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Pay & Leave Student Loan Repayment

 

Overview

Description

The Federal student loan repayment program permits agencies to repay Federally insured student loans as a recruitment or retention incentive for candidates or current employees of the agency. The program implements 5 U.S.C. 5379, which authorizes agencies to set up their own student loan repayment programs to attract or retain highly qualified employees.

Employee Coverage

Any employee (as defined in 5 U.S.C. 2105) is eligible, except those occupying a position excepted from the competitive civil service because of their confidential, policy-determining, policy-making, or policy-advocating nature (e.g., Schedule C appointees).

Loans Eligible for Payment

Loans eligible for payment are those made, insured, or guaranteed under parts B, D, or E of title IV of the Higher Education Act of 1965 or a health education assistance loan made or insured under part A of title VII or part E of title VIII of the Public Health Service Act. (See Q&A 17 for examples of the types of student loans that are eligible for repayment.)

Limitations

Although the student loan is not forgiven, agencies may make payments to the loan holder of up to a maximum of $10,000 for an employee in a calendar year and a total of not more than $60,000 for any one employee.

Discretionary Authority

As with any incentive, this authority is used at the discretion of the agency. Each agency must develop a plan to describe how the program will be implemented.

Service Agreement

An employee receiving this benefit must sign a service agreement to remain in the service of the paying agency for a period of at least 3 years. An employee must reimburse the paying agency for all benefits received if he or she is separated voluntarily or separated involuntarily for misconduct, unacceptable performance, or a negative suitability determination under 5 CFR part 731.  In addition, an employee must maintain an acceptable level of performance in order to continue to receive repayment benefits.

Periods in a Non-Pay Status

Periods of leave without pay, or other periods during which the employee is not in a pay status, do not count toward completion of the required service period. The service completion date must be extended by the total amount of time spent in non-pay status. However, as provided by 5 CFR 353.107, absence because of uniformed service or compensable injury is considered creditable toward the required service period upon reemployment.

Annual Reporting

Agencies are required to report annually to the U.S. Office of Personnel Management (OPM) on their use of the student loan repayment authority. Before March 31 of each year, agencies must submit their reports for the previous calendar year. The reports must contain-

  1. The number of employees who received student loan repayment this benefits;
  2. The job classifications of the employees who received student loan repayment benefits; and
  3. The cost to the Federal Government of providing student loan repayment benefits.

Annual reports to Congress on agencies' use of the Federal student loan repayment program.

References

* OPM changed from fiscal year to calendar year reporting to synchronize and simplify the agency reporting requirements.

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Best Practices And Lessons Learned

Under 5 U.S.C. 5379 and 5 CFR part 537, Federal agencies are authorized to implement a program under which they may agree to repay certain types of student loans as a recruitment or retention incentive for highly qualified personnel. Below is a summary of the best practices and lessons learned by agencies that have successfully implemented student loan repayment programs. This information is intended to assist agencies in establishing and administering a student loan repayment program.

Securities and Exchange Commission's Student Loan Repayment Program

  • Determine whether agency is going to repay all eligible loans (e.g., should the agency repay an employee's PLUS loan?).
    (See the Student Loan Repayment Program Questions and Answers.)
  • Address eligibility issues (e.g., is program open to employees on appointments that can lead to permanent positions, such as career interns?).
  • Determine whether the agency is going to repay loans taken out by an employee after employment to pay for courses toward a future degree, or only loans taken out for a completed degree.
  • Give adequate time to process applications to allow for potential delays in communicating with lenders.
  • Follow up with lenders to make sure payments are credited properly and employees are making required payments.

Department of Justice's Attorney Student Loan Repayment Program

  • Publish information on the Internet or agency intranet, including the agency's policy, forms, service agreements and other required documents, checklists, and frequently asked questions.
  • Shift the burden of crafting legally sufficient justifications to the candidate/employee as part of the application process. This can be done by providing a standard justification format that prompts the requester to provide the necessary information.
  • For ease in assembly, distribution, review, and selection, require the candidate/employee to package his or her application according to a standard format.
  • If the agency cannot fund benefits for all eligible applicants, defer validation of loans until after tentative recipients are selected. Loans need not be validated for individuals who will not receive benefits.
  • Require an applicant to submit a signed service agreement conditioned on selection for the program, which becomes null and void if he or she is not selected.
  • Include consent to disclosure of financial information as part of the service agreement so loan holders will discuss account information with you.
  • Require updated (and, if necessary, annotated) account statements as part of initial applications and annual renewals to ensure proper distribution to qualifying loans.
  • Withhold renewal payments until the employee corrects any erroneous distributions to non-qualifying loans, which frequently occurs when one loan holder carriers multiple loans.

Additional information is available for the Department of Justice's Attorney Student Loan Repayment Program.

Department of State's Student Loan Repayment Program

In the beginning:

  • Review other agencies' programs.
  • Determine pitfalls.
  • Receive assurances from management that program will be funded as a line item in first year's budget.
  • Conduct survey samplings.
  • Establish criteria for position-based eligibility.
  • Coordinate procedural aspects with human resources and payroll offices.
  • Obtain approval of policies and procedures by all bureaus/offices of the Department prior to implementation.
  • Include unions in policy discussions.

As the program matures:

  • Implement multiple communication channels. The Department of State established intranet and Internet Web sites, a Listserv to distribute messages automatically to subscribers, and a program email box exclusively for program exchanges, and funded an offsite postal and faxing service.
  • Assure timely customer service. The Department of State implemented a policy that promises a 2-day response time to inquiries, resulting in positive customer feedback.
  • Develop an online application system that will populate a database on student loan repayment benefits.

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Repayment Reports

Sample Agency Plans

Sample Agency Plan 1: Guidance On Student Loan Eligibility, Service And Repayment Options

Eligible Loans

The repayment authority, 5 U.S.C. 5379 as amended, is limited to student loans authorized by the Higher Education Act of 1965 and the Public Health Service Act. These are Federally insured loans made by educational institutions or banks and other private lenders.

The Higher Education Act covers guaranteed student loan programs such as:
Stafford Loans (subsidized, unsubsidized, Direct subsidized, and Direct unsubsidized);
Plus Loans (Federal and Direct Federal);
Federal Consolidation Loans (Direct subsidized and Direct unsubsidized);
Defense Loans (made before July 1, 1972);
National Direct Student Loans (made between 7/1/72 and 7/1/87); and
Perkins Loans.

Loans covered under the Public Health Service Act include the:
Nursing Student Loan Program loans;
Health Profession Student Loan Program loans; and
Health Education Assistance Loan Program loans.

Eligibility, Size of Payments, Service, and Repayment Options

  1. Eligibility for payments

    The following options are intended to provide assistance in making determinations of eligibility that satisfy the requirement for fair and equitable treatment in the selection of repayment candidates. [Please note that, under the authorizing legislation and regulations, the need to maintain a balanced workforce in which women and members of racial and ethnic minority groups are represented must be taken into consideration in determining which candidates will be eligible. The spirit and intent of this requirement may be satisfied by directing recruitment information and activities toward events and locations that are most likely to produce candidates in the employment group(s) needed by the respective [AGENCY COMPONENT], even though the results of all recruitment efforts produce highly qualified candidates other than in the targeted employment group(s).]

    1. Limit eligibility to those occupations which are priorities as specified in an [AGENCY COMPONENT] staffing and diversity plan. Thus, a business case is made on a pro-active basis as to which occupations and candidates and/or employees will be eligible.

    2. Limit eligibility to those whose grade point averages (GPAs) meet the standard established by the [AGENCY COMPONENT] for both graduates and employees who are, or will be, enrolled in academic training while employed.

  2. Periods of service and loan repayment periods

    The next two payment options may require negotiations with the lender/note holder to adjust the existing payment schedule to conform to the dollar limits established under the Student Loan Repayment Program. They are intended to provide consistency in approach toward loan repayments. For example, in determining periods of service, the [AGENCY COMPONENT] may follow the current practice of service for [AGENCY]-paid training/education, which is to require service based on a ratio of 1:3, e.g., 3 months of service for a 1-month class.

    1. Set the minimum period of service at 3 years for all candidates and then determine the loan payment period.

    2. Convert the loan amount to years.

      1. The loan payment period is the same as the period of service, which is determined by dividing the annual school cost into the loan balance.

        Example 1 - total loan is $20,000; total cost for 4-year bachelors degree is $40,000; outstanding loan represents 2 years of total school cost; years of service is determined by multiplying 2 years of costs x 3 years of service per each year of payments = 6 years of service; loan is payable over 6 years at $3,333/yr.

        Example 2 - total loan is $42,000 for an advanced degree; annual cost for 2 years is $21,000; outstanding loan represents the total 2 year cost; years of service is determined by multiplying 2 x 3 = 6; loan is paid over 6 years = $7,000/yr; therefore, the total amount that [AGENCY] would pay is 6 x $7,000 = $42,000.

      2. The loan payment period is determined by dividing the maximum annual payment into the loan balance; the period of service is determined by multiplying the loan payment period by 3.

        Example 1 - total loan is $20,000; $20,000 / $10,000 = 2 years of allowable payments, i.e., loan is payable over 2 years at $10,000 per year; 2 years of [AGENCY] payments x 3 years of service for each year of payments = 6 years of service.

        Example 2 - total loan is $42,000 for an advanced degree; the maximum annual amount that may be paid by [AGENCY] is $10,000; therefore, the number of years of payments of $10,000 = 4.2 years; assuming that 3 years of service would be required for each year of student loan benefit payments, the related service requirement would be 4.2 years x 3 years = 12.6 years of service.

    3. The loan payment period is determined by dividing the outstanding balance by the number of years to attain the degree; the period of service is determined by multiplying the loan payment period by 3.

      Example 1 - total loan is $20,000 for a 4-year bachelors degree (which took 4 years to get); the loan payments are $5,000 per year ($20,000 / 4) for 4 years; years of service: 4 years of loan payments x 3 for each year of payment = 12;

      Example 2 - total loan is $42,000 for a 2-year advance degree (which took 3 years to get); the loan payments are $10,000 per year, which is the maximum allowable per year, for 3 years, for a total of $30,000; years of service: 3 years of loan payments x 3 for each year of payment = 9.

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Payment Schedules

  1. Lump-Sum Net Payments

    This occurs when the employee elects, and the lender/note holder agrees, to have one loan payment made each calendar year. The total amount of taxes is first deducted from the gross loan amount and a net payment is made annually to the lender/note holder. The flat rate of 28% will be used to determine the amount of Federal income taxes to be withheld from the gross loan payment amount; social security, Medicare, and State and local income taxes are then determined and withheld based on the gross amount authorized as supplemental wages.

    Example - Gross amount of annual payment - $10,000; approximately $3,000 is withheld and reported on the employee's W-2; a net payment of approximately $7,000 is made to the lender/note holder.

  2. Biweekly Payroll Payments

    This occurs when the employee elects, and the lender/note holder agrees, to biweekly payments of a set amount. For this option, the amount of the loan payment is added to the gross salary amount to increase the total salary for that pay period; taxes are calculated and withheld based on the total salary to determine the employee's net pay.

    The total payment amounts may vary from year to year because each calendar year does not always have 26 pay periods; the total amount will probably be less the first calendar year and is dependent on the employee's entry on duty date. Thus, the biweekly amount may need to be adjusted each year so that the maximum allowable per calendar year is not exceeded.

    Example - Annual amount of payments - $5,200; employee's biweekly gross pay during the loan repayment period would be increased by $200; $200 would be paid to the lender/note holder each pay period (assuming 26 payments in any calendar year) resulting in a reduction in the employee's net pay of approximately $65 due to the taxes on the loan repayment amount.

Processing Payments

An employee may use [FORM NUMBER] for providing payment information in lieu of providing information on the employee, lender/note holder, and loan account separately. A separate [FORM NUMBER] is required for each loan. For lump-sum payments, the [FORM NUMBER] must clearly indicate that it is for a one-time payment with the amount indicated as "NET loan repayment." For biweekly payroll deductions, no further action is needed, as the payment will remain in effect until the end of the agreement period or, as a result of the annual recertification process (see the next section), notice is provided to the payroll office that the payment should be changed or stopped. Payments will automatically stop when the total authorized amount has been paid each year. If [FORM NUMBER] is used, it should be attached to the payroll copy of the service agreement.

Annual Recertifications

This process should be similar to recertifications of retention allowances, in which the servicing human resources staff "suspenses" the effective date of the service agreement and follows up with the appropriate management official; the management official provides a statement that funds are still available for the entire calendar year and that each loan has been reviewed to ascertain whether or not it is in arrears or default. If the amount of the allotment(s) will not change, then a statement to that effect must be provided to the payroll office. If the amount of the loan repayment(s) will be different from the prior year, the new information must be provided. If the loan(s) is in arrears or default, then the management official must determine the appropriate course of action and inform the employee and the servicing human resources staff. If payments will be terminated, then the [AGENCY COMPONENT] must inform the employee, the payroll office, and the lender/note holder.

Interest Deductions

Employees may be able to deduct the interest on their student loans even though the interest is included in the total loan amount and paid by the agency. Employees should review Chapter 3 of the Internal Revenue Service Publication 970, which is available at www.irs.gov/pub/irs-pdf/p970.pdf.

References

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Sample Agency Plan 2

Purpose

This instruction provides policy and guidance for implementing the Student Loan Repayment Program. This program is intended to facilitate the recruitment and retention of highly-qualified employees by allowing agencies to repay part or all of their Federally insured student loans.

References

Title 5, U.S. Code, Section 5379
Title 5, Code of Federal Regulations, Part 537

Definitions

Student Loan: A loan made, insured, or guaranteed under parts B, D, or E of Title IV of the Higher Education Act of 1965; or a health education assistance loan made or insured under Part A of Title VII of the Public Health Service Act, or under Part E of Title VIII of that Act.

Loans covered under The Higher Education Act include such loans as:

  • Federal Stafford Loans -- including Federal subsidized, Federal unsubsidized, direct subsidized, and direct unsubsidized loans;
  • Federal Plus Loans -- Federal and Direct Plus Loans;
  • Federal Consolidation Loans -- direct subsidized, direct unsubsidized, and Federal Consolidation Loans;
  • Defense Loans -- made before July 1, 1972;
  • National Direct Student Loans -- made between 7/1/72 and 7/1/87;
  • Federal Perkins Loans.

Loans covered under the Public Health Service Act include loans made under:

  • The Nursing Student Loan Program;
  • The Health Profession Student Loan Program; and
  • The Health Education Assistance Loan Program.

Federal Direct Student Loan: The U. S. Department of Education is the lender for these loans. Direct loans include Federal Direct PLUS loans and Federal Direct Stafford loans.

Federal Family Education Loan Program: These loans are insured by the Department of Education. Loans are privately issued by a bank, credit union, or other lender that participates in the Federal Family Education Loan Programs.

Subsidized Loan: The U.S. Government pays the interest on the loan while the student is in school, during the 6-month grace period, and during periods of authorized deferment.

Unsubsidized Loan: The student is responsible for paying the interest accrued while the student is in school, during the 6-month grace period, and during authorized periods of deferment.

Coverage

The following are eligible for student loan repayment assistance:

  • Permanent employees;
  • Employees serving a term appointment with at least 3 years remaining on their appointment;
  • Employees serving in excepted appointments with non-competitive conversion to term, career, or career-conditional appointments (e.g., Presidential Management Interns, VRAs, and career interns);
  • Temporary employees under 5 CFR 315.704 who are serving on appointments leading to conversion to term or permanent appointments.

NOTE: Employees receiving a physicians' comparability allowance (PCA) under 5 CFR 595.105(e) are eligible. However, the amount of their PCA must be reduced by an amount equal to any loan repayment assistance received under this program.

Employees serving in confidential, policy determining, policymaking, or policy advocating positions (e.g., Schedule C employees) are not eligible.

Criteria for Payment:

Eligible employees may be considered for loan repayment assistance up to $10,000 per calendar year, with a $60,000 lifetime maximum for any individual. More than one loan may be repaid so long as the combined repayments do not exceed these limits. Assistance may be provided for both recruitment and retention purposes. Recommendations will normally be made by the immediate supervisor, and approval will be at the discretion of the next higher level.

Recruitment

Loan repayment may be authorized upon determination that, in the absence of loan repayment benefits, the agency would have difficulty filling a position with a highly qualified candidate. Evidence of need may be based on:

  • The success of recent efforts to recruit suitable candidates for similar positions, including such indicators as offer acceptance rates, the proportion of positions filled, and the length of time required to fill positions;
  • Recent turnover in the same or similar positions;
  • Labor market factors that affect the ability to recruit for similar positions;
  • Any special qualifications needed.

This determination must be in writing and must document the criteria used to determine the amount of loan repayment benefits. Managers may consider the following criteria in deciding the amount:

  • The severity of the recruiting problem;
  • Salary levels reported in published salary surveys for comparable non-Federal positions;
  • The importance/criticality of the position to be filled and the effect on the agency if it is not filled or if there is a delay in filling it;
  • Current salary of the candidate;
  • Salary documented in a competing job offer;
  • The disparity in cost of living between the candidate's current residence and the proposed duty station;
  • The projected cost of further recruitment effort if the candidate does not accept the position;
  • The extent of the individual's past training and experience that serves to qualify him/her for the position;
  • Budget availability.

Each determination for recruitment purposes and the amount to be paid must be made before the employee enters on duty.

Retention

Loan repayment may be authorized upon determination that, in the absence of loan repayment benefits, the agency would have difficulty retaining a highly qualified employee. Evidence of need may be based on--

  • The unique or high qualifications of the employee or the special need for the employee's services that makes it essential to retain him/her;
  • The likelihood the employee would leave for employment outside the Federal service if he/she does not receive loan repayment benefits;
  • 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.

This determination must be in writing and must document the criteria used to determine the amount of the loan repayment benefit. Managers may consider the following criteria in deciding the amount:

  • Salary levels reported in published salary surveys for comparable non-Federal positions;
  • Salary documented in a competing job offer;
  • The importance/criticality of the position and the effect on the agency if the employee were to leave;
  • The projected cost of recruitment and training associated with replacement of the employee;
  • The length of service of the employee with the [agency];
  • Budget availability.

Termination of Benefits

An employee receiving loan repayment benefits will be ineligible for continued benefits if he/she--

  • Separates from the agency for any reason;
  • Fails to maintain a fully satisfactory level of performance; or
  • Violates any of the conditions of the service agreement.

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Service Agreement

Before any loan repayment may be made, the employee must sign a written agreement to serve a minimum of 3 years with the employing agency, regardless of the amount of repayment authorized. This 3-year period will begin when the first payment is made to the holder of the loan. Any further repayment made after the initial agreement has been completed will extend the service agreement by 1 additional year for each additional payment made. A model service agreement is at attachment 1.

The agreement may specify employment conditions considered appropriate, such as, but not limited to, the employee's position and the duties he/she is expected to perform, work schedule, or level of performance. However, the service agreement in no way constitutes a right, promise, or entitlement to continued employment or noncompetitive conversion to the competitive service, nor does it limit management's right to take corrective or disciplinary actions as otherwise appropriate.

Failure to Complete a Service Agreement

An employee who, voluntarily or because of performance or misconduct, fails to complete the agreed-upon period of service must refund the full amount of benefits received during the initial 3-year period. Employees who fail to complete the period of service under a 1-year extension (e.g., 4th year, 5th year), must repay the amount of the benefits received in the extension year only. If an employee fails to reimburse the agency, the amount outstanding will be recovered from the employee under established debt collection procedures.

Waiver of Repayment

Repayment may be wholly or partially waived at the discretion of the [agency] if recovery would not be in the public interest or would be against equity and good conscience. In making this determination, the [agency] will take into account consistency, fairness, and the cost to the taxpayer of recovering monies owed to the government. A waiver may be considered, but is not automatic, when an employee accepts a position in another operating division of the [agency].

When an employee is separated by death or disability retirement, or is unable to continuing working because of disability evidenced by acceptable medical documentation, repayment is automatically waived.

Procedures for Making Loan Repayments

Payments will be made directly to the lending institution holding the loan on behalf of the employee. One payment will be made each year for the duration of the service agreement. Payments may be applied only to indebtedness outstanding at the time the agreement is signed, and no payment may be made before an employee enters on duty.

Loan repayment benefits made under this authority are in addition to basic pay. These benefits are subject to Federal income tax, FICA and Medicare withholding, and any State or local income tax that may be applicable. Tax withholdings will be deducted at the time payment is made.

Responsibilities

Employing offices will–

  • comply with merit system principles when selecting employees to receive loan repayment benefits and consider the need to maintain a balanced and diverse workforce;
  • ensure that their responsibilities under labor relations statutes and union agreements are fulfilled;
  • verify that a student loan is Federally insured and eligible to be repaid under this program (see Attachment 2);
  • verify the current loan balance at time of entrance on duty and any subsequent extensions of the service agreement (see Attachment 2);
  • reach agreement with the holder on terms of payment;
  • prepare the written justification for the loan and maintain case files (see Attachment 3); and
  • provide information needed to process the reimbursement request to the Program Support Office, Division of Payroll (see Attachment 4).

Servicing Personnel Offices will–

  • develop and disseminate policies governing the use of the loan repayment program and provide technical guidance to employing offices concerning its administration;
  • maintain a record of each determination made under this authority and retain the record for 3 years (files may be destroyed after 3 years); and
  • report annually to the Office of Human Resources the number of employees receiving benefits under this authority, their job classifications, and the amount of benefits.

Employees will–

  • be responsible for making loan payments on the portion of the loan that continues to be their responsibility;
  • be responsible for any income tax obligation resulting from the loan repayment benefit.

References

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References

Section 5379 of Title 5, United States Code

§ 5379. Student loan repayments  

      (a)(1) For the purpose of this section—

(A) the term "agency" means an agency under subparagraph (A), (B), (C), (D), or (E) of section 4101(1) of this title; and  

(B) the term "student loan" means—

       (i) a loan made, insured, or guaranteed under part B of title IV of the Higher Education Act of 1965 (20 U.S.C. 1071 et seq.);

       (ii) a loan made under part D or E of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq., 1087aa et seq.); and

       (iii) a health education assistance loan made or insured under part A of title VII of the Public Health Service Act (42 U.S.C. 292 et seq.) or under part E of title VIII of such Act (42 U.S.C. 297a et seq.).  

      (2) An employee shall be ineligible for benefits under this section if the employee occupies a position that is excepted from the competitive service because of its confidential, policy-determining, policy-making, or policy-advocating character.  

      (b)(1) The head of an agency may, in order to recruit or retain highly qualified personnel, establish a program under which the agency may agree to repay (by direct payments on behalf of the employee) any student loan previously taken out by such employee.  

      (2) Payments under this section shall be made subject to such terms, limitations, or conditions as may be mutually agreed to by the agency and employee concerned, except that the amount paid by an agency under this section may not exceed—  

            (A) $10,000 for any employee in any calendar year; or  

            (B) a total of $60,000 in the case of any employee.  

      (3) Nothing in this section shall be considered to authorize an agency to pay any amount to reimburse an employee for any repayments made by such employee prior to the agency's entering into an agreement under this section with such employee.  

      (c)(1) An employee selected to receive benefits under this section must agree in writing, before receiving any such benefit, that the employee will—  

            (A) remain in the service of the agency for a period specified in the agreement (not less than 3 years), unless involuntarily separated; and  

            (B) if separated involuntarily on account of misconduct, or voluntarily, before the end of the period specified in the agreement, repay to the Government the amount of any benefits received by such employee from that agency under this section.  

      (2) The payment agreed to under paragraph (1)(B) of this subsection may not be required of an employee who leaves the service of such employee's agency voluntarily to enter into the service of any other agency unless the head of the agency that authorized the benefits notifies the employee before the effective date of such employee's entrance into the service of the other agency that payment will be required under this subsection.  

      (3) If an employee who is involuntarily separated on account of misconduct or who (excluding any employee relieved of liability under paragraph (2) of this subsection) is voluntarily separated before completing the required period of service fails to repay the amount agreed to under paragraph (1)(B) of this subsection, a sum equal to the amount outstanding is recoverable by the Government from the employee (or such employee's estate, if applicable) by—  

(A) setoff against accrued pay, compensation, amount of retirement credit, or other amount due the employee from the Government; and  

(B) such other method as is provided by law for the recovery of amounts owing to the Government.  

The head of the agency concerned may waive, in whole or in part, a right of recovery under this subsection if it is shown that recovery would be against equity and good conscience or against the public interest.  

      (4) Any amount repaid by, or recovered from, an individual (or an estate) under this subsection shall be credited to the appropriation account from which the amount involved was originally paid. Any amount so credited shall be merged with other sums in such account and shall be available for the same purposes and period, and subject to the same limitations (if any), as the sums with which merged.  

      (d) An employee receiving benefits under this section from an agency shall be ineligible for continued benefits under this section from such agency if the employee—  

      (1) separates from such agency; or  

      (2) does not maintain an acceptable level of performance, as determined under standards and procedures which the agency head shall by regulation prescribe.  

       (e) In selecting employees to receive benefits under this section, an agency shall, consistent with the merit system principles set forth in paragraphs (1) and (2) of section 2301(b) of this title, 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.  

      (f) Any benefit under this section shall be in addition to basic pay and any other form of compensation otherwise payable to the employee involved.  

      (g) The Director of the Office of Personnel Management, after consultation with heads of a representative number and variety of agencies and any other consultation which the Director considers appropriate, shall prescribe regulations containing such standards and requirements as the Director considers necessary to provide for reasonable uniformity among programs under this section.  

      (h)(1) Each head of an agency shall maintain, and annually submit to the Director of the Office of Personnel Management, information with respect to the agency on—  

            (A) the number of Federal employees selected to receive benefits under this section;  

            (B) the job classification for the recipients; and  

            (C) the cost to the Federal Government of providing the benefits.  

      (2) The Director of the Office of Personnel Management shall prepare, and annually submit to Congress, a report containing the information submitted under paragraph (1), and information identifying the agencies that have provided benefits under this section.

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Part 537 of Title 5, Code of Federal Regulations

Part 537 – Repayment of Student Loans

Sec.
537.101   Purpose.
537.102   Definitions.
537.103   Agency student loan repayment plans.
537.104   Employee eligibility.
537.105   Criteria for payment.
537.106   Conditions and procedures for providing student loan repayment benefits.
537.107   Service agreements.
537.108   Loss of eligibility for student loan repayment benefits.
537.109   Employee reimbursements to the Government.
537.110   Records and reports.

Authority: 5 U.S.C. 5379(g).

§537.101 Purpose.

This part implements 5 U.S.C. 5379, which authorizes agencies to establish a student loan repayment program for the purpose of recruiting or retaining highly qualified personnel.  Under such a program, an agency may agree to repay (by direct payment to the loan holder on behalf of the employee) all or part of any outstanding qualifying student loan or loans previously taken out by a job candidate to whom an offer of employment has been made, or by a current employee of the agency.

§537.102 Definitions.

The definitions in this section apply only to part 537. In this part:

Agency has the meaning given that term in subparagraphs (A) through (E) of 5 U.S.C. 4101(1).

Authorized agency official means the head of an Executive agency or an official who is authorized to act for the head of the agency in the matter concerned.

Employee means an employee of an agency who satisfies the definition of the term in 5 U.S.C. 2105.

Loan payment means the net payment made by an agency to the holder of a student loan (after deducting any tax withholdings that may be made from the gross student loan repayment benefit credited to the employee).

Service agreement means a written agreement between an agency and an employee (or job candidate) under which the employee (or job candidate) agrees to a specified period of service in exchange for student loan repayment benefits, subject to the conditions set forth under this part.

Student loan means–

  1. A loan made, insured, or guaranteed under parts B, D or E of title IV of the Higher Education Act of 1965; or
     
  2. A health education assistance loan made or insured under part A of title VII of the Public Health Service Act or under part E of title VIII of that Act.

Student loan repayment benefit means the benefit provided to an employee under this part in which an agency repays (by a direct payment on behalf of the employee) a qualifying student loan as described in § 537.106(b) previously taken out by such employee.  The dollar value of this benefit is the gross amount credited to the employee at the time of a loan payment to the holder of the student loan, before deducting any employee tax withholdings from that gross amount as described in § 537.106(a)(6)(iii).  A student loan repayment benefit is not considered basic pay for any purpose.

Time-limited appointment means a non-permanent appointment including—

  1. A temporary appointment under 5 CFR part 316, subpart D, or similar authority;
  2. A term appointment under 5 CFR part 316, subpart C, or similar authority;
  3. An overseas limited appointment with a time limitation under 5 CFR part 301, subpart B;
  4. A limited term or limited emergency appointment in the Senior Executive Service, as defined in 5 U.S.C. 3132(a), or an equivalent appointment made for similar purposes;
  5. A Veterans Recruitment Appointment under 5 CFR part 307;
  6. A Presidential Management Fellow appointment under 5 CFR 213.3102(ii) and 5 CFR 213.3102(jj);
  7. A Federal Career Intern appointment under 5 CFR 213.3202(o); and
  8. An appointment under the fellowship and similar programs authority at 5 CFR 213.3102(r).

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§537.103 Agency student loan repayment plans.

Before providing student loan repayment benefits under this part, 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 (which may parallel the approval delegations used for other recruitment, relocation, and retention incentives);
  2. The situations in which the student loan repayment authority may be used;
  3. The criteria to meet or consider in authorizing student loan repayment benefits, including criteria for determining the size and timing of the loan payment(s);
  4. A system for selecting employees (or job candidates) to receive student loan repayment benefits that ensures fair and equitable treatment;
  5. The requirements associated with service agreements (including a basis for determining the length of service to be required if it is greater than the statutory minimum);
  6. The procedures for making loan payments;
  7. The provisions for recovering any amount outstanding from an employee who fails to satisfy a service agreement and conditions for waiving an employee's obligation to reimburse the agency for payments made under this part; and
  8. Documentation and recordkeeping requirements sufficient to allow reconstruction of each action to approve a student loan repayment benefit.

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§537.104 Employee eligibility.

  1. Subject to the conditions in 5 U.S.C. 5379 and this part, an authorized agency official may approve student loan repayment benefits to recruit a highly qualified job candidate or retain a highly qualified employee who, during the service period established under a service agreement consistent with § 537.107, will be serving under—
    1. An appointment other than a time-limited appointment; or
    2. A time-limited appointment if—
      1. The employee (or job candidate) will have at least 3 years remaining under the appointment after the beginning of the service period established under a service agreement; or
      2. The time-limited appointment authority leads to conversion to another appointment of sufficient duration so that his or her employment with the agency is projected to last for at least 3 additional years after the beginning of the service period established under a service agreement.
    3. An employee occupying a position that is excepted from the competitive service because of its confidential, policy-determining, policy-making, or policy-advocating character is ineligible for student loan repayment benefits.
    4. An employee becomes ineligible for student loan repayment benefits under the conditions described in § 537.108.

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§537.105 Criteria for payment.

  1. General criteria.  Before authorizing student loan repayment benefits for an employee (or job candidate), an agency must make a written determination that—
    1. The employee (or job candidate) is highly qualified and otherwise eligible (as described in § 537.104); and
      1. In a case where the authorization is granted to recruit a job candidate to fill an agency position, the agency otherwise would encounter difficulty in filling a position with a highly qualified individual; or
      2. In a case where the authorization is granted to retain a current employee of the agency, the employee otherwise is likely to leave the agency for employment outside the Federal service and it is essential to retain the employee based on the employee's high or unique qualifications or a special need of the agency.
  2. Retention considerations.  In making a determination under paragraph (a)(2)(ii) of this section, an agency must consider 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 its mission.
  3. Current Federal employees.  An agency may not authorize student loan repayment benefits to recruit an individual from outside the agency who is currently employed in the Federal service.
  4. Selecting employees.  When selecting employees (or job candidates) to receive student loan repayment benefits, agencies must ensure that benefits are awarded without regard to political affiliation, race, color, religion, national origin, sex, marital status, age, or handicapping condition.

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§537.106 Conditions and procedures for providing student loan repayment benefits.

    1. General conditions.
      1. Student loan repayment benefits may be provided at the discretion of the agency and are subject to such terms, limitations, or conditions as may be mutually agreed to in writing by the agency and the employee (or job candidate) as part of a service agreement under § 537.107.
      2. The student loan to be repaid must be a qualifying student loan as set forth in paragraph (b) of this section.
      3. The agency must document in writing each approval of student loan repayment benefits. An authorized agency official must review and approve each written determination.  The written determination must show the employee (or job candidate) meets the criteria specified in § 537.105.
      4. An authorized agency official must approve student loan repayment benefits in connection with a recruitment action before the job candidate actually enters on duty in the position for which he or she was recruited.  The agency and the job candidate may sign the service agreement (consistent with § 537.107) before the job candidate begins serving in the position, but the agency may not begin making loan payments until the job candidate begins serving in the position.
      5. Student loan repayment benefits are in addition to basic pay and any other form of compensation otherwise payable to the employee involved.
      6. Appropriate tax withholdings must be deducted or applied at the time any payment is made.  Since these tax implications could create a financial hardship for the recipient of the student loan repayment benefit, agencies may lessen the impact of tax withholdings on an employee's paycheck in one of the following ways:
        1. Make smaller payments at periodic intervals throughout the year, rather than issue payments under this part in one lump sum;
        2. Allow the employee to write a check to the agency to cover his or her tax liability, rather than have the tax liability withheld from the employee's paycheck;
        3. Deduct the amount of taxes to be withheld from the student loan repayment benefit before the balance is issued as a loan payment to the holder of the loan.

      Note to § 537.106(a)(6): Contact the Internal Revenue Service for further details concerning these options, as well as the tax withholding implications of payments under this part.

    2. Qualifying student loans.
      1. The agency may make loan payments only for student loan debts that are outstanding at the time the agency and the employee (or job candidate) enter into a service agreement. Before authorizing loan payments, an agency must verify with the holder of the loan that the employee (or job candidate) has an outstanding student loan that qualifies for repayment under this part.  The agency must verify remaining balances to ensure that loans are not overpaid.
      2. The agency may repay more than one loan if the employee's student loan repayment benefit does not exceed the limits set forth in paragraph (c) of this section.
      3. These regulations do not impose a limit on the age of a student loan for qualification purposes.  The agency may, however, specify in its agency plan that only student loans made within a certain timeframe are eligible for repayment.
    3. Benefit amount.
      1. In determining the amount of student loan repayment benefits to approve, an agency must consider the employee's (or job candidate's) value to the agency and how far in advance the agency is permitted to commit funds.  If an agency decides to make additional student loan repayment benefits contingent on budget levels or other factors, it must address these contingent benefits in the written service agreement as described in § 537.107(a).
      2. The amount of student loan repayment benefits provided by an agency is subject to both of the following limits:
        1. 10,000 per employee per calendar year; and
        2. A total of $60,000 per employee.
    4. In applying the limits in paragraph (c)(2) of this section, the agency must count the full student loan repayment benefit (i.e., before deducting any tax withholdings as described in paragraph (a)(6)(iii) of this section).
    5. Employee responsibility.  Loan payments made by an agency 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 also is responsible for any income tax obligations resulting from the student loan repayment benefit.

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§537.107 Service agreements.

      1. Before an employing agency makes any loan payments for an employee, the employee (or job candidate) must sign a written service agreement to complete a specified period of service with the agency and to reimburse the agency for the student loan repayment benefit when required by § 537.109.  The service agreement also may specify any other employment conditions the agency considers to be appropriate, including the employee's (or job candidate's) position and the duties he or she is expected to perform, his or her work schedule, his or her level of performance, and the geographic location of his or her position.  (See §§ 537.108 and 537.109.)  The service agreement may address the possibility that, during the period the agreement is in effect, the agency may modify the agreement to provide student loan repayment benefits in addition to those fixed in the agreement based on contingencies or conditions specified in the agreement.
      2. The minimum period of service to be established under a service agreement is 3 years, regardless of the amount of student loan repayment benefits authorized.  The agency and the employee may mutually agree to modify an existing service agreement, subject to the limitations at § 537.106(c)(2), to provide additional student loan repayment benefits for additional service without the need for an entirely new service agreement (which would require a new 3-year minimum service period).  Periods of leave without pay, or other periods during which the employee is not in a pay status, do not count toward completion of the required service period.  Thus, the service completion date must be extended by the total amount of time spent in non-pay status.  However, as provided by 5 CFR 353.107, absence because of uniformed service or compensable injury is considered creditable toward the required service period upon reemployment.
      3. A service agreement made under this part in no way constitutes a promise of, or right or entitlement to, appointment, continued employment, or noncompetitive conversion to the competitive service.  This condition should be stated in the service agreement.
      4. The service period begins on the date specified in the service agreement.  That beginning date may not be—
        1. Earlier than the date the service agreement is signed; or
        2. Earlier than the date the individual begins serving in the position for which he or she was recruited (when student loan repayment benefits are approved to recruit a job candidate to fill an agency position).
      5. The service agreement must contain a provision addressing whether the individual would be required to reimburse the paying agency for student loan repayment benefits if he or she voluntarily separates from the paying agency to work for another agency before the end of the service period.  (See § 537.109(b)(2).)
      6. The agency may include in a service agreement specific conditions (in addition to those required by law) that trigger the loss of eligibility for student loan repayment benefits and/or a requirement that the employee reimburse the agency for student loan repayment benefits already received.  (See §§ 537.108(a)(3) and 537.109(a)(2).)  However, a service agreement may not require reimbursement based on-
        1. An employee's failure to maintain performance at a particular level (unless the employee is separated based on unacceptable performance); or
        2. An involuntary separation for reasons other than misconduct, unacceptable performance, or a negative suitability determination under 5 CFR part 731 (e.g., an involuntary separation resulting from a reduction in force or medical reasons).

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§537.108 Loss of eligibility for student loan repayment benefits.

      1. An employee receiving student loan repayment benefits from an agency is ineligible for continued benefits from that agency if the employee—
        1. Separates from the agency;
        2. Does not maintain an acceptable level of performance, as determined under standards and procedures prescribed by the agency; or
        3. Violates a condition in the service agreement, if the agreement specifically provides that eligibility is lost when the condition is violated.
      2. For the purpose of applying paragraph (a)(2) of this section, an acceptable level of performance is one that is equivalent to level 3 (“Fully Successful” or equivalent) or higher, as described in 5 CFR 430.208(d).  An employee loses eligibility for student loan repayment benefits if his or her most recent official performance evaluation does not meet this requirement.

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§537.109 Employee reimbursements to the Government.

      1. An employee is indebted to the Federal Government and must reimburse the paying agency for the amount of any student loan repayment benefits received under a service agreement if he or she—
        1. Fails to complete the period of service required in the applicable service agreement (except as provided by paragraph (b) of this section); or
        2. Violates any other condition that specifically triggers a reimbursement requirement under the agreement.
      2. An agency may not apply paragraph (a) of this section based on an employee's failure to complete the required period of service established under a service agreement if—
        1. The employee is involuntarily separated for reasons other than misconduct, unacceptable performance, or a negative suitability determination under 5 CFR part 731; or
        2. The employee leaves the paying agency voluntarily to enter into the service of any other agency, unless reimbursement to the agency is otherwise required in the service agreement, as provided by § 537.107(e).
      3. If an agency and an employee mutually agree to modify an existing service agreement to provide additional student loan repayment benefits for additional service (as provided by § 537.107(b)), the modified service agreement may stipulate that, if the employee completes the initial service period but fails to complete the additional service period, he or she is required to reimburse the paying agency only for the amount of any student loan repayment benefits received during the additional service period.
      4. If an employee fails to reimburse the paying agency for the amount owed under paragraph (a) of this section, a sum equal to the amount outstanding is recoverable from the employee under the agency's regulations for collection by offset from an indebted Government employee under 5 U.S.C. 5514 and 5 CFR part 550, subpart K, or through the appropriate provisions governing Federal debt collection if the individual is no longer a Federal employee.
      5. An authorized agency official 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.  (See 5 U.S.C. 5379(c)(3).)
      6. Any amount reimbursed by, or recovered from, an employee under this section must be credited to the appropriation account from which the amount involved was originally paid.  Any amount so credited must be merged with other sums in such account and must be available for the same purposes and time period, and subject to the same limitations (if any), as the sums with which merged.  (See 5 U.S.C. 5379(c)(4).)

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§537.110 Records and reports.

    1. Each agency must keep a record of each determination to provide student loan repayment benefits under this part and make such records available for review upon request by OPM. Such a record may be destroyed when 3 years have elapsed since the end of the service period specified in the employee's service agreement unless any dispute has arisen regarding the agreement. If the service agreement has not been fulfilled, there are other disputes regarding the agreement or the loan payouts, or the agreement has become the subject of litigation, the records should be kept until the agency is notified by agency counsel that all pending claims have been resolved, all litigation concluded, and any applicable periods for seeking further review has elapsed and, in any event, for a minimum of 6 years from the date the facts giving rise to the dispute occurred. If debt collection is pursued against the employee for repayments made by the agency, the agency must keep the records until the agency is notified by agency counsel that the debt is fully collected, compromised, or settled finally and that any applicable period for seeking further review has elapsed.
    2. By March 31st of each year, each agency must submit a written report to OPM containing information about student loan repayment benefits it provided to employees during the previous calendar year. Each report must include the following information:
      1. The number of employees who received student loan repayment benefits;
      2. The job classifications of the employees who received student loan repayment benefits; and
      3. The cost to the Federal Government of providing student loan repayment benefits.

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