[Federal Register: January 11, 2001 (Volume 66, Number 8)]
[Rules and Regulations]
[Page 2789-2793]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ja01-31]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 537
RIN: 3206-AJ12
Repayment of Student Loans
AGENCY: Office of Personnel Management.
ACTION: Final rulemaking.
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SUMMARY: The Office of Personnel Management (OPM) is issuing final
regulations to implement provisions authorizing Federal agencies to
repay federally insured student loans when necessary to recruit or
retain highly qualified professional, technical, or administrative
personnel.
DATES: Effective February 12, 2001.
FOR FURTHER INFORMATION CONTACT: Michael J. Mahoney, (202) 606-0830
(FAX 202-606-0390).
SUPPLEMENTARY INFORMATION: On June 22, 2000, OPM published proposed
regulations to implement provisions of 5 U.S.C. 5379 (Public Law 101-
510). Public Law 101-510 (National Defense Authorization Act for Fiscal
Year 1991), section 1206, amends subchapter VII of 5 U.S.C. chapter 53,
by adding a new section 5379. This section authorizes agencies to
establish a program under which they may agree to repay all or part of
an outstanding federally insured student loan to facilitate the
recruitment or retention of highly qualified professional, technical,
or administrative employees.
The repayment authority is one of several flexibilities made
available to agencies when trying to attract individuals to the Federal
service, or retain highly qualified professional, technical, or
administrative personnel.
The final regulations describe the following: Loans Qualifying for
Repayment, Employees Covered, Payment Limitations, Employee Service
Requirements, and Selection Procedures.
Comments
OPM received comments from 15 agencies, four professional
organizations, one labor union, and 14 individuals.
A few individuals opposed this regulation because they thought it
was an unfair and inappropriate use of taxpayer monies. OPM disagrees
and is moving forward with this regulation because we believe this
incentive will benefit both agencies and employees. One individual
thought this incentive was not fair to those individuals who never took
out a student loan. Another individual thought it was inappropriate for
the Federal government to be repaying loans when no incentive was being
offered to those who managed to pay off their loans or stay out of debt
in the first place. OPM disagrees, noting that Congress established
this authority in statute.
Several agencies noted that non-General Schedule (GS) employees
would be excluded from this incentive. Consequently, they asked that
employees serving on other pay scales (including people serving in
demonstration projects) be included in the final regulation. OPM did
not incorporate this suggestion because the limitation to GS employees
is specified in the authorizing statute.
Six agencies commented that the two level review process was overly
burdensome and redundant. OPM agreed and streamlined this section by
deleting the higher level review and approval portion of this section.
Agencies must establish student loan repayment plans which include
delegation of authority to review and approve offering student loan
repayment benefits, but no further review process is needed.
Two agencies suggested that the final regulations clarify which
employees would be eligible for the student loan repayment incentive.
OPM did not adopt this suggestion because we will address specific
examples in accompanying Questions and Answers guidance.
Three agencies suggested that OPM drop the ``case by case'' review
requirement in the Criteria for Payment section. OPM adopted this
suggestion. Several agencies complained that the ``factors to be
considered'' portion of this section were overly restrictive and
burdensome. OPM adopted this suggestion by deleting these
considerations.
Twelve agencies suggested that OPM clarify the tax implications of
this incentive and offer alternatives to help lessen the impact of a
potential tax burden on recipients of this incentive. OPM adopted this
suggestion and added language clarifying how agencies can make payments
to ease the tax burden on recipients of loan repayment benefits. The
final regulations specify that tax withholdings must be applied at the
time any loan repayment is made. The final regulations also advise
agencies that:
- In addition to lump sum payments, smaller, incremental payments can be made;
- Employees can write checks to the agency to cover their tax liability rather
than have large withholdings deducted from their paychecks;
- Withholdings can be deducted from the amount of the loan repayment before
it is issued; and
- The Internal Revenue Service should be consulted for specifics concerning
the tax withholding implications of this incentive.
Several agencies suggested the final regulations shorten the three-
year service requirement or give agencies the flexibility to prorate
the service requirement when the full amount of the incentive is not
being offered. OPM did not adopt this suggestion because the
requirement is specified in statute. One agency suggested the final
regulations clarify whether a new service agreement is needed when an
agency extends or renews loan repayments. OPM adopted this suggestion
with language stating a new service agreement is not needed in these
situations but that agencies should say as much in their service
agreements.
Several agencies suggested the final regulations require that
individuals separated involuntarily for performance should have the
same reimbursement obligation as employees who were separated
involuntarily for misconduct. OPM adopted this suggestion. Also,
several agencies suggested the final regulations specify that
reimbursements to the Government can be made on a pro-rata basis. The
regulations already provide for agencies to waive, in whole or in part,
a right of recovery of an employee's debt.
Finally, one agency suggested the final regulations reduce the
length of time agencies must keep records for payments made under this
part from three years to two years. OPM did not adopt this suggestion
because the 3-year requirement is consistent with the Governmentwide
standard published by the National Archives and Records Administration
for retaining records on other recruitment and retention incentives.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities because it affects
only certain Federal employees.
[[Page 2791]]
List of Subjects in 5 CFR Part 537
Administrative practice and procedure, Government employees, Wages.
Office of Personnel Management.
Janice R. Lachance,
Director.
Accordingly, OPM is adding part 537 to title 5, Code of Federal
Regulations, to read as follows:
PART 537--REPAYMENT OF STUDENT LOANS
Sec.
537.101 Purpose.
537.102 Definitions.
537.103 Agency loan repayment plans.
537.104 Employee eligibility.
537.105 Criteria for payment.
537.106 Procedures for making loan repayments.
537.107 Service agreements.
537.108 Loss of eligibility for loan repayment benefits.
537.109 Employee reimbursements to the Government.
537.110 Records.
Authority: 5 U.S.C. 5379.
Sec. 537.101 Purpose.
This part provides regulations to implement 5 U.S.C. 5379, which
authorizes agencies to establish a program under which they may agree
to repay (by direct payment on behalf of the employee) all or part of
any outstanding federally insured student loan or loans previously
taken out by a candidate to whom an offer of employment has been made,
or a current employee of the agency, in order to recruit or retain
highly qualified professional, technical or administrative personnel.
Sec. 537.102 Definitions.
In this part:
Agency has the same meaning as in 5 U.S.C. 4101(l) subparagraph
(A), (B), (C), (D), or (E).
Employee has the meaning given that term in 5 U.S.C. 2105, except
it does not include an employee occupying a position which --
(a) Is excepted from the competitive service because of its
confidential, policy-determining, policy-making, or policy advocating
character (i.e., employees serving under Schedule C appointments); or
(b) Is not subject to the General Schedule established under 5
U.S.C. chapter 53, subchapter III.
Head of agency means the head of an Executive agency or an official
who has been delegated the authority to act for the head of the agency
in the matter concerned.
Service agreement means a written agreement between an agency and
an employee under which the employee agrees to a specified period of
employment with the agency of not less than 3 years, in return for
payments toward a student loan previously taken out by the employee.
Student loan means--
(a) A loan made, insured, or guaranteed under parts B or E of title
IV of the Higher Education Act of 1965; or
(b) A health education assistance loan made or insured under part C
of title VII of the Public Health Service Act, or under part B of title
VIII of that Act.
Sec. 537.103 Agency loan repayment plans.
(a) Agency loan repayment plans. Before repaying any student loans
under this part, the head of an agency must establish a student loan
repayment plan. This plan must include the following elements:
(1) The designation of officials with authority to review and
approve offering student loan repayment benefits (agencies should use
approval delegations which are similar to those used for other
recruitment and relocation incentives);
(2) The situations when the loan repayment authority may be used;
(3) Criteria that must be met or considered in authorizing loan
repayments, including criteria for determining the size and timing of a
payment(s);
(4) Procedures for making loan payments;
(5) A system for selecting employees to receive repayment benefits
that ensures fair and equitable treatment;
(6) Requirements for service agreements (including a basis for
determining the length of service to be required if greater than the
statutory minimum) and provisions for recovering any amount outstanding
from an employee who fails to complete the period of employment
established under a service agreement and for conditions when the
agency decides to waive the employee's obligation to reimburse the
agency for payments made under this part; and
(7) Documentation and recordkeeping requirements sufficient to
allow reconstruction of the action taken in each case. (when an
employee is considered for the repayment benefit.)
(b) [Reserved]
Sec. 537.104 Employee eligibility.
In accordance with the other provisions of this part and 5 U.S.C.
5379, an agency may authorize offering loan repayments benefits to
recruit or retain--
(a) Temporary employees who are serving on appointments leading to
conversion to term or permanent appointments; or
(b) Term employees with at least 3 years left on their appointment;
or
(c) Permanent employees; or
(d) Employees serving on excepted appointments with conversion to
term, career, or career conditional appointments (including, but not
limited to, Career Intern or Presidential Management Intern
appointments).
Sec. 537.105 Criteria for payment.
(a) Written determination. Loan repayments made under this part
must be based on a written determination that, in the absence of
offering loan repayment benefits, the agency would encounter difficulty
either in filling the position with a highly qualified candidate, or
retaining a highly qualified employee in that position. Agencies can
decide for themselves who has the authority to make written
determinations.
(b) Determination for recruitment. Each determination for
recruitment purposes (including the amount to be paid) must be made
before the employee actually enters on duty in the position for which
he or she was recruited.
(c) Determination for retention. Payments authorized in order to
retain an employee must be based upon a written determination that the
high or unique qualifications of the employee or special need of the
agency for the employee's services makes it essential to retain the
employee, and that, in the absence of offering student loan repayment
benefits, the employee would be likely to leave for employment outside
the Federal service. This determination must be based on a written
description of the extent to which the employee's departure would
affect the agency's ability to carry out an activity or perform a
function that is deemed essential to the agency's mission.
(d) Selecting employees. When selecting employees to receive loan
repayment benefits, agencies must adhere to merit system principles and
take into consideration the need to maintain a balanced workforce in
which women and members of racial and ethnic minority groups are
appropriately represented in Government service.
Sec. 537.106 Procedures for making loan repayments.
(a) Conditions for payments. Payments will be at the discretion of
the agency and are subject to such terms, limitations, or conditions as
may be
[[Page 2792]]
mutually agreed to in writing by the agency and employee. Payments may
be applied only to the indebtedness outstanding at the time the agency
and the employee enter into an agreement, and may not begin before the
employee enters on duty with the agency. Student loan repayment
benefits must be in addition to basic pay and any other form of
compensation otherwise payable to the employee involved. Tax
withholdings must be deducted or applied at the time any payment is
made. Tax withholdings may not be spread out over time. Since these tax
implications could create a financial hardship for the recipient of the
repayment benefit, agencies can lessen the impact of tax withholdings
on an employee's paycheck in one of the following ways:
(1) Agencies can make smaller payments at periodic intervals
throughout the fiscal year rather than issue payments under this part
in one lump sum;
(2) Employees can write a check to the paying agency to cover their
tax liability rather than have the tax liability withheld from the
employee's paycheck;
(3) Agencies can deduct the amount of taxes to be withheld from the
loan repayment benefit before issuing payment to the holder of the
loan.
(4) Agencies are strongly advised to consult the Internal Revenue
Service for further details concerning these options as well as the tax
withholding implications of payments under this part.
(b) Loans to be repaid. Before authorizing loan repayments, an
agency must verify with the holder of the loan that the employee has an
outstanding student loan that qualifies for repayment under this part.
Agencies should verify remaining balances to ensure that loans are not
overpaid. An agency may repay more than one loan as long as the loan
repayments do not exceed the limits set forth in paragraph (c) of this
section.
(c) Size of payments. In determining the size of the loan payments,
an agency should take into consideration the employee's value to the
agency, and how far in advance the agency can commit funds. If
budgetary considerations are an issue, agencies have the discretion to
determine the repayment benefit amount given to an employee each year.
This type of arrangement must be included in the written service
agreement with the employee. The amount paid by the agency is subject
to all the following maximum limits:
(1) $6,000 per employee per calendar year; and
(2) A total of $40,000 per employee.
(d) Employee responsibility. The employee will be responsible for
making loan payments on the portion of the loan(s) that continues to be
the employee's responsibility. Payments under this part do not exempt
an employee from his or her responsibility and/or liability for any
loan(s) the individual has taken out. The employee will also be
responsible for any income tax obligations resulting from the loan
repayment benefit.
Sec. 537.107 Service agreements.
(a) Before any loan repayments may be made, an agency must require
that the employee sign a written agreement to complete a specified
period of employment with the agency and to reimburse the agency for
loan repayment benefits, when required by Sec. 537.109. This agreement
may also specify any other employment conditions the agency considers
to be appropriate, such as, but not limited to, the employee's position
and the duties he or she is expected to perform, work schedule, or
level of performance.
(b) The minimum period of employment to be established under a
service agreement must be 3 years, regardless of the amount of loan
repayment authorized. Agencies can state in their service agreements
that increases or renewals of payments made under this part can be made
without requiring the employee to enter into a new service agreement.
(c) A service agreement made under this part in no way constitutes
a right, promise, or entitlement for continued employment or
noncompetitive conversion to the competitive service. This language
should be stated in the service agreement.
Sec. 537.108 Loss of eligibility for loan repayment benefits.
(a) An employee receiving loan repayment benefits from an agency
will be ineligible for continued benefits from that agency if the
employee:
(1) Separates from the agency; or
(2) Does not maintain an acceptable level of performance, as
determined under standards and procedures prescribed by the head of the
agency; or
(3) Violates any of the conditions of the service agreement.
(b) For the purpose of applying paragraph (a) of this section, in
the case of an employee covered by an appraisal system established
under part 430, subpart B, of this chapter, the employee's most recent
rating of record must be at least level 3 (``Fully Successful'').
Sec. 537.109 Employee reimbursements to the Government.
(a) Except as provided in paragraph (d) of this section, an
employee who fails to complete the period of employment established
under a service agreement will be indebted to the Federal Government
and must reimburse the paying agency for the amount of any student loan
repayment benefits the employee received.
(b) Failure to complete the period of employment established under
a service agreement occurs when the employee's service with the agency
terminates before the employee completes the period of employment
specified in the service agreement because:
(1) The employee is separated involuntarily on account of
misconduct or performance; or
(2) The employee leaves the agency voluntarily.
(c) If an employee fails to reimburse the agency for the amount
owed under paragraph (a) of this section, a sum equal to the amount
outstanding must be recovered from the employee under the agency's
regulations for collection by offset from an indebted Government
employee under 5 U.S.C. 5514 and subpart K of part 550 of this chapter,
or through the appropriate provisions governing debt collection if the
individual is no longer a Federal employee.
(d) Paragraph (a) of this section does not apply when the employee
fails to complete a period of employment established under a service
agreement because:
(1) The employee is involuntarily separated for reasons other than
misconduct or performance; or
(2) The employee leaves the agency voluntarily to enter into the
service of any other agency, unless reimbursement to the paying agency
is otherwise specified in the service agreement.
(e) The head of an agency may waive, in whole or in part, a right
of recovery of an employee's debt if he or she determines that recovery
would be against equity and good conscience or against the public
interest.
(f) Any amount repaid, or recovered from, an employee under this
section will be credited to the appropriation account from which the
amount involved was originally paid. Any amount so credited will be
merged with other sums in such account and will be available for the
same purposes and period, and subject to the same limitations (if any),
as the sums with which merged.
[[Page 2793]]
Sec. 537.110 Records
Each agency must keep a record of each determination made under
this part and make such records available for review upon OPM's
request. These records may be destroyed after 3 years or after OPM
formally evaluates the program (whichever comes first).
[FR Doc. 01-1039 Filed 1-9-01; 2:59 pm]
BILLING CODE 6325-01-P