Federal employees can now roll unpaid loan interest into their principal

Federal employees who take loans from their retirement savings will find it easier to repay them if they fall behind. The agency will now combine any unpaid interest with the original loan amount, rather than requiring it to be paid off separately first.

Previously, if a federal employee missed payments on a loan from their Thrift Savings Plan, they had to pay all accrued interest before they could resume paying down the principal. This often made it harder to catch up, leading to defaults. This change makes it easier for employees to get back on track with their loan payments, reducing the chance of defaulting and facing tax consequences.