Career Starter Loans for Military Officers from Navy Fed or USAA Military Money Manual Podcast Episode 9

14,542 grads of the Ultimate Military Credit Cards Course already know why
The Platinum Card® from American Express is my #1 recommended card

Military Money Manual has partnered with CardRatings for our coverage of credit card products and may receive a commission from card issuers. Some or all of the cards that appear on this site are from advertisers and may impact how and where card products appear on the site. This site does not include all card companies or all available card offers. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

Listen to The Military Money Manual Podcast on SpotifyApple PodcastsAmazon MusicAudible, YouTube, or Stitcher.

In this episode Jamie and Spencer discuss Navy Federal Career Starter Loan and USAA Career Starter Loan.

  • West Point, Annapolis, or Air Force Academy can get the Navy Federal loan 1.25% up to $32,000 or USAA 0.75% up to $36,000
  • Army, Air Force, Navy, Marine Corps ROTC can get the NFCU or USAA loan at 2.99% up to $25,000
  • Some loan pitfalls to watch out for
  • How to invest your loan to accelerate your path to financial independence
  • How to use the loan to get into military travel hacking early and save money on travel. Learn more in my free course at
  • How you can use the loan to pay off auto or student loans
  • How you can pay the loan off early
  • Debt habits to avoid

Military Money Manual Podcast Episode 9 Transcript

[00:00:00] Jaimie: Welcome to another episode of the Military Money Manual Podcast. I'm Jamie. 

[00:00:06] Spencer: And I'm Spencer.

[00:00:07] Jaimie: And today we were going to talk about the military career starter loans. Before we dive in detail, just remember that loans like this can be a very good tool to start off your career and launch your financial journey into adulthood. But it can also be a little bit dangerous if you are not careful about it. So, Spencer, as we look at something like a career starter loan, how does this play into our overall journey of financial independence and where can people kinda learn more about what they should be doing as they start off their financial journey in adulthood with their first big paying real job after college? 

[00:00:41] Spencer: I actually talk about the Career Starter Loan, in detail in my new book, “The Military Money Manual Practical Guide to Financial Freedom,” which is coming out in October, November timeframe, 2021. You can pre-order it right now on my website,, and as soon as it gets back from the printer, I'll mail you a copy of it. And, we have a promo code set up “PODCAST” if you type in the, promo code PODCAST on, you'll get a special discount on the book, and I'm really excited, about the book, it's been a long time coming. I've been really working on it for four or five years now, and I'm really excited to share it with the world. It's been through a lot of rounds of editing. Jamie, you were a beta reader and thank you so much for that. I think a lot of your comments are integrating the book and I think you are going to see some lines that I literally just stole right from you. I'm really excited about the book and really excited about today's podcast. 

So, the Career starter loan is available from a couple military friendly banks. One of them is Navy Federal, Credit Union, or NFCU, and the other one is USAA. And these are offered to commissions or soon to be commissions from the Air Force Academy, West Point, Annapolis, Coast Guard Academy, and the Army, Navy, and Air Force ROTC programs. And, officer training school OTS or Officer Cadet School OCS depending on your branch and flavor. I know for myself personally, I took the USAA loan. Did you take any of the loans, Jamie?

[00:02:18] Jaimie: Actually both my wife and I took the USAA Career starter loan before we commissioned. 

[00:02:24] Spencer: And your wife was active duty, right? 

[00:02:26] Jaimie: Yep. She was on active duty, as well. She's out now. But, if anyone is listening to this podcast and they're not in ROTC or at Academy or they have no aspiration of commissioning or they've already been in the military for a while, is there still something they can glean out of this episode is there still some benefit to sticking with us for a little bit? 

[00:02:42] Spencer: I think there's definitely value to be had here, because even if you are a master sergeant or some senior enlisted leader and you are listening to this podcast today- first of all, thank you and welcome.- But one day you might have a young lieutenant that you have to mentor and guide, I think you can get some good information out of this podcast or point them to this podcast to give them some advice on whether they should take the USAA or Navy Fed Career starter loan and how they should employ it and use it on their journey towards financial independence.

[00:03:12] Jaimie: I was just going to say, you mentioned that a lot of these principles are also just going to apply to any kind of ” should I take out debt or not,” discussions, what should I do with my debt or should I take out a loan for this item? I think it's more applicable than just a USAA career starter loan, or Navy federal career kickoff loan. Some of these themes will carry out to other conversations you'll have with people around you or that you are mentoring as well.

[00:03:36] Spencer: I think that a lot of times if someone came up to me and was like, “Hey, I want to borrow $36,000,” I'd be like, Okay, do you need the money? Why are you borrowing this money? And I think a lot of military service members see the loan offered and they think, I have to take it. And slow down, let's think about what you are going to use it for and some of the reasons that you should take it and is it actually a good deal? Before we get into those questions, let's just talk about some of the nitty gritty here. Both for Navy Federal and USAA, both companies will require you to be a member, which I think is free for both of them, and you'll have to join that particular bank. And then you'll have to set up a checking account and have the loan directly deposited into that checking account. And I know for USAA, as long as you have the loan, you have to have your military paycheck directly deposited into USAA or else the interest rate jumps up a lot. And I think that's true for, Navy Federal as well, I didn't take out the Navy federal loan, so I'm a little bit shakier in the details of that one, but no, for USAA, you are locked into the USAA ecosystem for the first couple years of your military life. 

And that's why they offer the loans really. They want new recruits, new service members to be part of their financial ecosystem. In my mind it's a win-win, because the banks that I'm always recommending to other military service members are Pentagon Federal, Navy Federal, USAA, Ally Bank, Schwab Investor Checking, those are the banks that're going to waive or reimburse your ATM fees, no monthly fees. Like I said, your military pay has to be directly deposited into the account in order to maintain the low interest rates. And, do you want to just go over those in detail, the interest rates and the loan values that are available both at Navy Federal and USAA? 

[00:05:23] Jaimie: Both Spencer and I are a decade or so removed from taking out this loan. Make sure you are looking at the Navy Federal and USAA website as you start the process of thinking about a loan and applying to get the most current rates and offers. But, as of now, Navy Federal and they call theirs again, the career kickoff loan for Navy Federal is 1.25% interest rate for academy, cadets or midshipman. And that's up to $32,000 if you are ROTC or OTS or OCS it's 2.99% for up to $25,000 and just a little disclaimer, if we accidentally say OTS or OCS and your branch does the opposite one, just bear with us, we were going to use those terms primarily OTS since we were both Air Force. But if we say OTS, just assume OTS or OCS is the same. Then for USAA, their career starter loan is 0.75% for Academy Cadets and midshipmen up to $36,000. And then for ROTC and OTS, it's 2.99% up to $25,000 so those are the numbers there. And Spencer, when can people apply? Is this something that a freshman in ROTC can do or do you need to be a little closer?

[00:06:33] Spencer: You need to be a little bit closer. If you are at the academies or ROTC and you are contracted, then you can apply as early as a year prior to commissioning. I know for myself, I commissioned in May 2010. And, I opened up the loan in November or October of 2008 or 2009, so it might have been a little bit earlier back in the day, I think it was 18 months for us. And I remember I was so excited to apply for it, get approved, and when the money was deposited within a week into my checking account, I had never seen so much money in my life. I mean, it was $25,000. And at the time, it was mind blowing. I had a plan for it and I had talked to a couple of my financial mentors, my dad, my grandfather about various options of what to do with the money. But one thing I really encourage people to do is before you apply for the loan, before you get the money directly deposited into your account, have a plan and write it out and then stick to that plan. 

I think that way, it's a lot easier to not get in trouble with this loan. But, for the OTS and OCS commissions out there, four months before, and then I think it's up to four months after as well. For after you commission, you can apply for the loan and then one of the nice things is you defer payments for six months after you commission. I know for a lot of commissions these days, you might not report to active duty for up to a year after you graduate from college and actually commission, so that six months referral is really nice there. However, it has to be noted that interest is still accruing, so the loan is going up and, and that can be scary. I know when I took out the loan from the time I took it out to the time I started making payments which was almost 18 months or two years after I took out the loan. It was over $26,000 when I started making payments on it. That's scary when you are staring that down. You mentioned the interest rates earlier and the dollar amounts involved and one of the things we should highlight here is those are really good interest rates, especially for the Academy Cadets, 1.25% for Navy Federal are 0.75% for the USAA career starter alone. Inflation right now is 2% or 3%. So you are essentially getting a very good deal on an interest rate on a loan. But like any loan, you are going to have to pay it back. I think that's just one thing we should highlight there is it is a very good interest rate, it is access to a lot of money at a very young age. And it can set you up for financial success, but you just have to be careful with how you use it.

[00:09:04] Jaimie: A great point I think you had about making sure you have a plan beforehand, because what you don't want to do is see that $25,000 or $36,000 show up in your bank account. I remember being excited when I was in RGC when my book money came in, that was $240 and that was a big deal. So imagine how you are going to feel emotionally when you see $36,000 or $25,000 show up in your account. So don't let that happen to you. I think we all have friends who blew it and then looked back with a lot of regret. I also had a friend- and I'm sure this happens more than we want to admit- but something happens their senior year right before commissioning, they don't end up commissioning on time or at all ever. So, review your options in the terms of if something happens, whether medically or I get in trouble and I don't end up commissioning, your interest rate's going to skyrocket, you might be back charged interest and all this weird things, there is definitely some risk involved in taking the loan, especially if you do it a year in advance, but it could be a good way to build your history as well because they will run a credit check on you. If you have a very low credit score, and you don't really have anything derogatory on there, or you have no history.

The USAA and navy federal system, like you mentioned before, Spencer, they're using this as a marketing tool to get their hooks in you. And so then you take out this loan, you put some money in your checking account, you put some money in a savings account, you use their car insurance, you use their homeowners or renters' insurance. Next thing, you are a lifelong customer of USAA right? This is exactly how it happens. So just know that it could be a good way to build your history. They're probably going to approve, a large majority of cadets and midshipmen, for that purpose if they really want to start developing a relationship with you.

[00:10:47] Spencer: Even if you don't have a credit score, you can still be approved for it. If you are planning to buy a house, right off the get go after commissioning, you might not want that credit check on your credit report to preserve your credit score. But for myself personally, this is one of the oldest accounts on my credit history. It's paid off now, so it's not an open account anymore for me because I paid it off several years ago. But it was an installment payment and it went a long way towards building the healthy credit profile that I have now. So let's move on to some things, cadets or midshipmen can use a loan for. 

[00:11:24] Jaimie: There's so many options and again, we really have to caution you to make sure you have a good plan and don't blow it all. We'll talk a little bit more about what not to do in a second, but some good options or some decent options maybe to consolidate debt or higher interest rate student loan repayments. If you don't have a car, maybe getting a reliable used car that is within your means and isn't too crazy, maybe having a lot of cash or enough cash set aside for your first PCS depending on where you are going. Your first PCS, you are not going to have a single military paycheck at that time, and it's going to take months for your pay to get' correctly settled out, and it's going to take months for your travel voucher to get settled for your first PCS. So you may need $5,000 or $10,000 in your account for your first PCS, so that may be a good plan for you as well. 

[00:12:16] Spencer: One of the things that I did when I first got the loan, at the time, certificates of deposits or CDs were offering, 5% interest rates on five year CDs, so I just looked at the numbers and, I could borrow at 2.99% or essentially 3% and invest at 5%, and I can make 2% risk free. Sounds like a pretty good deal to me. So I actually ended up taking $10,000 of the money and investing it into a CD and then I took $15,000 of the money and I just put it into an S and P 500 index fund. And at my tax bill, brokerage account at Schwab, I just put it in there. One of my everlasting regrets is I sold it two years later, and didn't leave it invested in there because it would probably be worth, probably well over a hundred thousand dollars now, honestly. And instead, what I did was, right when I graduated college, I had some student loans that were 6%, 7%, 8% interest, and I took that $15,000 and I paid them off. Just, like you were saying, Jamie, I consolidated my debt and instead of making payments on all these different student loans. I paid off my highest interest rate student loans with a lowest interest, lower interest rate debt. For me, it was the USAA career starter loan and I dropped my interest rate from 8% down to 3%.

I think that's a really good use, if you are coming out of college with any debt. First of all, especially if you are coming from the academy or you had a full ride scholarship in ROTC I think it's a great opportunity for you to reevaluate why you have debt. If you have some of those debt habits and those debt behaviors where you tend to spend more than you are taking in, then you need, I think it's a great opportunity to reevaluate and think, okay, am I on the path of financial independence? Or is it going to be 5-10 years from now and I'm going to continue to build up debt and this loan is not going to help me get towards my goal of financial independence. I think it's a really good opportunity, if you do have debt coming out of college, especially if you went to the academies. Everything should be paid for and you should have been paid while you were there.

[00:14:14] Jaimie: So you really want to be careful, like I mentioned earlier about wasting it, being frivolous with it, making silly purchases. We like to joke about a lieutenant mobile where you see a lieutenant that makes $35,000 or $40,000 a year having a $50,000 Corvette, their monthly payments on that car are 50% or 75% of their paychecks sometimes. And you'll see that if you go to any pilot training base in the Air Force or anything where there's O1 grade officer training happening, you'll see way too nice of cars for that level. So just really be careful not to waste it. And also remember, no matter what you use it for, you are going to have to pay it back. For example, I think my payment each month was about $450, $460, Spencer's was about $471, that's a large chunk of your paycheck when you are starting out as a second lieutenant or Ensign on active duty. Also, remember, some of you might commission and not be active duty. So if you commission in the guard of reserves out of ROTC which is an option, you are still going to have the same repayment requirements, even if you are not getting active duty orders. So if your monthly payment is 25% of your take home pay for an active duty member, just know that that's going to be a significant burden to pay off if you are not careful.

[00:15:30] Spencer: That was one thing that I struggled with when I first got on active duty was I had student loan payments. I had $60,000 of student loan payments and my monthly payments were over a thousand dollars a month. With a lieutenant paycheck. I think it was a quarter to almost half of my paycheck at one point. And that was before I was getting BAH. Smaller paycheck living in the dorms, while I was training. But it sucks when you get $2,000 or $3,000 a month and a good chunk of it is going to the bank to pay off this loan that you took out. If you use it wisely, then it's good, but if -like Jamie was saying- you buy that Lieutenant Mobile and all of a sudden you've got really high payments on the car and you are still making the payments on the career or, career kickoff loan. It's not a great place to be in.

[00:16:21] Jaimie: I was just looking back at some of our numbers. I mentioned before that my wife and I both took out the loan, $25,000 each, when we were first married and we'll do another episode in the future about debt and getting out of debt. Because Spencer and I both have pretty good stories about that. But my wife and I got married a couple months after my commissioning. $118,728 is what we had in debt when we first got married. And I just said 50% of that was from our USAA career starter loans and at the time we had a wedding to pay for, we had minimal financial support for the wedding. We consolidated a lot of credit card debt that my wife came to the marriage with. So we got rid of a lot of 28% credit cards and brought them down for my loan. It was 0.9% at the time. So, those are some positive ways to use it. So there can be goodness here, but what we really want to watch out for is that it doesn't create habits of debt. Like you mentioned before, Spencer, if you already are a habitual overs spender, if you are not super organized with your finances, it can be another stumbling block or negative thing when you should be building towards financial independence instead.

[00:17:34] Spencer: That being said though, especially if you did four years at the academy and you get that rumspringa, where you get 60 days of leave or whatever before you come on active duty.

[00:17:44] Jaimie: I know we lost like 10% of our academy viewers, by the way, for not knowing what that's called, sorry guys. 

[00:17:48] Spencer: But, if that's your one chance after the academy to go be a normal human being before you go right back into active duty service. Take $5,000 and go to Europe, you won't get a chance to do that again, to be that young and to be that free. For the rest of your military career, you are going to get 30 days of leave a year and a lot of guys struggle to use any of that. I've got guys right now that are working for me that were taking as much leave as they could towards the end of the year because they had use or lose. And when the 120 day extension was approved due to covid. They jumped on it and they were like, great, I don't take anymore leave, and now they've got hundreds of days of leave. Highly encourage you guys, if you are young, if you are listening to this, you are coming out of ROTC, you are coming out of the academy, and, you get a little bit of time before you go active duty. Take it from an old guy, I think it's worth it to at least go and do a bit- and with Covid right now it really sucks- but just do a little bit of traveling, go see the world a little bit before you enter active duty. Don't spend all of it. Don't spend $25,000, please don't spend $25,000 on a vacation, but, taking $2,000, $3,000, $4,000, $5,000 if you have a plan for financial independence in the grand scheme of things, I don't think you are going to miss it. 

But, take the other 20,000 and live off of that and put 60% of your military paycheck for the first year into the Roth TSP. I know a lot of guys that have done that. I see it on Reddit where they commission out of the academy, and they take the loan and essentially just live off the loan while they're investing almost their entire military paycheck into their Roth IRA and their Roth TSP. And then as their income increases, they can decrease the percentage of their pay going into those retirement accounts, and eventually they deplete their loan. But it's a great way to not go into credit card debt on your first PCS, and to really build your retirement savings early in your career. And I think the loan can really be a springboard towards financial independence.

[00:19:44] Jaimie: Speaking of financial independence, if we do have a listener who's, maybe still newer on this journey, maybe this is their first episode they've ever listened to, can you give us a little brief overview of what their goals should look like? What is financial independence and how does a soon to be officer in the military or a new officer in the military view their financial goals? What should that look like? 

[00:20:06] Spencer: I cover a lot of this in my book that we talked about at the beginning of the podcast, the military money manual. And you can pick that up at, promo code PODCAST for a special offer. At this point in your career, if you are listening to this episode and you are in ROTC you are in the academies, I think what you should really start doing at this point is educating yourself and figuring out what is financial independence and what is that going to look like for me? , so for me personally, I'm a numbers guy and I've set my goal to be 25 times my annual expenses. And if you dig into the details of it, the 4% rule. If you have a pile of money invested in a stock and bond portfolio, let's say a million dollars. You can pull $40,000 of that or 4% out every year and live on that for the rest of your life. And with the average annual returns of the stock market, about 7%, 3% for inflation. And if you back test the data, 30, 40, 50, 60 years, we seem to have cracked the code on financial independence.

A safe withdrawal rate from a pile of money is about 4%, and it should last for a long time. So I really encourage- and if that's a new concept to you, just start Googling financial independence, retire early. There's a lot of good information out there about it, the plan that I came up with for financial independence by the age of 40. And that's what I've been investing for, for the last 10 years. So, I really encourage people to take this opportunity. If you are going to take out the career, starter loan, if you are going to take out the Navy federal loan, this can be the start of your journey to financial independence, to having enough invested assets that you can live off the 4% rule and take this opportunity while you are thinking about money to start digging into the details of what it's going to look like for you. 

[00:21:58] Jaimie: One of the big benefits about financial independence, and again, this is a big theme in the book is, having the choice of when to work, how to work, and choose what to do with your time, basically. And in order to do that, you have to free up your money so you can invest it as early as possible. We all know that the earlier you invest money, the more it's going to grow as you reach retirement age. So one of the ways we can free up a little bit of money is by paying off this loan. If you do take it by paying it off early, both you and I paid off our loans early and we paid off my wife's loan early as well. There's no penalty for that with these loans, so if you do take it, we encourage you to do that. And what you do is you take that $471 or whatever your monthly payment is, and then what do they do with that money that they've now freed up when they pay off this loan early?

[00:22:47] Spencer: If you take $471 a month, 12 months is about $5,600, which coincidentally in 2021 is just shy of the $6,000 necessary to max out your Roth IRA. So one thing I'd really encourage people to do is, first of all, max out your Roth IRA while you are paying off the loan. But then as soon as you pay it off, you can just roll those payments into your Roth IRA, max that out into your Roth TSP, max that out or into a taxable brokerage account. One of the tricks that I used to pay off my loan early was rounding up to the nearest a hundred. Like Jamie said, my monthly payment was about $471 and I just rounded up to 500, and that meant I was going to pay it off so many months faster because I was applying that extra $30 payment there. One thing I'll note is, if you do that option on the USAA website, at the time when I was paying it off, you had to select, apply additional payments towards principal. And that will just help chip away at your principle that's accruing interest.

[00:23:47] Jaimie: All right. Quicker episode today, but we were really grateful for everyone, all of you joining us today on the Military Money Manual Podcast. We hope you enjoyed the show and you are enjoying the podcast series overall and learned something today about the career starter loan that USAA and Navy Federal offer, for example. Even if that loan is not for you, you are not commissioning soon or recently that you took away something that you could just maybe give a little bit better advice to someone that you cross paths with. If you are finding the podcast useful, thank you for sticking with us. We were just two guys that became friends after being stationed together twice, and we just started doing this because we were passionate about stuff. Spencer's had his website for a while, and one day we were on vacation or at dinner, I forget where my wife was like, You guys should start a podcast. And we were like, that sounds like a lot of fun. So if you are enjoying it, please leave a five star review and subscribe on whatever platform you are listening on. We just ask that so other service members can find this useful content that we were creating. Because we do think it's beneficial and good stuff to pass on. Remember to check out the and Spencer's free Ultimate military credit card course that's on there. It's no spam, five days. He'll email you the course completely free, and that will get you started on your military travel hacking journey. There's all kinds of good information on the website as well for your financial independence journey.

Also, one last plug for the book, Check out the Military Money Manual, a practical guide for financial freedom at, and used a promo code PODCAST. Spencer, anything else to say for today's episode? 

[00:25:19] Spencer: No, thanks a lot, Jamie and for all of you out there thinking about Navy federal or USAA career starter loans, career kickoff loans, both me and Jamie took them and I would say in retrospect, I'd probably still take it again. I'd make a couple of different decisions. But I think it can be an excellent tool to get you started on your path to financial freedom. But debt always has a hidden danger lurking behind it. So be, be careful with it. [00:25:47] Jaimie: Yep. Thanks for listening, guys. We'll see you next time.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.