[Federal Register: October 31, 2008 (Volume 73, Number 212)]
[Rules and Regulations]
[Page 64861-64868]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc08-2]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 537
RIN 3206-AK51
Repayment of Student Loans
AGENCY: Office of Personnel Management.
ACTION: Final rule.
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SUMMARY: The U.S. Office of Personnel Management is issuing final
regulations to revise the rules governing the authority to offer
student loan repayment benefits to Federal job candidates or current
Federal employees when necessary to recruit or retain highly qualified
personnel. These revisions include certain policy changes and
clarifications to assist agencies in the administration of the Federal
student loan repayment program.
[[Page 64862]]
DATES: The regulations are effective December 1, 2008.
FOR FURTHER INFORMATION CONTACT: Mark Harrington by telephone at (202)
606-2858; by fax at (202) 606-0824; or by e-mail at pay-performance-
policy@opm.gov.
SUPPLEMENTARY INFORMATION: On January 9, 2007, the U.S. Office of
Personnel Management (OPM) published proposed regulations (72 FR 914)
to revise the rules implementing 5 U.S.C. 5379, which authorizes
agencies to offer student loan repayment benefits to candidates for
Federal jobs or current Federal employees when necessary to recruit or
retain highly qualified personnel. The primary purpose of the revision
was to make part 537 more readable and usable. However, we have also
made substantive changes that will improve the agencies' program
administration and promote alignment between this authority and related
authorities that support recruitment and retention efforts.
The 60-day comment period for the proposed regulations ended on
March 12, 2007. During the comment period, OPM received comments from
four Federal agencies, one union, and two individuals.
Definitions
An agency recommended we clarify the definition of student loan
repayment benefit in Sec. 537.102 by adding a reference to Sec.
537.106(b), which describes student loans that qualify for repayment.
We agree and have added the reference.
We also have made two additional minor revisions in the definitions
section. Specifically, we have added language clarifying that the
definitions in Sec. 537.102 apply only for purposes of part 537. We
also have revised the definition of time-limited appointment to refer
to a ``non-permanent appointment'' rather than an ``appointment of
temporary duration'' to ensure there is no confusion with the use of
the term ``temporary'' in other regulations (e.g., 5 CFR part 316,
subpart D).
Comment on Authorizing Student Loan Repayment Benefits To Retain an
Employee Likely To Leave for a Different Position in the Federal
Service
One agency commented on proposed Sec. 537.105(a)(2)(ii), which
requires an agency to make a written determination that an employee
would otherwise be likely to leave the agency for employment outside
the Federal service and that it is essential to retain the employee
based on the employee's high or unique qualifications or a special need
of the agency before authorizing student loan repayment benefits to
retain a current agency employee. The agency recommended we remove the
requirement that the employee be likely to leave for employment outside
the Federal service to permit agencies to offer student loan repayment
benefits to retain an employee likely to leave for a different position
in the Federal service. The agency noted the authorizing statute does
not prohibit agencies from offering student loan repayment benefits to
current employees who are likely to leave for a different position in
the Federal service.
Comments on Authorizing Student Loan Repayment Benefits To Recruit an
Employee From Another Federal Agency
Two agencies, one union, and one individual submitted comments in
opposition to proposed Sec. 537.105(c), which provides that an agency
may not authorize student loan repayment benefits to recruit an
individual from outside the agency who is currently employed in the
Federal service. One agency and the union commented that it is
inequitable for a newly appointed employee to be eligible for student
loan repayment benefits while an employee transferring from another
Federal agency is not. The agency stated this provision will make it
extremely difficult for agencies to recruit for mission-critical
positions from other agencies. The agency also commented that all
Federal agencies compete with each other for job candidates and each
agency offers different benefits and opportunities based on various
factors, including budget and certain flexibilities available solely to
the particular agency. The union asserted the focus should be on
filling the position with the best qualified individual, with all the
benefit options open to an agency, regardless of the job candidate's
current position.
Response to Comments on Authorizing Student Loan Repayment Benefits To
Retain an Employee Likely To Leave for a Different Position in the
Federal Service or To Recruit an Employee From Another Federal Agency
Ensuring agencies have an effective civilian workforce to achieve
their goals is one of the primary objectives of strategic human capital
management in the Government. To meet this objective, agencies must
have the necessary human resources tools to recruit and retain
essential employees to perform mission-critical work. The student loan
repayment authority is one of several tools providing agencies
substantial flexibility to help recruit and retain key employees.
We carefully considered the comments recommending the regulations
be amended to provide agencies with additional flexibility to authorize
student loan repayment benefits to either retain a current employee
likely to leave for a different position in the Federal service or to
recruit an individual from outside the agency who is currently employed
in the Federal service. In determining whether to provide additional
flexibility, we must balance the workforce needs of a single agency
with the workforce needs of other agencies. An employee providing
valuable services to one agency also may possess the competencies that
are valuable to another agency. We also need to be cautious when
establishing new flexibilities that have the potential to result in
costly and inefficient interagency competition.
We have not amended proposed Sec. 537.105(a)(2)(ii) to permit
agencies to authorize student loan repayment benefits to retain an
employee likely to leave for a different position in the Federal
service. We note that this policy was established at Sec. 537.105(c)
in OPM's original final regulations on the repayment of student loans,
which were published on January 11, 2001 (66 FR 2790).
We also have not amended proposed Sec. 537.105(c) to permit
agencies to authorize student loan repayment benefits to recruit an
employee from outside the agency who is currently employed in the
Federal service. While not previously addressed in OPM's regulations,
it has been OPM's longstanding guidance that agencies should not use
the student loan repayment authority to recruit current Federal
employees from other agencies.
The legislative history of 5 U.S.C. 5379 indicates Congress
intended student loan repayment benefits to be a tool used to improve
the Federal Government's ability to compete for top college graduates
by allowing Federal agencies to repay the student loans of those
individuals. (See House Report 101-402, February 7, 1990.) The student
loan repayment authority is designed to be used at an agency's
discretion as part of a set of flexibilities--including recruitment
incentives under 5 CFR part 575, subpart A, and the superior
qualifications and special needs pay-setting authority under 5 CFR
531.212--allowing agencies to tailor employment offers to the needs of
individual job candidates to compete with non-Federal employers for the
best and brightest
[[Page 64863]]
personnel. The authority is not intended to assist agencies in
competing with other Federal agencies for current Federal employees.
We understand interagency competition already exists, and some
agencies are disadvantaged because other agencies have the flexibility
to pay higher salaries or provide other unique incentives. However, we
must balance single agency needs against the Governmentwide interest of
avoiding costly and inefficient interagency competition. If these
regulations were to permit agencies to use student loan repayment
benefits to retain current employees likely to leave for a different
position in the Federal service and to recruit current employees from
other agencies, they could result in student loan repayment bidding
wars between the current and prospective agencies. We do not intend to
discourage interagency movements, which provide certain benefits to
both Federal agencies and employees. However, we do not think it is
appropriate for Federal agencies to use student loan repayment benefits
as a financial incentive to compete with each other for current Federal
employees.
Request for Clarification Regarding Advertising a Student Loan
Repayment Program and the Eligibility of Employees Who Previously
Transferred From Another Federal Agency
One agency asked for clarification concerning what constitutes
recruitment for the purpose of Sec. 537.105(c). The agency would like
to retain its ability to advertise its student loan repayment program
and be assured that simply advertising the program will not be
prohibited. In addition, the agency is concerned the new provision
would adversely impact the eligibility of an employee with prior
Federal work experience if he or she otherwise would be eligible to
participate in the agency's student loan repayment program.
Although these final regulations prohibit agencies from authorizing
student loan repayment benefits expressly to recruit an individual from
outside the agency who is currently employed in the Federal service,
there is no restriction prohibiting an agency from advertising its
student loan repayment program as part of a general recruitment effort.
In addition, the regulations do not prohibit an agency from offering
student loan repayment benefits to an employee who previously
transferred from another agency. In other words, an agency may not
include student loan repayment benefits as part of a job offer in an
effort to recruit a current Federal employee from another agency.
However, if at some point after entering the new position the
individual meets the agency's requirements for participation in its
student loan repayment program, the agency may provide student loan
repayment benefits to the employee.
Movement to a Position in a Different Geographic Location Within the
Same Agency
An agency recommended we revise the regulations to address a
situation in which an employee receiving student loan repayment
benefits moves to a position in a different geographic location within
the same agency. Specifically, the agency suggested allowing agencies
to make a determination regarding whether to terminate or continue
providing student loan repayment benefits when an employee moves to a
position in a different geographic location within the same agency. The
agency stated the agency component in the new geographic location may
not have the funds to continue providing student loan repayment
benefits to the employee and also may not have the same circumstances
to justify providing the incentive. As provided by Sec. 537.107(a), a
written service agreement may specify any employment conditions the
agency considers to be appropriate, including the individual's position
and the duties he or she is expected to perform, his or her work
schedule, and his or her level of performance. Also, Sec. 537.107(f)
provides that an agency may include in a service agreement specific
conditions (in addition to those required by law) that trigger the loss
of eligibility for student loan repayment benefits and/or a requirement
that the employee reimburse the agency for student loan repayment
benefits already received. (Also see Sec. Sec. 537.108(a)(3) and
537.109(a)(2).) Therefore, the regulations already provide agencies
with the authority to make student loan repayment benefits contingent
on an employee working in a position at a certain geographic location.
However, to address the agency's comment, we have amended Sec.
537.107(a) to clarify that an agency may add language to the service
agreement to make the geographic location of an employee's position a
condition of receiving student loan repayment benefits.
Suitability Determinations
An agency recommended we expand on Sec. 537.109(b)(1) to add
suitability determinations and failure to complete a probationary
period to the types of involuntarily separations that trigger a
requirement for an employee to reimburse his or her agency for student
loan repayment benefits received. We agree in part. As provided by
Sec. Sec. 537.107(f)(2) and 537.109(b)(1), a service agreement may not
require reimbursement based on an involuntary separation for reasons
other than misconduct or unacceptable performance. We have revised
Sec. Sec. 537.107(f)(2) and 537.109(b)(1) to also require
reimbursement when an employee is separated involuntarily prior to the
completion of a service agreement as a result of a negative suitability
determination under 5 CFR part 731. However, we are not adding language
requiring reimbursement based on an involuntary separation due to a
failure to complete a probationary period because we believe such an
action would be considered an involuntary separation for misconduct or
unacceptable performance, which are already covered by the regulations.
Comment on Reimbursement Requirements
One agency questioned whether the provisions allowing agencies to
require reimbursement for employees who are removed for poor
performance or for non-suitability exceed the statutory authority
granted to OPM under 5 U.S.C. 5379. We disagree, and for the reasons
explained below, we are not changing our regulations in Sec. Sec.
537.107(f)(2) and 537.109(b)(1).
Section 5379 provides discretionary authority for agencies to set
up programs for student loan reimbursement for eligible employees.
(``The head of an agency may, in order to recruit or retain highly
qualified personnel, establish a program under which the agency may
agree to repay'' (emphasis added). See 5 U.S.C. 5379(b)(1).) Agencies
are not required to set up such programs, and employees are not
entitled to benefits under the authority. Entitlement begins only after
a written agreement between the agency and the employee is signed, and
the student loan reimbursement is subject to ``such terms, limitations,
or conditions, as may be mutually agreed to by the agency and employee
concerned.'' See 5 U.S.C. 5379(b)(2). If agencies decide to offer the
program, there are only three statutory limitations. First, an agency
may not pay more than $10,000 per calendar year or $60,000 total in
student loan repayments for an individual employee (5 U.S.C.
5379(b)(2)). Second, an agency may not reimburse an employee for
repayments made by the employee before entering into an agreement with
the agency (5 U.S.C. 5379(b)(3)). Third, an agency must require
reimbursement if the employee
[[Page 64864]]
is involuntarily separated for misconduct or is voluntarily separated
before the completion of the term of the agreement, (5 U.S.C. 5379(c)).
In addition, agencies must follow regulations implemented by OPM under
the authority of 5 U.S.C. 5379(g).
Agencies may not expand a program to provide for more benefits to
employees than are authorized by statute. However, where a benefit is
discretionary, agencies may set conditions, limitations, or terms on
the employee's eligibility for payment of the benefit. This is
explicitly stated in the statute. The phrase ``terms, limitations, or
conditions as may be mutually agreed to by the agency and employee
concerned'' refers to aspects of the administration of the program
relating to individual payments. OPM may properly use its regulatory
authority to mandate that agencies uniformly include certain terms,
limitations, and conditions in service agreements. (See 5 U.S.C.
5379(g), which allows OPM to establish ``standards and requirements''
by regulation to ensure uniformity in appropriate areas.) We believe
that requiring agencies to condition payment of the student loan
repayment benefit on the employee's acceptance of reimbursement when
involuntarily separated for performance or for non-suitability is
within the letter and the spirit of the authority given under 5 U.S.C.
5379(b)(2). It is good policy to require that agencies seek
reimbursement when an employee has been found unsuitable, engaged in
misconduct, or failed to perform adequately. In summary, the statute
does not provide entitlement, and employees are required to sign
agreements with conditions only if they wish to participate in their
agencies' discretionary programs.
Commissioned Corps Officers of the Public Health Service
One agency requested that OPM delegate it the authority to offer
student loan repayment benefits to Commissioned Corps Officers of the
Public Health Service. However, officers of the Commissioned Corps are
not covered by the authorizing statute, and OPM cannot extend
eligibility to Commissioned Corps officers by regulation. The statute
authorizing student loan repayment benefits, 5 U.S.C. 5379, does not
define ``employee.'' Therefore, the general title 5 definition of
employee at 5 U.S.C. 2105 applies to the student loan repayment
authority. As such, proposed Sec. 537.102 defines employee as ``an
employee of an agency who satisfies the definition of the term in 5
U.S.C. 2105.'' Under 5 U.S.C. 2105(a), the term ``employee'' includes
officers and individuals appointed in the ``civil service.'' Section
2101(1) of title 5, United States Code, states that ``the `civil
service' consists of all appointive positions in the executive,
judicial, and legislative branches of the Government of the United
States, except positions in the uniformed services.'' Under 5 U.S.C.
2101(3), the term ``uniformed services'' includes the Commissioned
Corps of the Public Health Service. Officers of the Commissioned Corps
are not employees under 5 U.S.C. 2105 and thus are not covered by the
student loan repayment authority in 5 U.S.C. 5379. OPM may not extend
an authority by regulation to employees who are not covered by the
authorizing statute.
Other Comments
An individual provided a comment generally opposing the authority
for Federal agencies to repay student loans. We disagree. One of the
biggest challenges for Federal agencies is attracting and retaining
well-qualified, high-performing employees. We believe the student loan
repayment authority is a valuable human capital management tool that
enables agencies to recruit highly qualified candidates into Federal
service and keep talented employees in the Federal workforce.
A union recommended the sections pertaining to benefit caps and
employee eligibility be looked at with an eye towards increasing the
maximum total student loan repayment benefit. The union noted student
loan debt burdens are continuously increasing and requested that
wherever possible, efforts be made to give agencies the option of
offering greater benefits to recruit and retain excellent employees.
Under 5 U.S.C. 5379(b)(2), an agency may provide student loan repayment
benefits of up to $10,000 for an employee in any calendar year up to an
aggregate total of $60,000 for any one employee. An increase in the
annual or aggregate limits on student loan repayment benefits would
require a statutory amendment. We note that the Federal Employee
Student Loan Assistance Act (Pub. L. 108-123, November 11, 2003)
increased the maximum amounts Federal agencies are authorized to repay
under the Federal student loan repayment program from $6,000 to $10,000
per employee in any calendar year and from $40,000 to a total of
$60,000 for any one employee. On April 20, 2004, OPM published a final
rule (69 FR 21039) to revise Sec. 537.106(c) in accordance with the
statutory amendment.
An agency recommended expanding on Sec. 537.106(a)(4) to emphasize
that an agency should not begin making loan payments prior to the time
the employee starts work under any circumstances. We have not made this
recommended change because we believe the paragraph is sufficiently
clear that although an agency and a job candidate may sign a service
agreement before the job candidate begins serving in the position, the
agency may not begin making loan payments until the job candidate
actually begins serving in the position. However, we are adding a
reference to Sec. 537.107, which contains the regulations regarding
service agreements.
An agency suggested that in order to differentiate between
paragraphs (1) and (2) of 5 CFR 537.107(d), paragraph (1) should be
revised to read as follows: ``Earlier than the date the service
agreement is signed, for individuals who are current employees''
(emphasis added). We do not believe this change is necessary. Because
we have written the phrase in the negative and use the conjunction
``or'' between paragraphs (1) and (2), both conditions must be met.
An agency suggested that even though 5 U.S.C. 5379(c)(2) allows
agencies to waive the reimbursement of student loan repayments already
made by an agency if the employee enters into the service of another
agency, OPM should consider making such reimbursement a requirement. We
disagree and are not changing 5 CFR 537.107(e). We believe that
agencies should be allowed to make their own decisions regarding the
granting of a waiver of recovery of already paid benefits.
Finally, an agency points out that under 5 CFR 537.110(a), records
kept under the Program may be destroyed when 3 years have elapsed since
the end of the service period, but that a longer record retention
period may be necessary where potential litigation is involved (i.e.,
if there has been a default of the service agreement and the agency
engages in debt collection). We agree and are making the necessary
changes to that section.
E.O. 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with E.O. 12866.
Regulatory Flexibility Act
I certify that these regulations would not have a significant
economic impact on a substantial number of small entities because they
would apply only to Federal agencies and employees.
[[Page 64865]]
List of Subjects in 5 CFR Part 537
Administrative practice and procedure, Government employees,
Students, Wages.
Office of Personnel Management.
Michael W. Hager,
Acting Director.
0
Accordingly, OPM is revising 5 CFR part 537 to read as follows:
PART 537--REPAYMENT OF STUDENT LOANS
Sec.
537.101 Purpose.
537.102 Definitions.
537.103 Agency student loan repayment plans.
537.104 Employee eligibility.
537.105 Criteria for payment.
537.106 Conditions and procedures for providing student loan
repayment benefits.
537.107 Service agreements.
537.108 Loss of eligibility for student loan repayment benefits.
537.109 Employee reimbursements to the Government.
537.110 Records and reports.
Authority: 5 U.S.C. 5379(g).
Sec. 537.101 Purpose.
This part implements 5 U.S.C. 5379, which authorizes agencies to
establish a student loan repayment program for the purpose of
recruiting or retaining highly qualified personnel. Under such a
program, an agency may agree to repay (by direct payment to the loan
holder on behalf of the employee) all or part of any outstanding
qualifying student loan or loans previously taken out by a job
candidate to whom an offer of employment has been made, or by a current
employee of the agency.
Sec. 537.102 Definitions.
The definitions in this section apply only to part 537. In this
part:
Agency has the meaning given that term in subparagraphs (A) through
(E) of 5 U.S.C. 4101(1).
Authorized agency official means the head of an Executive agency or
an official who is authorized to act for the head of the agency in the
matter concerned.
Employee means an employee of an agency who satisfies the
definition of the term in 5 U.S.C. 2105.
Loan payment means the net payment made by an agency to the holder
of a student loan (after deducting any tax withholdings that may be
made from the gross student loan repayment benefit credited to the
employee).
Service agreement means a written agreement between an agency and
an employee (or job candidate) under which the employee (or job
candidate) agrees to a specified period of service in exchange for
student loan repayment benefits, subject to the conditions set forth
under this part.
Student loan means--
(1) A loan made, insured, or guaranteed under parts B, D or E of
title IV of the Higher Education Act of 1965; or
(2) 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.
Student loan repayment benefit means the benefit provided to an
employee under this part in which an agency repays (by a direct payment
on behalf of the employee) a qualifying student loan as described in
Sec. 537.106(b) previously taken out by such employee. The dollar
value of this benefit is the gross amount credited to the employee at
the time of a loan payment to the holder of the student loan, before
deducting any employee tax withholdings from that gross amount as
described in Sec. 537.106(a)(6)(iii). A student loan repayment benefit
is not considered basic pay for any purpose.
Time-limited appointment means a non-permanent appointment
including--
(1) A temporary appointment under 5 CFR part 316, subpart D, or
similar authority;
(2) A term appointment under 5 CFR part 316, subpart C, or similar
authority;
(3) An overseas limited appointment with a time limitation under 5
CFR part 301, subpart B;
(4) A limited term or limited emergency appointment in the Senior
Executive Service, as defined in 5 U.S.C. 3132(a), or an equivalent
appointment made for similar purposes;
(5) A Veterans Recruitment Appointment under 5 CFR part 307;
(6) A Presidential Management Fellow appointment under 5 CFR
213.3102(ii) and 5 CFR 213.3102(jj);
(7) A Federal Career Intern appointment under 5 CFR 213.3202(o);
and
(8) An appointment under the fellowship and similar programs
authority at 5 CFR 213.3102(r).
Sec. 537.103 Agency student loan repayment plans.
Before providing student loan repayment benefits under this part,
an agency must establish a student loan repayment plan. This plan must
include the following elements:
(a) The designation of officials with authority to review and
approve offering student loan repayment benefits (which may parallel
the approval delegations used for other recruitment, relocation, and
retention incentives);
(b) The situations in which the student loan repayment authority
may be used;
(c) The criteria to meet or consider in authorizing student loan
repayment benefits, including criteria for determining the size and
timing of the loan payment(s);
(d) A system for selecting employees (or job candidates) to receive
student loan repayment benefits that ensures fair and equitable
treatment;
(e) The requirements associated with service agreements (including
a basis for determining the length of service to be required if it is
greater than the statutory minimum);
(f) The procedures for making loan payments;
(g) The provisions for recovering any amount outstanding from an
employee who fails to satisfy a service agreement and conditions for
waiving an employee's obligation to reimburse the agency for payments
made under this part; and
(h) Documentation and recordkeeping requirements sufficient to
allow reconstruction of each action to approve a student loan repayment
benefit.
Sec. 537.104 Employee eligibility.
(a) Subject to the conditions in 5 U.S.C. 5379 and this part, an
authorized agency official may approve student loan repayment benefits
to recruit a highly qualified job candidate or retain a highly
qualified employee who, during the service period established under a
service agreement (consistent with Sec. 537.107), will be serving
under--
(1) An appointment other than a time-limited appointment; or
(2) A time-limited appointment if--
(i) The employee (or job candidate) will have at least 3 years
remaining under the appointment after the beginning of the service
period established under a service agreement; or
(ii) The time-limited appointment authority leads to conversion to
another appointment of sufficient duration so that his or her
employment with the agency is projected to last for at least 3
additional years after the beginning of the service period established
under a service agreement.
(b) An employee occupying a position that is excepted from the
competitive service because of its confidential, policy-determining,
policy-making, or policy-advocating character is ineligible for student
loan repayment benefits.
(c) An employee becomes ineligible for student loan repayment
benefits under the conditions described in Sec. 537.108.
[[Page 64866]]
Sec. 537.105 Criteria for payment.
(a) General criteria. Before authorizing student loan repayment
benefits for an employee (or job candidate), an agency must make a
written determination that--
(1) The employee (or job candidate) is highly qualified and
otherwise eligible (as described in Sec. 537.104); and
(2)(i) In a case where the authorization is granted to recruit a
job candidate to fill an agency position, the agency otherwise would
encounter difficulty in filling a position with a highly qualified
individual; or
(ii) In a case where the authorization is granted to retain a
current employee of the agency, the employee otherwise is likely to
leave the agency for employment outside the Federal service and it is
essential to retain the employee based on the employee's high or unique
qualifications or a special need of the agency.
(b) Retention considerations. In making a determination under
paragraph (a)(2)(ii) of this section, an agency must consider 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 its mission.
(c) Current Federal employees. An agency may not authorize student
loan repayment benefits to recruit an individual from outside the
agency who is currently employed in the Federal service.
(d) Selecting employees. When selecting employees (or job
candidates) to receive student loan repayment benefits, agencies must
ensure that benefits are awarded without regard to political
affiliation, race, color, religion, national origin, sex, marital
status, age, or handicapping condition.
Sec. 537.106 Conditions and procedures for providing student loan
repayment benefits.
(a) General conditions. (1) Student loan repayment benefits may be
provided at the discretion of the agency and are subject to such terms,
limitations, or conditions as may be mutually agreed to in writing by
the agency and the employee (or job candidate) as part of a service
agreement under Sec. 537.107.
(2) The student loan to be repaid must be a qualifying student loan
as set forth in paragraph (b) of this section.
(3) The agency must document in writing each approval of student
loan repayment benefits. An authorized agency official must review and
approve each written determination. The written determination must show
the employee (or job candidate) meets the criteria specified in Sec.
537.105.
(4) An authorized agency official must approve student loan
repayment benefits in connection with a recruitment action before the
job candidate actually enters on duty in the position for which he or
she was recruited. The agency and the job candidate may sign the
service agreement consistent with Sec. 537.107 before the job
candidate begins serving in the position, but the agency may not begin
making loan payments until the job candidate begins serving in the
position.
(5) Student loan repayment benefits are in addition to basic pay
and any other form of compensation otherwise payable to the employee
involved.
(6) Appropriate tax withholdings must be deducted or applied at the
time any payment is made. Since these tax implications could create a
financial hardship for the recipient of the student loan repayment
benefit, agencies may lessen the impact of tax withholdings on an
employee's paycheck in one of the following ways:
(i) Make smaller payments at periodic intervals throughout the
year, rather than issue payments under this part in one lump sum;
(ii) Allow the employee to write a check to the agency to cover his
or her tax liability, rather than have the tax liability withheld from
the employee's paycheck;
(iii) Deduct the amount of taxes to be withheld from the student
loan repayment benefit before the balance is issued as a loan payment
to the holder of the loan.
Note to Sec. 537.106(a)(6): Contact the Internal Revenue
Service for further details concerning these options, as well as the
tax withholding implications of payments under this part.
(b) Qualifying student loans. (1) The agency may make loan payments
only for student loan debts that are outstanding at the time the agency
and the employee (or job candidate) enter into a service agreement.
Before authorizing loan payments, an agency must verify with the holder
of the loan that the employee (or job candidate) has an outstanding
student loan that qualifies for repayment under this part. The agency
must verify remaining balances to ensure that loans are not overpaid.
(2) The agency may repay more than one loan if the employee's
student loan repayment benefit does not exceed the limits set forth in
paragraph (c) of this section.
(3) These regulations do not impose a limit on the age of a student
loan for qualification purposes. The agency may, however, specify in
its agency plan that only student loans made within a certain timeframe
are eligible for repayment.
(c) Benefit amount. (1) In determining the amount of student loan
repayment benefits to approve, an agency must consider the employee's
(or job candidate's) value to the agency and how far in advance the
agency is permitted to commit funds. If an agency decides to make
additional student loan repayment benefits contingent on budget levels
or other factors, it must address these contingent benefits in the
written service agreement as described in Sec. 537.107(a).
(2) The amount of student loan repayment benefits provided by an
agency is subject to both of the following limits:
(i) $10,000 per employee per calendar year; and
(ii) A total of $60,000 per employee.
(3) In applying the limits in paragraph (c)(2) of this section, the
agency must count the full student loan repayment benefit (i.e., before
deducting any tax withholdings as described in paragraph (a)(6)(iii) of
this section).
(d) Employee responsibility. Loan payments made by an agency under
this part do not exempt an employee from his or her responsibility and/
or liability for any loan(s) the individual has taken out. The employee
also is responsible for any income tax obligations resulting from the
student loan repayment benefit.
Sec. 537.107 Service agreements.
(a) Before an employing agency makes any loan payments for an
employee, the employee (or job candidate) must sign a written service
agreement to complete a specified period of service with the agency and
to reimburse the agency for the student loan repayment benefit when
required by Sec. 537.109. The service agreement also may specify any
other employment conditions the agency considers to be appropriate,
including the employee's (or job candidate's) position and the duties
he or she is expected to perform, his or her work schedule, his or her
level of performance, and the geographic location of his or her
position. (See Sec. Sec. 537.108 and 537.109.) The service agreement
may address the possibility that, during the period the agreement is in
effect, the agency may modify the agreement to provide student loan
repayment benefits in addition to those fixed in the agreement based on
contingencies or conditions specified in the agreement.
(b) The minimum period of service to be established under a service
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agreement is 3 years, regardless of the amount of student loan
repayment benefits authorized. The agency and the employee may mutually
agree to modify an existing service agreement, subject to the
limitations at Sec. 537.106(c)(2), to provide additional student loan
repayment benefits for additional service without the need for an
entirely new service agreement (which would require a new 3-year
minimum service period). 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 must be extended by the total amount of time spent in non-pay
status. However, as provided by 5 CFR 353.107, absence because of
uniformed service or compensable injury is considered creditable toward
the required service period upon reemployment.
(c) A service agreement made under this part in no way constitutes
a promise of, or right or entitlement to, appointment, continued
employment, or noncompetitive conversion to the competitive service.
This condition should be stated in the service agreement.
(d) The service period begins on the date specified in the service
agreement. That beginning date may not be--
(1) Earlier than the date the service agreement is signed; or
(2) Earlier than the date the individual begins serving in the
position for which he or she was recruited (when student loan repayment
benefits are approved to recruit a job candidate to fill an agency
position).
(e) The service agreement must contain a provision addressing
whether the individual would be required to reimburse the paying agency
for student loan repayment benefits if he or she voluntarily separates
from the paying agency to work for another agency before the end of the
service period. (See Sec. 537.109(b)(2).)
(f) The agency may include in a service agreement specific
conditions (in addition to those required by law) that trigger the loss
of eligibility for student loan repayment benefits and/or a requirement
that the employee reimburse the agency for student loan repayment
benefits already received. (See Sec. Sec. 537.108(a)(3) and
537.109(a)(2).) However, a service agreement may not require
reimbursement based on--
(1) An employee's failure to maintain performance at a particular
level (unless the employee is separated based on unacceptable
performance); or
(2) An involuntary separation for reasons other than misconduct,
unacceptable performance, or a negative suitability determination under
5 CFR part 731 (e.g., an involuntary separation resulting from a
reduction in force or medical reasons).
Sec. 537.108 Loss of eligibility for student loan repayment benefits.
(a) An employee receiving student loan repayment benefits from an
agency is ineligible for continued benefits from that agency if the
employee--
(1) Separates from the agency;
(2) Does not maintain an acceptable level of performance, as
determined under standards and procedures prescribed by the agency; or
(3) Violates a condition in the service agreement, if the agreement
specifically provides that eligibility is lost when the condition is
violated.
(b) For the purpose of applying paragraph (a)(2) of this section,
an acceptable level of performance is one that is equivalent to level 3
(``Fully Successful'' or equivalent) or higher, as described in 5 CFR
430.208(d). An employee loses eligibility for student loan repayment
benefits if his or her most recent official performance evaluation does
not meet this requirement.
Sec. 537.109 Employee reimbursements to the Government.
(a) An employee is indebted to the Federal Government and must
reimburse the paying agency for the amount of any student loan
repayment benefits received under a service agreement if he or she--
(1) Fails to complete the period of service required in the
applicable service agreement (except as provided by paragraph (b) of
this section); or
(2) Violates any other condition that specifically triggers a
reimbursement requirement under the agreement.
(b) An agency may not apply paragraph (a) of this section based on
an employee's failure to complete the required period of service
established under a service agreement if--
(1) The employee is involuntarily separated for reasons other than
misconduct, unacceptable performance, or a negative suitability
determination under 5 CFR part 731; or
(2) The employee leaves the paying agency voluntarily to enter into
the service of any other agency, unless reimbursement to the agency is
otherwise required in the service agreement, as provided by Sec.
537.107(e).
(c) If an agency and an employee mutually agree to modify an
existing service agreement to provide additional student loan repayment
benefits for additional service (as provided by Sec. 537.107(b)), the
modified service agreement may stipulate that, if the employee
completes the initial service period but fails to complete the
additional service period, he or she is required to reimburse the
paying agency only for the amount of any student loan repayment
benefits received during the additional service period.
(d) If an employee fails to reimburse the paying agency for the
amount owed under paragraph (a) of this section, a sum equal to the
amount outstanding is recoverable from the employee under the agency's
regulations for collection by offset from an indebted Government
employee under 5 U.S.C. 5514 and 5 CFR part 550, subpart K, or through
the appropriate provisions governing Federal debt collection if the
individual is no longer a Federal employee.
(e) An authorized agency official 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. (See 5 U.S.C. 5379(c)(3).)
(f) Any amount reimbursed by, or recovered from, an employee under
this section must be credited to the appropriation account from which
the amount involved was originally paid. Any amount so credited must be
merged with other sums in such account and must be available for the
same purposes and time period, and subject to the same limitations (if
any), as the sums with which merged. (See 5 U.S.C. 5379(c)(4).)
Sec. 537.110 Records and reports.
(a) Each agency must keep a record of each determination to provide
student loan repayment benefits under this part and make such records
available for review upon request by OPM. Such a record may be
destroyed when 3 years have elapsed since the end of the service period
specified in the employee's service agreement unless any dispute has
arisen regarding the agreement. If the service agreement has not been
fulfilled, there are other disputes regarding the agreement or the loan
payouts, or the agreement has become the subject of litigation, the
records should be kept until the agency is notified by agency counsel
that all pending claims have been resolved, all litigation concluded,
and any applicable periods for seeking further review has elapsed and,
in any event, for a minimum of 6 years from the date the facts giving
rise to the dispute occurred. If debt collection is pursued against the
employee for repayments made by the agency, the agency must keep the
records until the agency is notified by agency counsel that the debt is
fully
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collected, compromised, or settled finally and that any applicable
period for seeking further review has elapsed.
(b) By March 31st of each year, each agency must submit a written
report to OPM containing information about student loan repayment
benefits it provided to employees during the previous calendar year.
Each report must include the following information:
(1) The number of employees who received student loan repayment
benefits;
(2) The job classifications of the employees who received student
loan repayment benefits; and
(3) The cost to the Federal Government of providing student loan
repayment benefits.
[FR Doc. E8-26013 Filed 10-30-08; 8:45 am]
BILLING CODE 6325-39-P