GovernmentExecutive.com

Major student loan legislation affecting civil servants is slated to take effect next week, but it may not be the benefit some employees hoped for.

The College Cost Reduction Act, which President Bush is expected to sign Thursday, will forgive outstanding debt for employees who have made 10 years of monthly repayments on their loans while serving in full-time government jobs.

But there is a catch -- the benefit is not retroactive, meaning any payments you have made before Oct. 1 won't count.

Still, it would be hard to argue that the new benefit isn't significantly better than the current one. Since 1993, public servants have had to make 25 years of monthly repayments on their loans before the government would forgive the remaining debt. By that time, many civil servants are putting their own children through college.

"Some of our members have enormous debt, up to $100,000 or more, for example," said Colleen Kelley, president of the National Treasury Employees Union. "The College Cost Reduction Act ... is a great initiative because it recognizes the importance of public service and rewards those who make a long-term commitment to public service."

According to Rachel Racusen, a spokeswoman for the House Education and Labor Committee, the legislation sets no cap on the amount the government will forgive after a decade. For example, if a public servant still holds $60,000 in law school debt after 10 years of consistent payments, then the government will forgive that amount.

Like other loan forgiveness programs currently offered at federal agencies, the amount the government will forgive will still be subject to taxes, Racusen said. The Office of Personnel Management has said after taxes, the value employees actually receive from the benefit can be about two-thirds of the amount forgiven.

The new benefit will not take the place of flexibilities agencies already have to recruit and retain employees with high student loan debt. Currently, agencies can grant up to $10,000 a year for a total of $60,000 in student loan repayments in return for a promise of at least three years of service. But not all agencies provide that benefit.

The benefits afforded by the College Cost Reduction Act are outside the control of individual agencies. Public servants across government will have the option to participate, Racusen said.

The true test will be how agencies will choose to market the incentive, if at all. The extent to which they do that will depend on their budgets, Kelley said. "Agencies need to make recruiting and retaining talented employees a reality by elevating this loan forgiveness program and channeling the necessary resources to [marketing] it," she said.

The key is to ask your manager what student loan benefits you may qualify for. If anything, you can start counting your monthly loan repayments on Oct. 1.

Retiree Relief

Federal and military retirees are now one step closer to paying their monthly health care premiums with pre-tax dollars.

Last week, the House Oversight and Government Reform Committee passed legislation providing such a benefit, resulting in what could be an average savings of $820 a year for federal annuitants.

The bill (H.R. 1110), sponsored by Rep. Tom Davis, R-Va., currently has 263 co-sponsors. A similar measure had 340 co-sponsors in the 109th Congress and was approved by the House Government Reform Committee in June 2005, but never was enacted.

The latest bill now moves to the House Ways and Means Committee, where it has stalled in recent years. But with nearly half of the members on Ways and Means signed on as co-sponsors, the bill's prospects for passage are looking bright.

"I am hopeful that sufficient momentum has finally built up behind this proposal to see results this Congress," Davis said.

COMMENTS

• Why should the person who takes out loans be paid extra compaired to the person that worked and paid for their education as they went. It's the same degree the same amount of time and effort. Why reward someone for doing it the easy way. paidmyownway Posted October 2, 2007 11:42 AM
• There are more catches to this legislation. Only loans being paid under certain repayment methods will be covered. AND, two of the four of those approved loan repayment programs must be with ten year terms - HELLO!? Am I the only one totally stunned by this? How can the government agree to forgive a student loan, after you've made 10 years of payments on a ten year repayment term - there would be nothing left to payoff! Am I missing something? John B Posted October 1, 2007 7:52 AM
• I've never heard read or seen a policy in the private sector that "automatically" promotes someone once the get a degree. Fred the answer is "NO" it applies to the employee dan ketter Posted September 27, 2007 11:07 AM