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It depends. The 2012 interest rate is 2.99%, which is the same as was offered in 2008. In 2009, the rate jumped to around 5%. Prior to 2008 the rate was as low as 1-2%. The loan is usually offered at $25,000, which is a great chunk of change to get you started in life.
The USAA Career Starter loan program is offered to cadets and midshipmen commissioning through Army, Air Force, and Navy/Marines ROTC (Reserve Officer Training Corps) or through OCS/OTS (Officer Candidate/Training School). The terms and conditions change every year, so make sure you call or check with USAA for the most current information.
In 2012, you may apply for the loan within the 12 months prior to commissioning if you are a ROTC cadet/midshipmen, or 4 months prior if you are an OTS/OCS attendee. If you already commissioned, you have up to a year from your commissioning date to apply for the loan, which is subject to credit approval. I’ve never heard of anyone being denied. The first payment is deferred until 6 months after you commission, so if your EAD (Extended active duty) orders are delayed a bit you have that safety buffer.
This loan can be a powerful tool to get you started as a brand new officer. If you incurred any debt in college, such as credit card, student loan, or car loans, this can be your ticket to paying off that high interest debt with a low interest, fixed monthly payment loan.
Be careful that you don’t get sucked into a cycle of debt though. This is not a loan that you should take out and then blow on a brand new BMW or Audi (“Lieutenant mobiles” are all too common in every service). There are no early repayment fees on this loan, so you could take out the full $25,000, immediately pay back $15,000, and then use the $10,000 remaining to pay off credit card bills, get your first PCS started, or anything else you need to do.
Don’t treat this loan as free money though! The monthly payments are $471 for five years ($25,000 at 2.99%)! As a 2nd Lieutenant or Ensign, if you’re not being paid BAH this could be almost a quarter of your take home pay. Only take out this loan if you have a plan for what you’re going to do with it. Trust me when I say that you’re going to miss almost $500 a month for the next five years.
Did I take the loan? I sure did. Find out how I used my USAA cadet loan.
2 FinTech Companies I'm Using to Achieve FI
The best way I know to achieve financial independence is to keep your investments simple, diversified, automatic, and low-cost. Costs eat into your returns like you wouldn't believe! A 1% difference in expense ratios can mean $100,000s lost to fees over a lifetime of investing.
Even if you're a DIY (do-it-yourself) investor like I am, you need to check out Betterment. You can read my full review here, but the bottom line is for only $150 per $100,000 invested (0.15% expense ratio) you get simple, diversified, and automated investing. In addition every account now gets free Tax Loss Harvesting+ features, which should increase returns for the average investor more than the minuscule management fee.
If you're not a DIY investor or are just getting started with investing, then you definitely need to check out Betterment. It's what I recommend to my family and friends who aren't strong investors or don't care to learn about asset allocations, diversification, or rebalancing.
I have investment accounts all over the place. To keep track of all of them in one place I use Personal Capital. It combines all of my accounts, shows me where I may be overpaying in fees, and provides beautiful charts showing my overall asset allocation and performance.
I use Personal Capital to track my Roth and Traditional TSP, Vanguard IRAs, banking accounts, SDP, and my Betterment taxable account, all in one place. It's free, secure and presents me with a one-stop dashboard so I can see all my money on one site.
Read my full review of Personal Capital and see how easy it can be to manage your investments in one place. Trust me, once you try it, you'll love it.
P.S. - If you have over $100,000 of assets and a 401k, you really need to run the Personal Capital 401k Fee Analyzer.