Student loan repayment program off to slow start

The State Department helped 407 employees repay their student loans last year. The General Accounting Office helped 169 employees repay their school loans. But most federal agencies helped few or no employees with their college debt under a two-year-old repayment program aimed at recruiting and retaining good federal workers.

The Office of Personnel Management on Monday issued its annual report on the student loan repayment program, reporting that 16 federal agencies provided $3.1 million in student loan repayments to 690 federal workers in fiscal 2002. The State Department and GAO accounted for 84 percent of the recipients. In fiscal 2001, the first year of the program, only one federal worker-a human resources specialist at the Health and Human Services Department-received a student loan repayment.

"I am encouraged by the agencies' increased use of existing flexibilities such as the student loan repayment program," OPM Director Kay Coles James said in a statement.

The student loan repayment program, authorized by Congress in 1990 but not established by OPM until 2001, is designed to help agencies recruit and retain workers in hard-to-fill or critically important positions. Workers can receive up to $6,000 per year in student loan repayments, up to a $40,000 lifetime limit. In return, employees must commit to at least three years of agency service. They must also pay taxes on the benefit.

Secretary of State Colin Powell and Comptroller General David Walker have both made public commitments to the student loan repayment program and to workforce improvements in general. The State Department last year committed $2 million to student loan repayments, and GAO paid out about $600,000. The Federal Energy Regulatory Commission also used the benefit extensively last year, paying out $226,435 to 35 employees. Most other federal leaders have not promoted loan repayments as recruitment and retention tools.

Some, such as the Social Security Administration and the Housing and Urban Development Department, have had difficulty agreeing with employee unions on student loan repayment rules, according to union representatives. Agencies reported to OPM that budget constraints are the main reason they aren't using loan repayments more extensively. Lifting the dollar limits, three-year service rule and tax requirement would also improve usage, agencies said.

Some agencies reported that loan repayments could be perceived as unfair. "A few agencies commented that a perception of inequity among employees is a barrier to using the program effectively," OPM's report said. "Some managers are reluctant to use the program because it forces them to single out an employee."

The report says that of 57 agencies, more than half wrote student loan repayment plans, even though only 16 agencies actually offered student loan repayments last year. Before agencies can offer repayments, they have to write plans following OPM guidelines.

Max Stier, president and CEO of the Partnership for Public Service, said the higher number of student loan repayment recipients is encouraging. "These numbers confirm what we already know: help with student loan debt can be a more powerful recruitment and retention incentive than higher salaries," Stier said. But he noted that Congress must ensure that agencies have money to offer repayments. "What remains the biggest barrier to expansion however is lack of funding," he said.

The number of repayments offered in 2003 is likely to go up. The Justice Department, for example, helped only one employee-a program analyst-last year, but this year has set aside money to help 50 attorneys with their student loan repayments.

Congress is also considering legislation that would make the student loan repayments tax-free.

The student loan repayment program is one of several special benefits that agencies can offer to important recruits and employees. Agencies can also offer recruitment, retention and relocation bonuses, bumped-up salary offers (known in government jargon as advanced in-hire rates), special awards and performance-based salary hikes (known as quality step increases).

According to a General Accounting Office report issued Monday, human resources directors across government say OPM could do a better job of helping them use those benefits. "OPM often has placed its own restrictive interpretation on the use of personnel flexibilities, surrounding them with too many regulations that make the use of such flexibilities extremely complicated and more difficult than needed," GAO's report (03-428) said.

Fiscal 2002 Student Loan Repayments, By Agency

Source: Office of Personnel Management