TRS loan rates decreasing
Effective July 1, the fixed interest rate on loans issued by New York State Teachers' Retirement System to eligible Tier 3–6 members will decline by .5 percent to 6.5 percent. The reduction corresponds with the retirement board's decision to lower the assumed rate of return on investments from 8 percent to 7.5 percent.
The fixed interest rate for Tier 1–2 members is set in statute and will remain 5 percent. Additionally, a life insurance premium of .10 percent is charged annually, guaranteeing the loan is fully insured after 30 days. (This guarantee is forfeited should the loan go into default.)
Keep in mind, for those members attempting to use the online local calculator available at MYNYSTRS prior to June 28, loan payment calculations will be based on the rate currently in effect (i.e., the higher rate). Loans calculated on or after June 28 will use the rate effective July 1 (i.e., the lower rate).
A loan application received on or before June 27 will be subject to the higher rate of interest for the length of the loan. Applications received on June 28 will be processed and dated July 1, meaning the lower interest rate will be applied. TRS supplied the following example: For a member taking out a $10,000 loan with a five-year repayment schedule, the rate reduction would save $150 over the course of the loan using the new interest rate.
For more information on loans from NYSTRS and to understand the potential tax consequences of taking a loan, see the publication Borrowing From Your NYSTRS Contributions.