Scarce Payback
Federal employee student loan repayments are growing, but remain a relatively rare benefit.
Student loan repayments are a small but expanding federal perk. In one year, federal agencies increased the number of employees receiving the benefit by 50 percent and upped its funding by 70 percent.
Still, the increases bring agency use of the program from teeny to tiny. In fiscal 2005, 4,409 employees received about $28 million in student loan repayments, up from 2,945 employees receiving about $16 million in fiscal 2004.
Since 2002, agencies have had the authority to grant up to $10,000 a year for a total of $60,000 in student loan repayments in return for a promise of three years of service. The money can go to new recruits or current employees.
The Office of Personnel Management, which loosely oversees the program, is expecting a big increase again this year, according to a recently released report for Congress on the state of the student loan repayment program in fiscal 2005.
Why the small numbers? Congress authorized agencies to repay employee student loans, but it did not provide any funding to do so. According to OPM's report, agencies' primary barrier to broad use of the program is a lack of money.
The State Department, among the largest users, is one of a handful of agencies that earmarks specific funds in its budget for student loan repayments, which it uses largely for members of the Foreign Service. Most agencies fund the program out of existing salary and expense budgets.
In March, the House voted to allow federal agencies to use an Education Department set-aside fund to pay for up to $5,000 per employee for student loan repayments, but the Senate has yet to act on it.
Another problem is that the loan money is taxable. OPM said that after taxes, the amount employees take home can be about two-thirds of the money granted by agencies, something Congress would have to change. Rep. Tom Davis, R-Va., twice introduced a bill to do just that, called the Generating Opportunity by Forgiving Educational Debt for Service (GOFEDS), but it has yet to find legs.
OPM reported that most of the payments are made in five agencies: the Justice, Defense and State departments, the Securities and Exchange Commission and the Government Accountability Office. Justice made the biggest gains in 2005, offering about $10 million in repayments to just more than 1,000 employees. The year before, the department granted less than $2 million for about 300 employees.
Justice's jump is primarily due to the FBI, which offered compensation to many special agents and intelligence analysts. Criminal investigators and intelligence workers were the number two and three occupations in receiving reimbursements; attorneys were the first.
The Veterans Affairs Department has separate authority and a separate student loan repayment program under which it granted $12.7 million to almost 4,000 employees in certain health care occupations in fiscal 2005.
Small numbers in the rest of government for loan reimbursement may not be a bad thing, OPM told Congress.
"Student loan repayments are intended to be a recruitment and retention tool for agencies," the report said. "Therefore, agencies do not necessarily need to make a large number of student loan repayments to use the program effectively."