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Student Loan Repayment Program



This instruction provides policy and guidance for implementing the Student Loan Repayment Program. This program is intended to facilitate the recruitment and retention of highly-qualified employees by allowing agencies to repay part or all of their Federally insured student loans.


Title 5, U.S. Code, Section 5379
Title 5, Code of Federal Regulations, Part 537


Student Loan: A loan made, insured, or guaranteed under parts B, D, or E of Title IV 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.

Loans covered under The Higher Education Act include such loans as:

  • Federal Stafford Loans -- including Federal subsidized, Federal unsubsidized, direct subsidized, and direct unsubsidized loans;
  • Federal Plus Loans -- Federal and Direct Plus Loans;
  • Federal Consolidation Loans -- direct subsidized, direct unsubsidized, and Federal Consolidation Loans;
  • Defense Loans -- made before July 1, 1972;
  • National Direct Student Loans -- made between 7/1/72 and 7/1/87;
  • Federal Perkins Loans.

Loans covered under the Public Health Service Act include loans made under:

  • The Nursing Student Loan Program;
  • The Health Profession Student Loan Program; and
  • The Health Education Assistance Loan Program.

Federal Direct Student Loan: The U. S. Department of Education is the lender for these loans. Direct loans include Federal Direct PLUS loans and Federal Direct Stafford loans.

Federal Family Education Loan Program: These loans are insured by the Department of Education. Loans are privately issued by a bank, credit union, or other lender that participates in the Federal Family Education Loan Programs.

Subsidized Loan: The U.S. Government pays the interest on the loan while the student is in school, during the 6-month grace period, and during periods of authorized deferment.

Unsubsidized Loan: The student is responsible for paying the interest accrued while the student is in school, during the 6-month grace period, and during authorized periods of deferment.


The following are eligible for student loan repayment assistance:

  • Permanent employees;
  • Employees serving a term appointment with at least 3 years remaining on their appointment;
  • Employees serving in excepted appointments with non-competitive conversion to term, career, or career-conditional appointments (e.g., Presidential Management Interns, VRAs, and career interns);
  • Temporary employees under 5 CFR 315.704 who are serving on appointments leading to conversion to term or permanent appointments.

NOTE: Employees receiving a physicians' comparability allowance (PCA) under 5 CFR 595.105(e) are eligible. However, the amount of their PCA must be reduced by an amount equal to any loan repayment assistance received under this program.

Employees serving in confidential, policy determining, policymaking, or policy advocating positions (e.g., Schedule C employees) are not eligible.


Eligible employees may be considered for loan repayment assistance up to $10,000 per calendar year, with a $60,000 lifetime maximum for any individual. More than one loan may be repaid so long as the combined repayments do not exceed these limits. Assistance may be provided for both recruitment and retention purposes. Recommendations will normally be made by the immediate supervisor, and approval will be at the discretion of the next higher level.


Loan repayment may be authorized upon determination that, in the absence of loan repayment benefits, the agency would have difficulty filling a position with a highly qualified candidate. Evidence of need may be based on:

  • The success of recent efforts to recruit suitable candidates for similar positions, including such indicators as offer acceptance rates, the proportion of positions filled, and the length of time required to fill positions;
  • Recent turnover in the same or similar positions;
  • Labor market factors that affect the ability to recruit for similar positions;
  • Any special qualifications needed.

This determination must be in writing and must document the criteria used to determine the amount of loan repayment benefits. Managers may consider the following criteria in deciding the amount:

  • The severity of the recruiting problem;
  • Salary levels reported in published salary surveys for comparable non-Federal positions;
  • The importance/criticality of the position to be filled and the effect on the agency if it is not filled or if there is a delay in filling it;
  • Current salary of the candidate;
  • Salary documented in a competing job offer;
  • The disparity in cost of living between the candidate's current residence and the proposed duty station;
  • The projected cost of further recruitment effort if the candidate does not accept the position;
  • The extent of the individual's past training and experience that serves to qualify him/her for the position;
  • Budget availability.

Each determination for recruitment purposes and the amount to be paid must be made before the employee enters on duty.


Loan repayment may be authorized upon determination that, in the absence of loan repayment benefits, the agency would have difficulty retaining a highly qualified employee. Evidence of need may be based on--

  • The unique or high qualifications of the employee or the special need for the employee's services that makes it essential to retain him/her;
  • The likelihood the employee would leave for employment outside the Federal service if he/she does not receive loan repayment benefits;
  • The extent to which the employee's departure would affect the agency's ability to carry out an activity or perform a function that is deemed essential to the Agency's mission.

This determination must be in writing and must document the criteria used to determine the amount of the loan repayment benefit. Managers may consider the following criteria in deciding the amount:

  • Salary levels reported in published salary surveys for comparable non-Federal positions;
  • Salary documented in a competing job offer;
  • The importance/criticality of the position and the effect on the agency if the employee were to leave;
  • The projected cost of recruitment and training associated with replacement of the employee;
  • The length of service of the employee with the [agency];
  • Budget availability.

Termination of Benefits

An employee receiving loan repayment benefits will be ineligible for continued benefits if he/she--

  • Separates from the agency for any reason;
  • Fails to maintain a fully satisfactory level of performance; or
  • Violates any of the conditions of the service agreement.


Before any loan repayment may be made, the employee must sign a written agreement to serve a minimum of 3 years with the employing agency, regardless of the amount of repayment authorized. This 3-year period will begin when the first payment is made to the holder of the loan. Any further repayment made after the initial agreement has been completed will extend the service agreement by 1 additional year for each additional payment made. A model service agreement is at attachment 1.

The agreement may specify employment conditions considered appropriate, such as, but not limited to, the employee's position and the duties he/she is expected to perform, work schedule, or level of performance. However, the service agreement in no way constitutes a right, promise, or entitlement to continued employment or noncompetitive conversion to the competitive service, nor does it limit management's right to take corrective or disciplinary actions as otherwise appropriate.

Failure to Complete a Service Agreement

An employee who, voluntarily or because of performance or misconduct, fails to complete the agreed-upon period of service must refund the full amount of benefits received during the initial 3-year period. Employees who fail to complete the period of service under a 1-year extension (e.g., 4th year, 5th year), must repay the amount of the benefits received in the extension year only. If an employee fails to reimburse the agency, the amount outstanding will be recovered from the employee under established debt collection procedures.

Waiver of Repayment

Repayment may be wholly or partially waived at the discretion of the [agency] if recovery would not be in the public interest or would be against equity and good conscience. In making this determination, the [agency] will take into account consistency, fairness, and the cost to the taxpayer of recovering monies owed to the government. A waiver may be considered, but is not automatic, when an employee accepts a position in another operating division of the [agency].

When an employee is separated by death or disability retirement, or is unable to continuing working because of disability evidenced by acceptable medical documentation, repayment is automatically waived.


Payments will be made directly to the lending institution holding the loan on behalf of the employee. One payment will be made each year for the duration of the service agreement. Payments may be applied only to indebtedness outstanding at the time the agreement is signed, and no payment may be made before an employee enters on duty.

Loan repayment benefits made under this authority are in addition to basic pay. These benefits are subject to Federal income tax, FICA and Medicare withholding, and any State or local income tax that may be applicable. Tax withholdings will be deducted at the time payment is made.


Employing offices will--

  • comply with merit system principles when selecting employees to receive loan repayment benefits and consider the need to maintain a balanced and diverse workforce;
  • ensure that their responsibilities under labor relations statutes and union agreements are fulfilled;
  • verify that a student loan is Federally insured and eligible to be repaid under this program (see Attachment 2);
  • verify the current loan balance at time of entrance on duty and any subsequent extensions of the service agreement (see Attachment 2);
  • reach agreement with the holder on terms of payment;
  • prepare the written justification for the loan and maintain case files (see Attachment 3); and
  • provide information needed to process the reimbursement request to the Program Support Office, Division of Payroll (see Attachment 4).

Servicing Personnel Offices will--

  • develop and disseminate policies governing the use of the loan repayment program and provide technical guidance to employing offices concerning its administration;
  • maintain a record of each determination made under this authority and retain the record for 3 years (files may be destroyed after 3 years); and
  • report annually to the Office of Human Resources the number of employees receiving benefits under this authority, their job classifications, and the amount of benefits.

Employees will--

  • be responsible for making loan payments on the portion of the loan that continues to be their responsibility;
  • be responsible for any income tax obligation resulting from the loan repayment benefit.

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