Q: I have been contributing 17 percent into the TSP, and have two loans against the fund. It appears that the loans repayments are pre-tax just as the the contributions are. Is there a disadvantage to reducing the contribution to 5 percent (to maintain the matching from my employer), and re-amortizing one loan with that 12 percent to pay it off faster?
A: Your premise is incorrect. Your TSP loan payments are not tax-deductible, that is, they are made with post-tax dollars. Your loan gave you spendable, after-tax dollars, and it must be repaid with spendable, after-tax dollars.
