How Does the Loan Work?

Colorado2026

Colorado2026

USCGA ‘26 Parent
Joined
Mar 18, 2022
Messages
118
I am a bit confused about the loan that is received for new cadets for things like uniforms and laptops. Could somebody give me a quick synopsis of how that works?
 
The ICA (Initial Clothing Allowance) loan is used to pay for uniforms/equipment that is issued to new cadets. It is paid back in regular installments from the cadet's pay. You can also used scholarships and 529 plans to pay down/off your ICA loan balance so long as the funds are not specifically earmarked for tuition/room & board. Naturally, you can also use private funds to pay down/off the ICA loan if you or your family has the money available.
 
The ICA loan amount isn't given to you in cash or deposited to an account. Instead, they sum up the value of all of your initial uniforms, the laptop all new cadets are issued, your books during 4/c year, and all other items issued during swab summer and your first semester. So each cadet's loan amount may be slightly different. Usually it is compiled in two lump sums...one after most of the items are issued in swab summer, and then a second portion sometime during the first semester. A portion of money is then taken out of your monthly stipend to pay towards the loan balance. It is an interest free loan. I do not know how they calculate the amount that is paid back each month.

You or your parents can choose to apply scholarships or other funds directly to the loan to pay it off sooner.
You can not choose to add additional items to the loan. For example, all books after the first semester and all uniform items after the first semester must be paid for directly.
 
I can confirm that as of yesterday my 2/c is still paying off that loan each month (should be done in May). Chose not to use $ in hand to pay it outright in 4/c year, regrets it now. Pay it up front if you are able. That said, they survived but does miss the extra in the paycheck.
 
A few years ago the ICA loan was around $8500 and covered laptop and clothing issue, but you had to buy your own monitor and printer. I think now the monitor is included as well. There are two big chunks of purchase and a few smaller ones over your time at USCGA.

Things required for purchase in the 1/c year like the dinner dress whites and the saber are not included. I think the saber is about $450 with the belt, etc.

The ICA loan is structured to be paid in full by the end of 2/c year, that determines the payment amounts. This is done for a couple reasons. First, by regulation, cadets cannot take out loans without permission and the USCG wants cadets to only have one loan at a time. At the end of 2/c year cadets will be eligible for the optional USAA/Navy Fed starter personal loan (36K at 0.75% this year), other wise known as the cadet car loan, once permission is granted from command to get the loan. By having the ICA uniform loan paid in full by end of 2/c year, it frees the cadets up financially to get the USAA/Navy fed starter loan if they want. This lets them buy a car or whatever 1/c year. Hope this makes sense.

Textbooks are not funded from the loan (but this could have changed), the cadet must buy them 4/c year from the bookstore and after 4/c year can buy the books from anywhere (amazon) including from upperclassman that need gas money.

There is a area on in Chase Hall called the "Swap Shop" where cadets who drop out etc, turn in their uniforms and they are re-sold at a steep discount to cadets in need. Basically a used uniform shop. After Swab summer, ask about the Swap Shop if you need a pair of pants, etc. for a few bucks you will find a deal. I think Golf company runs the shop.

It takes a few pay periods, but listed on the bottom of each pay statement is the ICA loan balance, how much is being taken out with this check, etc. so you can keep track. Cadets are paid twice a month.

I think USCGA is in the process of changing ODU (uniform) designs with the rest of the USCG so there could be some partial issue of uniforms now and more after the updated uniforms come on line.

As for 529s, it is a complex tax area and I have posted about it on this forum, search 529 for the info. Recommend you get CPA advice prior to deploying 529 funds to the academy in lieu of the loan.
 
Do you have a link to that post, or remember what the title of the chat was? I remember reading it but can't find it now and the forum won't search for "529" or "tax."
 
Just wanted to make a pitch for Cadet to open a Roth IRA. Even if they did not work Senior year of HS, they will earn military wages for 6 months in the 2022 tax year, making them eligible to contribute to a Roth up to the limit of their W-2 earnings not to exceed $6,000.

Cadet pay is = 35% of 0-1 under 2 years (military pay chart). For 2022 = $1,216.95 monthly (paid out in two instalments of $608 on the 15th and the 30th each month). Your first check could be late due to in-processing, but it will arrive.

Cadets expected W-2 wage for 2022 = 6 months x $1,216 = $7,301.

Frankly, the first six months they do not need much spending money, a few off base weekend trips to Target and using the on base cadet store for supplies and text books are the main costs. Parents usually pay for the plane ticket home at Christmas. (Incidentally, cadets will be paid COMRATS on official leave, ie. Thanksgiving and Christmas. This is nontaxed food payments of about $12 a day, because they are soldiers and no mess hall is available at home. :))

The ICA loan payment will be at least $200 per check once it starts. The Academy also requires various allotments of around $65 total per check for academy programs etc. Of course there is Fed Tax, FICA etc.

The Cadet can contribute to a 2022 Roth IRA as late as April 10th of 2023, so you can wait and see how the budget goes and take any money saved and start a Roth after Christmas when you do your taxes.

Google Roth IRA if you want to know details, but in a nutshell, if kept for at least 5 years, the contributions and earnings are never taxed and you can choose any stock or mutual fund investment that you want.

The Federal 401k called the Thrift Savings Plan (TSP) is a great program, but only becomes available to Cadets after they graduate and are commissioned. So the Roth IRA is the best choice for the 4 cadet years. If you can't contribute the full 6k that's ok, even a few hundred bucks each year will start the growth cycle and set you up for future wealth.

Insurance info is here:
https://www.serviceacademyforums.com/index.php?threads/your-accepted-what-now.85572/post-890441
 
Haveaniceday said:
Just wanted to make a pitch for Cadet to open a Roth IRA. Even if they did not work Senior year of HS, they will earn military wages for 6 months in the 2022 tax year, making them eligible to contribute to a Roth up to the limit of their W-2 earnings not to exceed $6,000.

Cadet pay is = 35% of 0-1 under 2 years (military pay chart). For 2022 = $1,216.95 monthly (paid out in two instalments of $608 on the 15th and the 30th each month). Your first check could be late due to in-processing, but it will arrive.

Cadets expected W-2 wage for 2022 = 6 months x $1,216 = $7,301.

Frankly, the first six months they do not need much spending money, a few off base weekend trips to Target and using the on base cadet store for supplies and text books are the main costs. Parents usually pay for the plane ticket home at Christmas. (Incidentally, cadets will be paid COMRATS on official leave, ie. Thanksgiving and Christmas. This is nontaxed food payments of about $12 a day, because they are soldiers and no mess hall is available at home. :))

The ICA loan payment will be at least $200 per check once it starts. The Academy also requires various allotments of around $65 total per check for academy programs etc. Of course there is Fed Tax, FICA etc.

The Cadet can contribute to a 2022 Roth IRA as late as April 10th of 2023, so you can wait and see how the budget goes and take any money saved and start a Roth after Christmas when you do your taxes.

Google Roth IRA if you want to know details, but in a nutshell, if kept for at least 5 years, the contributions and earnings are never taxed and you can choose any stock or mutual fund investment that you want.

The Federal 401k called the Thrift Savings Plan (TSP) is a great program, but only becomes available to Cadets after they graduate and are commissioned. So the Roth IRA is the best choice for the 4 cadet years. If you can't contribute the full 6k that's ok, even a few hundred bucks each year will start the growth cycle and set you up for future wealth.

Insurance info is here:
https://www.serviceacademyforums.com/index.php?threads/your-accepted-what-now.85572/post-890441
Click to expand...
This is fantastic advice. DS (Plebe at USNA) opened his Roth this year and funded 2021 and 2022 using savings and graduation $ as he did not need "stuff" as gifts. The USNA has similar loan structure for the initial kit of clothing/equipment. Since the loan is 0% interest I quickly taught him about the time value of money, payoff monthly, live on his meager take home pay and use his savings to fund the Roth.
 
This thread is invaluable to me. Thank you everyone for the great information!
 
VAcadetmom said:
We paid off my cadet's loan in January of 4C year. Had it sent directly from the 529. It was around $8700. He used his extra income to start investing towards retirement.
Click to expand...
That was exactly what we did. The agreement was whatever amount he was going to pay towards his loan monthly, he must invest that instead. Now I get to hear him whine about the market.....
 
ProudMom7 said:
The ICA loan amount isn't given to you in cash or deposited to an account. Instead, they sum up the value of all of your initial uniforms, the laptop all new cadets are issued, your books during 4/c year, and all other items issued during swab summer and your first semester. So each cadet's loan amount may be slightly different. Usually it is compiled in two lump sums...one after most of the items are issued in swab summer, and then a second portion sometime during the first semester. A portion of money is then taken out of your monthly stipend to pay towards the loan balance. It is an interest free loan. I do not know how they calculate the amount that is paid back each month.

You or your parents can choose to apply scholarships or other funds directly to the loan to pay it off sooner.
You can not choose to add additional items to the loan. For example, all books after the first semester and all uniform items after the first semester must be paid for directly.
Click to expand...
any estimate of total cost?
 
smussluke033 said:
any estimate of total cost?
Click to expand...
For class of 2025, I believe it was somewhere in the $11K - $12K range. That was all-in; my son did not have college savings or outside scholarships to buy down the loan. No idea what it might have been for class of 2026 and as others have mentioned, it can vary based on a number of factors.
 
T-37IP said:
That was exactly what we did. The agreement was whatever amount he was going to pay towards his loan monthly, he must invest that instead. Now I get to hear him whine about the market.....
Click to expand...
What is the benefit of paying off the loan earlier, unless you have use it or lose it scholarship type funds?

I get having them invest the money they are no longer paying back the loan with. But, I would assume the same thing could occur with the funds used to pay it off immediately which should generate a better return. 8k invested on day 1 vs 200/month for 40 months, as example.
 
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