NYSTRS if you have an existing loan with a deferred compensation (457) or tax sheltered annuity (403(b)) plan. The IRS requires NYSTRS to consider these loan balances when calculating the taxability of a loan. If you are unsure of the status of your loan from your 457 or 403(b) plan, refer to your loan statement or contact the financial institution from which you borrowed.

If you are a MyNYSTRS account holder, you can obtain a loan estimate online. Performing calculations online allows you to try numerous estimates. You may minimize possible tax consequences by reducing the amount of your request, increasing payment amounts and/or condensing the payment schedule. You can also apply for a loan electronically through your MyNYSTRS account.
Or, to request a loan application or inquire about other loan-related information, call (800) 348-7298, Ext. 6080.
Currently, it takes approximately five business days to process a valid loan application. The payment will be mailed once the processing is complete.
Your employer will make the required deductions from your payroll checks during the months you are working.
If you have any questions about a new or existing loan, call the System at (800) 348-7298, Ext. 6080.

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More Loan Facts

If you are using the direct (coupon) repayment method, you are required to make the first payment one month from the loan's issue date and each month thereafter during the school year (September through June). Payments are not due in July and August.
You can track your existing loan online with your MyNYSTRS account, or in your Benefit Profile, which is mailed to you annually.
There is no pre-payment penalty if you repay your loan in full before the end of its term.

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If a Loan is Not Repaid

If you have an outstanding loan, you should contact the System prior to retirement to discuss your situation. If you are a Tier 3-6 member and don't repay your loan, your retirement benefit will be reduced.

Other important information:

Once a loan is four months past due, has been deducted from the Annuity Savings Fund (Tier 1 or 2), or is in a non-performing status (Tier 3-6), you cannot borrow again until the full balance is repaid by certified check or money order.
Interest penalties are assessed annually on unpaid loans and continue to accrue until either the loan is repaid in full or membership is withdrawn.
Failure to repay a loan will:

For Tier 1 and 2 members, reduce the return from your Annuity Savings Fund.

For Tier 3-6 members, significantly reduce your pension.

A portion of the unpaid balance may become subject to federal tax.

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Contact NYSTRS

Hotline (Recorded Messages & Form Requests)
(800) 782-0289

Loan Inquiries/Questions
(800) 348-7298, Ext. 6080

Email
communit@nystrs.org

New York State Teachers' Retirement System
10 Corporate Woods Drive
Albany, NY 12211-2395

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