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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 from their contributions and interest earned. This includes all Tier 3 and 4 members who have made or are making 3% required contributions, and a small number of Tier 1 and 2 members who have an Annuity Savings Fund (ASF). Members may borrow only from the funds they contributed, 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.

Under Tiers 3 and 4, you must have a minimum of $1,334 in your member contributions fund and you may borrow once per calendar year (Jan. 1-Dec. 31).

Under Tiers 1 and 2, you must have a minimum of $400 in your ASF and you 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 from 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, due to IRS regulations, you could face severe tax consequences if you have an outstanding loan and are considering borrowing additional funds.

An IRS regulation that took effect Jan. 1, 2004, requires the amount of a combined loan be added to the remaining balance of the original loan to test for taxable distributions. Therefore, a combined loan issued now will likely be subject to significantly higher federal taxes than combined loans issued prior to the IRS regulation.

This change has prompted NYSTRS to ensure members are fully informed before a loan is issued. A taxable combined loan will not be issued until you sign and return to NYSTRS a System-issued loan estimate that includes the taxable amount along with your withholding election.

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How Much You Can Borrow

Generally, you can borrow up to 75% of your contributions and accrued interest. 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 as follows: 7% for Tiers 3 and 4; 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 and 4 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 contact 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 submit a signed request for a direct (coupon) method along with your application or 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

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 this members-only link.
Or, to request a loan application, or inquire about other loan-related information, call (800) 348-7298, Ext. 6080.
Currently, it takes approximately two to three weeks 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 in your Benefit Profile, which is mailed to you each school year. It shows your current NYSTRS loan balance and the maximum amount you are eligible to borrow.
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 or 4 member and don't repay your loan, your retirement benefit will be reduced. However, you would have the funds available to you to invest privately or for other purposes.

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 or 4), you cannot borrow again until the full balance is repaid by certified check or money order.
Failure to repay a loan will:

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

For Tier 3 and 4 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

E-mail
communit@nystrs.state.ny.us

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

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