With the government shutdown stretching on since October 1, 2025, more federal employees are turning to their Thrift Savings Plan (TSP) accounts for immediate financial relief. According to data recently shared by the Federal Retirement Thrift Investment Board, TSP loans have increased 35% and withdrawals are up 15% compared to normal levels. The surge reflects mounting financial strain on the roughly 800,000 furloughed or unpaid workers who missed their first full paycheck on October 24.
The TSP remains fully operational during the shutdown because it is not funded through congressional appropriations. New loan applications continue to be processed, though reduced staffing may cause some delays. Existing loans also remain in good standing, and workers are not required to make payments until back pay begins.
For many, a TSP general purpose loan has become a temporary financial bridge. These loans have a $50 processing fee, can be used for any reason, require no supporting documentation, and offer repayment terms between one and five years.
Eligible employees can borrow as little as $1,000, and up to the smallest of:
- Your own contributions and earnings on those contributions in the TSP account you’d like to borrow from, not including any outstanding loan balance
- 50% of the portion of your total account balance that is made up of your own contributions and earnings on those contributions (including any outstanding loan balance) or $10,000, whichever is greater, minus any outstanding loan balance
- $50,000 minus your highest outstanding loan balance, if any, during the last 12 months
Because money invested in the TSP’s mutual fund window is not available for borrowing, it is not included in any of these calculations. Interest rates are tied to the G Fund, typically much lower than credit cards or personal loans, and the interest paid goes back into the employee’s own account.
However, there are important trade-offs. Money borrowed via TSP loans stops earning market returns until repaid, potentially creating a long-term dent in retirement savings. And if a worker leaves federal service before paying off the balance, the loan could default and be treated as a taxable distribution, possibly with penalties.
As this shutdown continues with no clear resolution, more federal employees may feel compelled to tap into their retirement funds. Before making a decision, it’s wise to weigh the short-term relief of TSP loans against the long-term impact on retirement income. A Federal Retirement Consultant (FRC®) can help you explore your options and determine the right move for your unique situation.
