The Student Loan Repayment Program in the Federal Government: Examining Program Users and Program Attributes by Fred Thomas III A paper submitted to the faculty of University of North Carolina at Chapel Hill in partial fulfillment of the requirements for the degree of Master of Public Administration. Spring 2010 This paper represents the work of a UNC MPA student. It is not a formal report of the School of Government, nor the School of Government faculty. Executive Summary In 2001, the Office of Personnel Management (OPM) granted federal government agencies authority to implement Student Loan Repayment Programs (SLRPs) to help recruit and retain talented workforces. Federal government agencies’ use of SLRPs has increased significantly since 2001 at varying levels and with varying attributes. This research used quantitative and qualitative methods to examine how agencies currently and previously employ SLRPs as a tool to recruit and retain talent. Findings indicate considerable variation in longevity and funding arrangements, relatively consistent general program goals but with differing target audiences, a range of alternative administrative structure, and a general lack of evaluation metrics. Recommendations are provided for users and potential users alike.
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The Student Loan Repayment Program in the Federal Government:
Examining Program Users and Program Attributes
by
Fred Thomas III
A paper submitted to the faculty of
University of North Carolina at
Chapel Hill in partial fulfillment of the
requirements for the degree of
Master of Public Administration.
Spring 2010
This paper represents the work of a UNC MPA student. It is not a formal report of the School of
Government, nor the School of Government faculty.
Executive Summary
In 2001, the Office of Personnel Management (OPM) granted federal government agencies authority to
implement Student Loan Repayment Programs (SLRPs) to help recruit and retain talented workforces.
Federal government agencies’ use of SLRPs has increased significantly since 2001 at varying levels and
with varying attributes. This research used quantitative and qualitative methods to examine how agencies
currently and previously employ SLRPs as a tool to recruit and retain talent. Findings indicate
considerable variation in longevity and funding arrangements, relatively consistent general program goals
but with differing target audiences, a range of alternative administrative structure, and a general lack of
evaluation metrics. Recommendations are provided for users and potential users alike.
1
Background With ever-increasing competition between the public sector and the private sector for highly qualified
individuals, the federal government uses hiring incentives to recruit and retain talent.1 In 1989, the
National Commission on the Public Service found that federal government agencies had trouble recruiting
and retaining a quality workforce. In response, the commission recommended that Congress approve a
student loan repayment program (SLRP). This program would add to the list of incentives that agencies
had at their disposal.2 A SLRP would serve as a recruitment tool to both encourage interested applicants
to apply for the position and as an incentive for the applicant to accept the position once an offer was
made. Additionally, it could serve as a retention tool by creating an environment that would encourage
employees to remain with their specific agency.3
In response to a 2001 study released by the Office of Management and Budget (OMB) that found
professional and administrative government employees are paid less relative to their counterparts in the
private sector, Congress authorized SLRPs for highly qualified applicants and current workers. To receive
the loan repayment employees would have to commit to serve for at least three years in the paying
agency. Eligible employees could receive up to $10,000 in a year and up to $60,000 total.4 Research by
the Office of Personnel Management (OPM) on SLRPs from fiscal year 2002 to fiscal year 2008 found
agency adoption and overall funding for SLRPs has increased and spread throughout the federal
government.5
This study focuses on the SLRP as a recruitment and retention tool. SLRPs vary across federal agencies
partially because the Congressional authority to use the SLRP is broad in scope. This study examines
variation in SLRP implementation throughout the federal government by examining three main questions.
First, what are the characteristics of the agencies using SLRPs? Second, how did these agencies choose
their program goals? Third, how do agencies structure and administer their SLRPs? In addition, this study
will document why some agencies chose to adopt this program and what benefits and drawbacks agencies
identify. The findings from this study will help inform federal government agencies that are considering
or currently using SLRPs.
Methodology
Research for this study was completed in two parts. The initial phase was a quantitative analysis of
federal student loan repayment programs (SLRPs). Descriptive statistics on the student loan program as a
whole as well as within individual agencies were produced. Data for this analysis were from FY2002
through FY2008 reports released by the Office of Personnel Management (OPM).3 The data included
information on the 39 federal government agencies that used SLRPs between 2002 and 2008. The OPM
reports include SLRP allocations, the number of employees using the program, and the number of years
each agency used the program. In addition to OPM’s data, the data set was expanded to include the total
number of full-time equivalent employees (FTEs) and annual budgets.6 The data for these variables were
collected from budgetary reports from OMB and then standardized for the sample.7
A multi-case study methodology was employed for the second phase of the research. Interviews and
content analysis of selected agencies’ SLRP policies were conducted. Cases were selected using a
stratified random sampling technique. The starting sample was all 39 agencies that reported use of an
SLRP to OPM at some point between FY2002 and FY2008. The sample was then stratified based on two
core factors: agency size and length of SLRP use.8 Once agencies were separated into these groupings, a
random sample of eight agencies was selected, including two agencies from each quadrant.
To stratify agencies based on size, the study used groupings consistent with categories established by
OPM’s Federal Human Resources Database.9 They classify agencies as small if they have fewer than 100
FTEs, medium if they have 100-999 FTEs, and large if they have 1,000 or more FTEs. Due to limited
representation in the small agency category, the small and medium groupings were consolidated.10
2
Length of SLRP use was also categorized into two groupings: short-term and long-term users. Out of the
seven years of the program’s existence, short-term users are defined as agencies that used the program
from one to four years and long-term users are those that employed the program for five to seven years.11
Most of the agencies that began using SLRP in 2002 used the program for five to seven years. Most of the
late adopters or sporadic users fell into the short-term user category of one to four years.12
Agencies were randomly selected from each of the four groupings (for a full listing of agency distribution
see Appendix A Table 1A). Two agencies from each group were selected. With the exception of the Farm
Credit Administration, small agencies in the short-term users quadrant opted not to participate in this
research.13
A third agency was added to the large and long-term use category because large agencies seem
to have greater disparities in terms of agency and program size. The number of employees in the large
agencies span from just above 1,000 to over 600,000 employees. Adding an additional agency in this
category helps to capture more of the variation within this grouping. The selected agencies can be found
3 Workforce Planning for Wisconsin State Government. (2005). Employee retention. Retrieved October 7,
2009, from http://workforceplanning.wi.gov/ category.asp?linkcatid=15&linkid=18 4 In 2002, the original OPM policy stated that agencies were able to authorize a student loan repayment of
up to $6,000 for an employee in any calendar year, and up to a lifetime limit of $40,000. In 2003, that
amount was increased to $10,000 in a calendar year and a lifetime limit of $60,000. This was changed in
order to assist agencies in effectively using student loan repayment as a recruitment and retention tool. 5 "Student Loan Repayment Program". Office of Personnel Management. August 10, 2009
<http://www.opm.gov/oca/pay/StudentLoan/>. This website houses federal government agency reporting
to OPM on the SLRP from 2002-2008. 6 Full-time equivalent employees (FTEs) accounts for full-time employees working 40 hours per week
and part-time employee hours are added together and divided by 40 to determine the number of full-time
employees. 7 The number of FTEs compared to the number of SLRP employees, completing seven-year averages of
the number of FTEs, total SLRP allocation, individual SLRP allocation, and annual budget totals. 8 Because this study is looking to assess who is using SLRP and how they are using it term of use was
identified as a factor worth considering. Agency size was considered a major factor based on the
quantitative analysis. 9 "FedScope Human Resources Data". Office of Personnel Management. August 10, 2009
<http://www.fedscope.opm.gov/employment.asp>. 10
By having three categories: small, medium, and large, many of the resulting quadrants had no agencies
represented based on the criteria. There is a huge disparity between the lowest number of FTEs and the
highest number of FTEs in the large agency, long-term user category. 11
The determination of a breakpoint was made at a natural break; the midpoint of program use was
identified as an appropriate point. 12
The grouping was intended to capture the variation between institutionalized programs and sporadic
users of the program. 13
Several attempts were made to contact the agencies in the short-term, small agency category. Attempts
included phone calls and emails. In the short-term, small agency quadrant, some agencies were no longer
using the SLRP incentive. An additional agency was added to the large, long-term user quadrant bringing
the total to three agencies in that quadrant. 14
Agency’s selection factors for employees seem to change based on the goal set for SLRP. 15
FCA’s policy does not address using SLRP as a retention tool. 16
The only exceptions to this claim about large agencies are the Department of Transportation (DOT) and
Department of Commerce (DOC). DOT only has 37 employees using the program and DOC only has 10
employees using the program. 17
Examples of these incentives include: tuition reimbursement, recruitment bonuses, retention bonuses,
travel compensation, extra health benefits, and relocation reimbursement. 18
FCA does not follow the OPM’s SLRP policy because of a special authority. As a federal regulator,
FCA uses their SLRP based on section 5.11(c)(2)(A) of the Farm Credit Act of 1971. 19
The extended commitments are increased based on the amount of the SLRP allocation, for every
additional $10,000 after $20,000 an additional year is added to the service commitment. 20
The percentage does not standardize for the one-year annual commitment. Programs with more
employees on one-year commitments than three-year commitments are likely to have a higher success
Chapter 2. Program Criteria, Conditions and Responsibilities .........................................3 1. Eligibility for Loan Repayments. .....................................................................3 2. Criteria for Loan Repayments. .........................................................................3 3. Recommendation and Approval of Loan Repayments. ...................................4 4. Conditions of Loan Repayments. .....................................................................4 5. Amount of Repayments and Limitations. ........................................................4 6. Method of Loan Repayments. ..........................................................................5 7. Service Agreements..........................................................................................5 8. Loss of Eligibility for Loan Repayments. ........................................................5 9. Employee Reimbursements to the Government...............................................5 10. Employee Responsibilities. ..............................................................................6
Distribution:
Initiated by: Human Capital
Office
2537.1 May 13, 2009
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Chapter 1. Introduction 1. Purpose, Scope, and Applicability.
This order contains the policies and procedures for the review and approval of the repayment of student loans in order to facilitate the recruitment or retention of highly qualified employees. The option of repaying all or part of a student loan provides an incentive for a candidate to accept a Government Accountability Office (GAO) position which would otherwise be difficult to fill or to retain a highly competent employee with knowledge or skills critical to GAO.
2. Supersession.
This order supersedes GAO Order 2537.1, Repayment of Student Loans, dated September 22, 2006. Revisions have been made to incorporate changes to 5 C.F.R. part 537. GAO’s program must be consistent with these regulations.
3. References.
a. 5 U.S.C. Section 5379.
b. 5 C.F.R. part 537.
c. 5 C.F.R. part 353.
d. GAO Order 0254.1, Debt Collection.
e. GAO Order 2353.1, Reemployment Rights of Members of the Uniformed Services.
f. GAO Order 2810.1, Line-of-Duty Injury Benefits for GAO Employees Under the Federal Employees’ Compensation Act.
4. Background.
Section 5379, title 5, United States Code, authorizes agencies, including GAO, to repay (by direct payment to the loan holder on behalf of the employee) all or part of an outstanding student loan to facilitate the recruitment or retention of highly qualified employees. GAO may repay up to a maximum of $10,000 per employee per calendar year up to a lifetime maximum of $60,000. Depending on funding resources and hiring and retention needs, GAO may determine that no incentive, or less than the annual maximum, will be paid in any year.
5. Coverage.
A candidate or employee must occupy a covered position identified in GAO’s annual plan (see paragraph. 6) in order to be recommended or approved for loan repayments.
6. Annual Plan.
HCO shall issue an annual plan specifying the positions eligible for loan repayments for recruitment and retention purposes, the loan repayment amounts, and the recommendation and approval procedures for loan repayments.
7. Adherence to Merit System Principles.
May 13, 2009 2537.1
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When recommending and selecting candidates or employees to receive loan repayment benefits, management officials should adhere to merit system principles and consider the need to maintain a balanced workforce in which women and members of racial and ethnic minority groups are appropriately represented in government service.
8. Definitions.
a. “Student loan” means a loan made, insured, or guaranteed under parts B, D, or E of title IV (Student Assistance) 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.
b. “Service agreement” means a written agreement between GAO and a candidate or employee under which the individual agrees to a specified period of employment with GAO of not less than 3 years, in return for repayments toward a student loan previously obtained by the candidate or employee. The specified period of service begins September 30, XXXX (of the given fiscal year) and ends September 30, XXXX (3 years later).
Chapter 2. Program Criteria, Conditions and Responsibility
1. Eligibility for Loan Repayments.
Student loan repayments may be approved to recruit or retain
a. temporary employees who are serving on appointments leading to conversion to permanent appointments;
b. term employees with at least 3 years remaining on their appointment; or
c. permanent employees.
2. Criteria for Loan Repayments.
a. Recruitment considerations. In order to be recommended and approved to receive a loan repayment for recruitment purposes, the candidate must
(1) have an outstanding student loan and must not have defaulted on the student loan prior to or during the period of the agreement with GAO; and
(2) be recommended in writing, for a loan repayment based on the fact that
(a) in the absence of such repayments, GAO would encounter difficulty in filling the position with a highly qualified candidate, and
(b) the individual is highly qualified and otherwise eligible for the position being recruited.
b. Retention considerations. In order to be recommended and approved to receive a loan repayment for retention purposes, the employee must
(1) have an outstanding student loan and must not have defaulted on the student loan prior to or during the period of the agreement with GAO;
2537.1 May 13, 2009
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(2) be recommended by his or her managing director, in writing, for a loan repayment based on the fact that the high or unique qualifications of the employee or special needs of GAO for the employee’s services makes it essential to retain the employee, and that, in the absence of such repayments, the employee would be likely to leave for employment outside of GAO;
(3) have completed any specified period of service with GAO by the effective date of the annual open application period; and
(4) have appraisal ratings for the most recent appraisal cycle of “meets expectations” or higher on all competencies.
3. Recommendation and Approval of Loan Repayments.
a. Recommending and approving officials. Managing directors/unit heads will recommend job candidates or employees for the repayment of student loans and the Chief Human Capital Officer (CHCO) will approve or disapprove the recommendations. Unless GAO specifies the amount of a repayment in advance, the managing director/unit head also will recommend the repayment amount for each student loan subject to the limits set forth in paragraph 5. The CHCO will approve, disapprove, or modify repayment amounts.
b. Consideration of other recruitment and retention incentives. In lieu of a loan repayment, management officials may consider other recruitment and retention incentives such as a superior qualifications appointment, a recruitment bonus or retention allowance, or reimbursement for job-related educational expenses.
4. Conditions of Loan Repayments.
Repayments will be at the discretion of GAO and are subject to such terms, limitations, or conditions as agreed to by GAO and the candidate or employee concerned. Repayments may be applied only to the indebtedness outstanding at the time GAO and the candidate or employee enters into a service agreement. Repayments are subject to the availability of fiscal year-appropriated funds.
5. Amount of Repayments and Limitations.
a. GAO’s annual plan will establish annual guidelines on the size of loan repayments, but amounts paid by GAO are subject to the following maximum limits: (1) $10,000 per employee per calendar year and (2) a lifetime aggregate of $60,000 per employee.
b. Using appropriate discretion, the CHCO may adjust the amount of loan repayments for any year or authorize an additional loan repayment for a subsequent year or years. These arrangements may be made part of the initial agreement with the employee. If the repayment is increased or renewed, the CHCO has the discretion to require an additional period of service beyond that set forth in paragraph 7b.
c. More than one loan may be repaid as long as the total for the loan repayments do not exceed any limits set forth in the HCO annual plan or the limits set forth in paragraph 5a.
d. In determining the size of the loan repayments, and whether the loan repayment should be adjusted or renewed, the following factors shall be considered: (1) the position involved, (2) the value of the candidate or employee to the organization, (3) the difficulty in recruiting the candidate or retaining the employee, (4) how far in advance GAO can obligate funds, and (5) budgetary constraints, if any.
May 13, 2009 2537.1
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6. Method of Loan Repayments.
a. All loan repayments (less applicable taxes) will be made directly to the holder of the loan on behalf of the employee.
b. Loan repayments for retention will be paid annually as a lump sum payment at the end of the fiscal year for which the authorization is given.
c. Any loan repayment for recruitment purposes will begin after the candidate enters on duty with GAO.
7. Service Agreements.
a. All recipients must sign a written service agreement to complete a specified period of employment with GAO and to reimburse GAO for loan repayment benefits as specified in paragraph 9.
b. The minimum period of employment to be established under a service agreement is 3 years, regardless of the amount of loan repayment authorized. The period can be increased at GAO’s discretion if the loan repayment is increased or renewed.
c. The service agreement also will specify the level of performance to be maintained and may specify any other conditions of employment GAO determines to be appropriate, such as, but not limited to, the employee’s position, the duties he or she is expected to perform, and work schedule.
d. With the exception of absence due to uniformed service or compensable injury, 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 will be extended by the total amount of time in nonpay status. Each 8 hours of nonpay time shall extend the service completion date by 1 day.
e. A service agreement under this authority must specify that the agreement in no way constitutes a right, promise, or entitlement for continued employment or, if appropriate, noncompetitive conversion to a permanent appointment.
f. GAO may renew or increase the amount of any repayment authorized in any service agreement or extend the period of such repayment with or without requiring the employee to enter into a new service agreement.
8. Loss of Eligibility for Loan Repayments.
An employee receiving loan payment benefits will be ineligible for continued benefits if the employee
a. separates from GAO;
b. does not maintain, as required in the service agreement, the specified level of performance on the most recent performance appraisal of record;
c. violates any of the conditions of the service agreement; or
d. is determined by the CHCO to have defaulted on the student loan prior to or during the period of the agreement with GAO.
9. Employee Reimbursements to the Government.
2537.1 May 13, 2009
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a. Except as provided in paragraphs 9d and 9e, an employee who fails to complete the period of employment established under a service agreement will be indebted to the federal government and must repay to GAO the gross amount of any loan repayments made by GAO to a lending institution on behalf of the employee. Repayment is required even when an employee leaves GAO for employment in another federal agency.
b. Failure to complete the period of employment established under a service agreement occurs when the employee’s service with GAO terminates before completion of the period of employment specified in the service agreement because
(1) the employee is separated involuntarily on account of performance or misconduct, or a negative suitability determination; or
(2) the employee leaves GAO voluntarily, even if to take another position in the federal service.
c. If an employee fails to reimburse GAO the amount owed under paragraph 9a, a sum equal to the amount outstanding shall be recovered from the employee under applicable regulations for collection by offset from an indebted government employee, or governing debt collection if the individual is no longer a federal employee (see GAO Order 0254.1, Debt Collection).
d. An employee does not have to repay the amount of any student loan repayment made by GAO when the employee fails to complete a period of employment established under a service agreement because the employee is involuntarily separated for reasons other than performance or misconduct.
e. The Comptroller General 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. Waivers of indebtedness under this program must be requested by the employee in writing to the CHCO (see GAO Order 0254.1, Debt Collection, ch. 8, Waiver).
10. Employee Responsibilities.
The employee is responsible for
a. making loan repayments on the portion of the loan that continues to be the responsibility of the employee;
b. paying any federal, state, and local income taxes and the employee’s share of applicable employment taxes resulting from the loan repayments (note: GAO will withhold applicable taxes through the National Finance Center (NFC) for any loan repayment);
c. notifying HCO (which processes loan payments through NFC) of any changes in
(1) outstanding student loan balance, and/or
(2) lending institution account number (i.e., specifically linked to employee’s student loan account number);
d. signing a service agreement as specified in paragraph 7; and
e. reimbursing GAO, as specified in paragraph 9, if he or she fails to complete the period of employment established under the service agreement.
DEPARTMENT OF COMMERCE REPAYMENT OF STUDENT LOANPOLICY
Number: DAO 202-957 Effective Date: 2005-06-03
SECTION 1. PURPOSE.
.01 Title 5 United States Code (U.S.C.) 5379 and accompanying regulations found at 5 Code ofFederal Regulations (CFR) 537, authorize agencies to repay student loans to recruit or retainhighly qualified professional, technical, or administrative personnel. This DepartmentAdministrative Order (DAO) further authorizes Department of Commerce (the Department)operating units to make such payments. Payments are to be made by direct payment to theeducational or lending institution on behalf of the employee and are not authorized asreimbursement to an employee for payments made by the employee prior to entering into aStudent Loan Repayment Service Agreement with the agency.
.02 This revision increases the annual and aggregate limits on student loan repayments byagencies, pursuant to changes made by Public Law (P.L.) 108-123.
SECTION 2. POLICY.
Heads of operating units are delegated the authority to make the determination to repay astudent loan as a recruitment or retention incentive. A total of up to $60,000.00 before taxesmay be repaid for any eligible employee. Payments are not to exceed $10,000 before taxes in acalendar year. This authority may be re-delegated by operating unit heads to appointing officialsdesignated in DAO 202-250. Heads of operating units or their designees must develop anoperating unit implementation plan which incorporates all the elements of this DAO and includesoperating unit specific elements, so long as those elements do not arbitrarily restrictparticipation in the program. The implementation plan, at a minimum, must identify approvingauthorities, and should further define the criteria in sections 6 and 7 that are specific to theoperating unit. These officials also have the authority to require employee reimbursement ofagency loan payments made on their behalf when one or more of the conditions apply asescribed in Section 12. of this Order.
SECTION 3. LABOR-MANAGEMENT RELATIONS.
In organizations where employees are represented by a labor organization accorded exclusiverecognition, management is obligated to notify the labor organization of its intent to implementthis policy and negotiate in good faith, as appropriate.
SECTION 4. COVERAGE.
.01 An operating unit may offer a student loan repayment incentive in order to fill a positionwith a highly qualified candidate or to retain a highly qualified employee. This incentive appliesto employees as defined in 5 U.S.C. 2105 serving in full or part-time positions including:
a. temporary employees serving on appointments leading to conversion as term or permanentappointments;
b. term employees with at least three years remaining on their appointment;
c. permanent employees, including employees serving on full-time excepted appointments underthe General Schedule, unless serving under a Schedule C appointment; and
d. employees serving on excepted appointments with conversion to term, career, or careerconditional appointments (including, but not limited to Career Intern or Presidential ManagementFellow appointments).
.02 Per 5 U.S.C. 5379(a) (2), a student loan may not be paid on behalf of an employeeoccupying a position excepted from the competitive service because of its confidential, policy-
determining, policy-making, or policy-advocating character, such as Schedule C appointments.
SECTION 5. DEFINITIONS.
The terms referred to in the policy have the following meanings:
a. "Student Loan" means a loan made, insured, or guaranteed under parts B, D, or E of Title IVof the Higher Education Act of 1965 (as amended by the Higher Education Act of 1998, P.L. 105-244, October 7, 1998). This legislation covers major Federal student financial aid programsincluding (but not limited to) Stafford Loans, Supplemental Loans, Plus Loans, FederalConsolidation Loans, Defense Loans made before July 1, 1972, National Direct Student Loansmade between July 1, 1972, and July 1, 1987, and Perkins Loans. Also included are HealthEducation Assistance Loan Program loans, Nursing Student Loan Program loans, and HealthProfession Student Loan Program loans made or insured under the Public Health Service Act.
b. "Service Agreement" means a written agreement between the operating unit and anemployee under which the employee agrees to a specified period of employment within theDepartment of not less than three years but no more than 15 years, depending upon theamount of the reimbursement by the operating unit, in return for payments toward a studentloan previously taken out by the employee. The service agreement period begins when the firstpayment is made by the Department to the holder of the loan.
SECTION 6. CRITERIA FOR ELIGIBILITY.
.01 The criteria for authorizing repayments of student loans are:
a. For Recruitment:
1. the candidate possesses qualifications which meet an important need of the operating unit, asdetermined by the operating unit;
2. the candidate would not accept the position without receiving the student loan repaymentincentive;
3. the candidate is not in default on repayment of the student loan; and
4. the student loan was used to pay tuition and related expenses for course work taken by theapplicant.
b. For Retention:
1. the recipient is an employee of the operating unit;
2. the operating unit determines that the employee possesses high or unique qualifications ormeets a special need of the operating unit;
3. in the absence of offering the student loan repayment benefit, the employee would very likelyleave for employment outside the Department;
4. the departure of the employee would affect the agency's ability to carry out an activity orfunction deemed essential to the agency's mission;
5. the employee has no performance or conduct actions pending against him/her;
6. the employee's most recent performance appraisal of record using the Department'sperformance appraisal system established under part 430, subpart B of Title 5, is at least levelthree ("Fully Successful") on a five-level system, or "Eligible" or "Meets or exceeds expectations"under a two-level system;
7. the employee is not in default on repayment of the student loan; and
8. the student loan was used to pay tuition and related expenses for course work taken by theemployee.
.02 Operating units may include additional criteria in their plan so long as the criteria are notused to arbitrarily restrict access to the program.
SECTION 7. CRITERIA FOR AMOUNT AND TIMING OF LOAN REIMBURSEMENT PAYMENTS.
In determining the amount of the loan reimbursement payments and the timing of thepayments, operating units must consider the following factors:
a. the employee's current or potential value to the operating unit;
b. budgetary restraints such as how far in advance funds can be committed;
c. if payment extends beyond the current fiscal year, repayments are subject to the availabilityof funds;
d. the special skills the individual brings to the operating unit and how those skills enhance theability of the organization to meet mission requirements; and
e. any other criteria or circumstances which enhance the value of the employee to the operatingunit.
SECTION 8. APPLICATION AND SELECTION PROCEDURES.
Where operating units decide to allow employees to apply for this repayment benefit, they mustpublicize the application procedures to employees. The procedures must describe the thresholdqualifications to meet the "high or unique qualifications" or "special need of the operating unit"standard for retention and the evidence required to show that the applicant/employee would belikely to leave the Department absent receiving the student loan repayment benefit. Forexample, the operating unit may determine that only employees in scientific and engineeringpositions at grades GS-5 through GS-9 meet both criteria, "high or unique qualifications" and"likelihood of leaving the Department" based on their pay being significantly below the marketrate. In identifying certain categories of positions, the operating unit may further limit eligibilityto those employees with their most recent performance rating at or above a certain level, forexample, "commendable" or above for a five-level system. After establishing those criteria, theoperating unit must then describe how selections will be made from those employees meetingthe eligibility criteria. For example, selections may be based on length of service with theFederal Government, and/or the operating units, or based on other considerations such as theamount or recency of the outstanding debt. Regardless, the criteria must be applied uniformlyand equally and be consistent with and adhere to the merit system principles. Operating unitemployees should be notified regarding any changes in the application procedures prior to thechanges becoming effective.
SECTION 9. JUSTIFICATION FOR STUDENT LOAN REPAYMENTS.
Requests for approval of a student loan repayment incentive must include a written justificationaddressing each of the criteria for eligibility and state the amount to be reimbursed. Repaymentrequests for new hires must be submitted by an authorized operating unit official and receivedby the servicing human resources office before the candidate actually enters on duty. Therequest must also identify other compensation options which have been considered and thereasons for their use or rejection.
SECTION 10. STUDENT LOAN REPAYMENT SERVICE AGREEMENT.
Before the operating unit initiates repayment of the student loan, the current or newly-appointed employee must sign a service agreement which requires completion of a minimumthree year period of employment with the Department, if the amount to be reimbursed is for atotal of $20,000 or less. For each additional $10,000 increment, the operating unit reimburses,a minimum of one, but not more than three, additional years of service must be added to theservice agreement. The following table illustrates the application of the service agreement
$30,001 - $40,000 1 additional year(5 years total)
3 additional years(9 years total)
$40,001 - $50,000 1 additional year(6 years total)
3 additional years(12 years total)
$50,001 - $60,000 1 additional year(7 years total)
3 additional years(15 years total)
a. The additional service requirement is only applied when the reimbursement dollar threshold asshown in the Service Requirement Table is exceeded. Operating units are not authorized toprorate the service requirement to correspond with amounts that do not meet the next higher$10,000 increment.
b. Operating units may establish service requirements which are more restrictive than those inthe Service Requirement Table. For example, an operating unit may require the minimum threeyear service requirement for the first $10,000 reimbursed and an additional one to three yearsfor each additional $10,000 reimbursed. However, they cannot raise the maximum amount forthe minimum three year service requirement above $20,000 or lower the minimum servicerequirement for the full $60,000 reimbursement below seven years or have the maximumservice requirement exceed 15 years. Operating unit plans should include service requirementswhere they differ from the Service Requirement Table or state that their plan will follow theService Requirement Table.
c. For new hires, when determining whether to require the minimum or maximum servicerequirement for each additional $10,000 beyond the minimum three year requirement, theoperating unit should balance the value of the student loan repayment benefit as a recruitingincentive versus the interests of the operating unit in recouping their investment.
d. Where the operating unit utilizes the student loan repayment benefit for current employees,criteria must be included in the operating unit plan for determining whether the minimum ormaximum service repayment amount will be required for each $10,000 increment. For instance,employees with 10 or more years of service with the Department and/or the operating unitmight only be required to serve the one-year minimum for each additional $10,000 increment.
e. The agreement must also indicate the conditions under which the operating unit may recoupstudent loan repayments from the employee which are explained in Section 12, EmployeeIndebtedness to the Department.
f. The agreement must also contain a statement clarifying that the agreement in no wayconstitutes a right, promise, or entitlement for continued employment or noncompetitiveconversion to the competitive service.
g. The agreement must indicate that subsequent years repayment are subject to availability offunds, and are not guaranteed.
h. The Repayment Agreement is to be sent to the servicing human resources office with a
transmittal memorandum for payment and documentation which verifies the employee's liabilityfor the loan and the outstanding balance. A copy of the service agreement will be filed in theleft side of the employee's Official Personnel Folder for the duration of the agreement. If theamount of the reimbursement by the operating unit is increased from the original agreement,the service agreement must be extended consistent with the Service Requirement Table. Inaddition, the service agreement must be modified to reflect the increased benefit and filed inthe left side of the employee's Official Personnel Folder. See Appendix A for a suggestedStudent Loan Repayment Service Agreement format.
i. The service agreement period begins on the date of the first payment by the operating unit tothe lending institution.
SECTION 11. LOSS OF ELIGIBILITY FOR LOAN REPAYMENT BENEFITS.
An employee receiving loan repayment benefits from an operating unit will be ineligible forcontinued benefits if the employee:
a. separates voluntarily or involuntarily from the Department;
b. separates from the operating unit to another operating unit within the Department, if statedin the service agreement;
c. does not maintain an acceptable level of performance, as determined under standards andprocedures prescribed by the operating unit head; or
d. violates any of the conditions of the service agreement.
SECTION 12. EMPLOYEE INDEBTEDNESS TO THE DEPARTMENT.
.01 An employee is deemed indebted to the Department for the amount of student loanrepayments paid on the employee's behalf up until the time of separation if the employee:
a. is separated from the Department involuntarily on account of misconduct or poorperformance; or
b. leaves the Department voluntarily without meeting the terms of the service agreement.
.02 This indebtedness provision also applies to an employee voluntarily separating from theDepartment to enter into the service of any other Federal agency.
SECTION 13. WAIVER OF EMPLOYEE INDEBTEDNESS.
Heads of operating units may waive, in whole or in part, the right of recovery of an employee'sdebt incurred for failure to meet a requirement of the service agreement if he or she determinesthat recovery would be against equity and good conscience or against the public interest, asdetermined by the operating unit. This authority may be re-delegated to an authorizedappointing official within the operating unit.
SECTION 14. WAIVER APPLICATION PROCESS.
Repayment may be wholly or partially waived at the discretion of the operating unit head ifrecovery would not be in the public interest or would be against equity or good conscience (e.g.,when an employee separates from service due to a disability).
The employee or former employee who fails to meet the terms of the Repayment ServiceAgreement may request a waiver of the debt. If the individual remains an employee of theagency, the employee must submit a written waiver request through their immediate supervisorto the head of the operating unit or the authorized appointing official within the operating unitwith delegated waiver approval authority. Individuals who are no longer employed by theoperating unit should submit a written waiver request directly to the head of the operating unitor the authorized appointing official delegated waiver approval authority. The request shouldcontain a copy of the Repayment Service Agreement, the bill presented by the agency to the
current or former employee or verification of the exact amount of debt where a bill has not beengenerated, and a narrative explaining why recovery by the agency would be against equity andgood conscience or against the public interest. Collection of the debt will be suspended pendingthe decision on the waiver request. Operating unit plans must also include waiver procedures.
SECTION 15. PROCEDURES FOR PAYMENT.
.01 The National Finance Center (NFC), the Department's Personnel/Payroll System, will processrepayments of student loans through their manual pay process. The loan repayments will bemade as lump sum payments. The loan repayments will be treated as "supplemental wages" forpayroll purposes; NFC will withhold a flat 28% for Federal tax, a flat 2% for State tax (ifapplicable), a flat 2% for City/Local tax (if applicable), a flat 6.2% for OASDI taxes (ifapplicable) and 1.45% for Medicare tax from the gross amount of the repayment. The netrepayment will be sent directly to the lending institution. For example, where an operating unitis paying $10,000 of an employee's student loan, NFC will withhold 28% for Federal tax, 2% forState tax, 2% for City/Local tax, 6.2% for OASDI tax, and 1.45% for Medicare tax, and remitthe net to the lending institution.
.02 NFC will establish a transaction code for the Earnings and Leave Statement so that theamount of the student loan repayment will be reflected on the employee's Earnings and LeaveStatement.
SECTION 16. OPERATING UNIT RESPONSIBILITY FOR LATE FEES.
Operating units are not responsible for late fees assessed by the holder of an employee'sstudent loan. Operating units should, to the extent possible, ensure that the timing of theirpayments to the lender coincides with the date the loan payment is due.
SECTION 17. RELATIONSHIP TO OTHER RECRUITMENT/RETENTION INCENTIVES.
A student loan repayment incentive may be paid in addition to a retention allowance, orrecruitment and relocation bonus. The period of service required by a Recruitment Bonus ServiceAgreement or a Relocation Bonus Service Agreement are exclusive from the period of servicerequired under a Student Loan Repayment Service Agreement. However, the specified period ofservice in a Student Loan Repayment Service Agreement may begin at the same time and runconcurrently with other service agreements.
SECTION 18. ANNUAL RECONSIDERATION OF PAYMENT AMOUNT.
Operating units may reconsider individual employee payment amounts on an annual basis ifbudgetary considerations are an issue, if such an option is included in the employee serviceagreement.
SECTION 19. SEPARATION OF AN EMPLOYEE RECEIVING THE STUDENT LOANREPAYMENT BENEFIT.
The operating unit of each separating employee who receives the student loan repaymentbenefit must notify the servicing human resources office of the impending separation date of theemployee. The notification must indicate whether the employee has fulfilled the terms of theservice agreement. If the employee has not fulfilled the terms of the agreement, the operatingunit must indicate whether it will seek reimbursement and the amount it is seeking. If theoperating unit waives the indebtedness amount, a signed waiver must be submitted from anauthorized official containing the amount to be waived and a brief statement indicating whyrequiring the employee to reimburse the operating unit would be against equity and goodconscience or against the public interest. Where the employee requests a waiver, the operatingunit must notify the servicing human resources office immediately upon receiving the request. Ifthe operating unit approves the waiver request, a copy of the approved waiver request, withthesignature of the approving official, must be forwarded to the servicing human resourcesoffice and a copy provided to the employee. If the waiver request is disapproved, the operatingunit must provide the servicing human resources office with documentation signed by thedeciding official that the waiver request was disapproved. The employee must receive writtennotification of the disapproval.
SECTION 20. RECORDS AND DOCUMENTATION REQUIREMENTS.
.01 Each operating unit must develop and maintain a policy for the reimbursement of studentloans. At a minimum, each policy must contain all the elements of this DAO plus an explanationof the selection process for determining which prospective and current employees shall receivethe student loan reimbursement benefit.
.02 Documentation must be maintained by the operating unit for each employee receiving thereimbursement benefit for a period of three years after the date of the final payment to theeducational or lending institution (if an employee leaves the operating unit within the three yearperiod of the employment agreement, the retention period is extended indefinitely pendingcollection of any outstanding debt). The documentation must contain, at a minimum, the name,title, series and grade of the employee receiving the benefit, the name of the educational orloan institution receiving the reimbursement, the amount of the reimbursement, the date thefirst and last payments were made by the operating unit, the justification for awarding thereimbursement, and a signed copy of the service agreement.
SECTION 21. REPORTING REQUIREMENTS.
Before December 1 of each year, operating units must submit a written report to theDepartment's Office of Human Resources Management stating:
a. the number of employees selected to receive the benefit;
b. the job classifications of the employees selected to receive the benefits; and
c. the cost to the operating unit of providing the benefits under this policy.
SECTION 22. PROGRAM OVERSIGHT.
Operating units are required to regularly monitor and review the use of the student loanrepayment benefit to ensure that payments conform to the criteria established under thisguidance. The Department will conduct such oversight as necessary to ensure conformance withthis policy.
SECTION 23. EFFECT ON OTHER ORDERS.
This Order supersedes Department Administrative Order 202-957, dated July 18, 2003, and anyoperating unit policy directives on these matters.
____________________________________Director for Human Resources Management
Approved:
_______________________________Chief Financial Officer and AssistantSecretary for Administration
Office of Primary InterestOffice of Human Resources Management
APPENDIX A
DEPARTMENT OF COMMERCESTUDENT LOAN REPAYMENT SERVICE AGREEMENT
EMPLOYMENT TERM____________________________________________________________REQUIRED PERIOD OF SERVICE___________________________________________________ TYPE OF LOAN__________________________________________________________________NAME/ADDRESS OF LOAN HOLDER______________________________________________TOTAL LOAN REPAYMENT AMOUNT______________________________________________TOTAL AMOUNT TO BE PAID IN CURRENT FISCAL YEAR (payment may be renewed for eachfiscal year until the total repayment amount is reached, subject to availability of funds) _____________________________
(Attach documentation showing that this is an authorized school loan in accordance with thedefinition in Title 5 U.S.C. 5379. The documentation must verify both the employee's liabilityand the outstanding balance. )
In return for accepting the benefit of the loan repayments specified above, I, the employee,hereby ACCEPT EMPLOYMENT WITH/AGREE TO REMAIN IN THE EMPLOYMENT OF the UnitedStates Department of Commerce, [NAME OF ORGANIZATIONAL UNIT] (the "AGENCY") under thefollowing terms:
1. I will remain an employee of the AGENCY for a period of not less than three (3) years fromthe date of the first payment by the AGENCY under this agreement.
2. If, within said three year period I separate from the employment of the AGENCY, then I shallbe indebted to, and hereby oblige myself to repay, the AGENCY for all funds received from orloan repayments made by the AGENCY as specified herein above.
3. Notwithstanding the foregoing, it is agreed that I shall not be so indebted and obligated if myseparation of employment from the AGENCY is for any of the following reasons:
a. Acceptance of a position with another organizational unit within the Department ofCommerce, provided, however, I remain within the employment of the Federal Government forthe balance of said three-year period;
b. Separation from employment with the AGENCY is for the convenience of the FederalGovernment; or
c. Such other conditions, which as determined within the sole discretion of the head of theAGENCY or his/her delegate, are found to be against equity and good conscience or contrary tothe public interest, so made in writing by the head of the AGENCY or his/her delegate.
4. If I separate from the employment of the AGENCY within said three (3) year period for anyreason, it is agreed and understood that the AGENCY is immediately released from anyobligation to continue making such loan repayments from the earlier of: (a) the date ofseparation from the employment of the AGENCY; or (b) the date of notice to the AGENCY ofsaid impending separation of employment. The AGENCY may also cease making such loanrepayments if: (a) I do not maintain at least a satisfactory rating on my most recentperformance appraisal; or (b) I violate any other condition of this Service Agreement.
5. Should I become so indebted to the AGENCY, I agree that the AGENCY may recover theentire amount of any and all funds received from or loan repayments made by the AGENCY asspecified herein above, and that such indebtedness shall bear interest from the date determinedin accordance with Paragraph 3, above, at a rate equal to the coupon issue yield equivalent (asdetermined by the Secretary of Treasury) of the average accepted auction price for the lastauction of fifty-two (52) weeks United States Treasury bills settled immediately prior to saiddate. (This is the judgment rate of interest as set forth in 28 U.S.C. 1961.) The agency mayalso assess and collect other administrative costs and expenses as may be incurred by theAGENCY in the collection of such indebtedness.
6. I am responsible for any late fees assessed by the holder of my student loan for untimelypayments made to the lender by the Department of Commerce.
7. I am responsible for any tax consequences or other obligations which may result from eitherthe loan repayments made by the AGENCY hereunder and/or termination of such repaymentsand/or the collection of any indebtedness.
8. This Service Agreement in no way constitutes a right, promise, or entitlement for continuedemployment or noncompetitive conversion to the competitive service.
9. Repayments are subject to availability of funds, and are not guaranteed.