Federal Student Loan Repayment Program

The federal student loan repayment program permits agencies to repay federally insured student loans as a recruitment or retention incentive for candidates or current employees of the agency. The program authorizes agencies to set up their own student loan repayment programs to attract or retain highly qualified employees.

Be aware that employees are not automatically entitled to a student loan repayment. Agencies have discretionary authority to repay certain types of federally insured student loans as a recruitment or retention incentive for highly qualified candidates or current employees.


Current Federal employees or potential candidates may contact their current or potential employing agency for information on how to apply for the student loan repayment program. Each participating agency must develop a plan that describes how it will implement the program.

Maximum Amount

For any one individual, an agency may agree to provide student loan repayment benefits of up to $10,000 per calendar year, subject to a cumulative maximum of $60,000 per employee. The employing agency makes student loan payments directly to the loan holder. Student loan payments are not paid to employees.

Future Student Loans

An agency may not agree to repay any future student loans accrued by an employee. An agency may agree only to make payments on those student loans taken out prior to the student loan repayment agreement.

In Addition to Existing Bonuses and Incentives

Agencies may offer student loan repayment benefits in conjunction with recruitment and relocation bonuses and retention allowances. Agencies may also use student loan repayment benefits in conjunction with a physicians comparability allowance (PCA). However, regulations require that the amount of the PCA be reduced by the amount of the student loan repayment.

Recruiting from Other Federal Agencies

The intent of the federal student loan repayment program is to help agencies recruit individuals for federal service, not for agencies to compete with one another for employees. Thus, agencies should not use this authority to recruit current federal employees from other agencies.

Retaining Employees Leaving for Another Federal Agency

Similarly, agencies may not offer to repay a student loan for an employee who is likely to leave for any other position in any branch of the federal government.

Service Agreements

An employee receiving this benefit must sign a service agreement to remain in the service of the paying agency for a specified period. The minimum period of service an agency may require an employee to fulfill in order to receive student loan repayment benefits is 3 years. Agencies may require service agreements of more than 3 years.

Agencies should specify the beginning date of the service requirement in the candidate or employee service agreement. The service requirement begins at the time specified in the service agreement, but may begin no earlier than the time the service agreement is signed. For example, an agency could make the student loan repayment benefits contingent on an employees completion of a basic training program. In this example, the employee enters federal service and completes a 90-day training course. The service agreement may state that, if the employee successfully completes the course, the service requirement begins at that time.

Service requirements may not be prorated according to the dollar amount of the student loan repayment benefit offered. The minimum service requirement is established in statute and may not be prorated. In addition, an employee must reimburse the paying agency for all benefits received if he or she is separated voluntarily or involuntarily for cause or poor performance. In addition, an employee must maintain an acceptable level of performance in order to continue to receive repayment benefits.

Employee Reimbursement If Leaving Agency

Occasionally, an employee may leave the paying agency for another federal agency before completion of the service requirement. Under these circumstances, the employee is not required by law to reimburse the paying agency unless specified in the service agreement. However, the gaining agency is not obligated to make any loan payments previously agreed to by another agency.

Employee Reimbursement If Leaving Federal Service

If an employee voluntarily separates from federal service and does not complete the terms of the service agreement, he or she is obligated to reimburse the paying agency for the full amount of the loan repayment benefits provided (gross before any tax deductions from the loan payment). For example, if an employees agreement states that he or she will receive $10,000 per year for 3 years, and the employee leaves with 6 months remaining on the service agreement after receiving $25,000 in loan repayment benefits, the employee must reimburse the paying agency for $25,000.

The same rule applies even if an employee fails to complete the service requirement because of disability retirement or leaves federal service because of a disabling condition he or she is required to reimburse the government for all loan payments received. However, agencies may waive recovery if they determine it to be against equity and good conscience or contrary to the public interest. Agencies are responsible for making their own determination regarding what against equity and good conscience means. But in doing so, agencies should take into account consistency, fairness, and the cost to taxpayers of recovering monies owed to the government.

Add Comment