The purpose of the student loan repayment benefit is to help agencies recruit and retain highly skilled workers for positions that are difficult to fill. It is a discretionary recruitment and retention tool available to managers. The student loan repayment benefit is not an entitlement nor is it something for which employees can apply.
When can student loan repayment benefits be offered?
As stated in OPM's regulations, the student loan repayment benefit may be offered in the following circumstances:
- Recruitment. When in absence of that benefit, USGS would encounter difficulty in filling the position with a highly qualified candidate from outside the Federal sector.
- Retention. When the high or unique qualifications of the employee or a special need of the USGS for the employee's services make it essential to retain the employee and, in the absence of the benefit, the employee would be likely to leave for employment outside the Federal sector.
Some employees are not eligible to receive the benefit (e.g., temporary employees, term employees with less than 3 years remaining on their appointments, Schedule C employees; and employees who have defaulted on their loans).
What can be paid?
Only federally insured or guaranteed loans authorized by the Higher Education Act of 1965 and the Public Health Service Act may be repaid. The amount that can be paid is discretionary and comes from program office funds. An agency can authorize up to a gross amount of $10,000 a year and a lifetime total of $60,000. Payments are made annually. Employees must continue to make loan repayments on the portion of the loan that continues to be their responsibility.
What are the tax implications?
The gross payment is considered taxable income to the employee, and tax withholdings must be deducted or applied at the time the loan repayment is made. Depending on the amount of the repayment, this could be costly for the employee. Therefore, to minimize the impact of tax withholdings on the employee and ensure that he/she does not have to pay the taxes at the time of payment, the DOI Payroll Office will withhold the taxes from the authorized amount and pay the net amount to the lending institution. Since the gross amount is applied to the annual/lifetime total limits and only the net is applied to the remaining loan balance, this means that a portion of the loan balance will remain the employee's responsibility. The gross amount of the repayment is included in the employee's income for tax purposes and will appear on his/her W2 statement. Since DOI is paying the net amount, the employee will have already paid the taxes and will not need to pay them at the end of the year. These paid taxes will also be reflected on the W2 statement.
What happens before the loan can be paid?
In the regions, requests to offer a student loan repayment benefit can be approved by the Regional Executive. At Headquarters, the requests can be approved by an official one SES or SL level below the Associate Director or Deputy Director. Requests for student loan repayment approval will be prepared by USGS managers and supervisors and will address specific payment criteria in writing. The requests must be forwarded through the formal approval and review.
The employee must provide the servicing Human Resources Office with official documentation from the lending institution that certifies the outstanding loan balance (current within the previous 30 days) and that the loan is authorized by the Higher Education Act of 1965 or the Public Health Service Act. Each year, before another payment can be made, the employee must provide this documentation.
In addition, an employee who is offered the benefit must sign a service agreement to remain with the DOI for 3 years. A new service agreement is not needed each year loan repayments are made. If the employee leaves the DOI before he/she completes the service agreement, he/she must reimburse the USGS for the entire gross amount of the loan paid by USGS. If the employee leaves USGS for employment with another DOI bureau, USGS will not continue to pay the benefit and the employee does not need to repay the loan to USGS unless he/she leaves DOI during the service agreement period. Also, if the employee leaves one USGS program office for another USGS program office, the payment may be discontinued but the employee does not need to repay the loan amount already paid by the program office. However, if the employee transfers to another DOI bureau and then leaves the DOI before completing the service agreement, he/she must reimburse the USGS for the entire gross amount of the loan paid by USGS. The service agreement will explain the conditions of receiving the benefit.
For more information please contact your servicing Human Resources Office.