You’ve heard about certain jobs that allow you to qualify for student loan forgiveness after a period of repayment. But how about just having the federal government pay your federal student loans for you?
No joke. Under a little known program called the Federal Student Loan Repayment Program, some agencies will actually pay your loans for you as a way to get you to take a job or remain in a particular position.
In fact, in 2014 there were 33 Federal agencies that provided 8,469 employees with a total of more than $58.7 million in student loan repayment benefits. That’s an average of $6,931 paid per employee.
Eligibility for the Program
Under federal law, agencies are allowed to set up their own student loan repayment programs to attract or retain highly qualified employees.
Any employee is eligible to participate in the Federal Student Loan Repayment Program, except those occupying a position excepted from the competitive civil service because of their confidential, policy-determining, policy-making, or policy-advocating nature.
Though the law says that the program is for, “highly qualified employees,” each agency gets to decide what that means. There’s no specific type of academic degree necessary, and every agency tailor their plans accordingly.
Therefore, an agency may specify the types of degrees and levels necessary to attain this goal.
How the Program Works
Each agency establishes its own plan authorizes a department or person to review and approve offers of student loan repayment benefits.
Though you may be eligible to participate, you aren’t automatically entitled to a student loan repayment just because they’re in a particular job. Each agency has discretionary authority to repay certain types of federally insured student loans as a recruitment or retention incentive.
If your agency allows you to participate then you’ll be required to sign a service agreement that spells out the terms of repayment as well as the length of time you’ll need to remain in the job. If you leave the job before completing the period of service required then you’ll have to reimburse the paying agency for the full amount of the loan repayment benefits provided.
The amount paid by the agency on your behalf is considered additional taxable income.
As a practical matter, this would be something you’d discuss with your employer before you take a particular job. As with any fringe benefit it’s something you can negotiate.
Which Loans Are Eligible?
The program allows for the payment of federally made, insured or guaranteed student loans only. You won’t be able to get your private loans repaid by virtue of the program, but getting those federal loans paid will leave you with more money available to use towards the private loans.
Loans eligible for payment are those 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 or part E of title VIII of the Public Health Service Act.
Loans made or insured under the Higher Education Act of 1965 include the following:
Federal Family Education Loans (FFEL)
- Subsidized Federal Stafford Loans
- Unsubsidized Federal Stafford Loans
- Federal PLUS Loans
- Federal Consolidation Loans
William D. Ford Direct Loan Program (Direct Loans)
- Direct Subsidized Stafford Loans
- Direct Unsubsidized Stafford Loans
- Direct PLUS Loans
- Direct Subsidized Consolidation Loans
- Direct Unsubsidized Consolidation Loans
Federal Perkins Loan Program
- National Defense Student Loans (made before July 1, 1972)
- National Direct Student Loans (made between July 1, 1972, and July 1, 1987)
- Perkins Loans (made after July 1, 1987)
Loans made or insured under the Public Health Service Act include the following:
- Loans for Disadvantaged Students (LDS)
- Primary Care Loans (PCL)
- Nursing Student Loans (NSL)
- Health Professions Student Loans (HPSL)
- Health Education Assistance Loans (HEAL)
How Much of Your Loans Will the Agency Pay?
Remember, we’re not talking about Public Service Loan Forgiveness. This is an actual payment of your federal student loan made by a Federal agency that employs you. Therefore, there’s a limit of how much the agency will pay.
Each agency sets its own rules for repayment of loans through theFederal Student Loan Repayment Program, so it will differ from agency to agency. By law, each agency may made payments of up to a maximum of $10,000 for an employee in a calendar year and a total of not more than $60,000 for any one employee.
An agency may agree to make payments on those student loans taken out prior to the student loan repayment agreement, so any loans you take out once the agreement is signed aren’t going to be paid.
Given the fact that the federal student loan limit is currently set at $57,500 for undergraduates and $138,500 for those who have graduate or professional studies, those repayment limits can come in handy.
How Long You Need to Work
You need to work at the agency for as long as the agreement says – once again, each agency has its own program requirements.
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. The service completion date must be extended by the total amount of time spent in non-pay status.
However, federal regulations allows absence because of uniformed service or compensable injury to be considered creditable toward the required service period upon reemployment.
Agencies Offering Student Loan Repayment
According to government reports, here are some of the 33 federal agencies that offer student loan repayment programs:
- Department of Defense (DOD)
- Department of Justice (DOJ)
- Department of State (DOS)
- Securities and Exchange Commission (SEC)
- Department of Veterans Affairs (VA)
- Department of Health and Human Services (HHS)
- Government Accountability Office (GAO)
- Department of the Interior (DOI)
- Department of Housing and Urban Development (HUD)
- Department of Commerce
- Department of Energy
- Department of Transportation
- Department of Treasury
- Federal Energy Regulatory Commission
A Good Argument for Government Employment
Federal government benefits are the best there are, and retirement plans are terrific.
Federal student loans come with Public Service Loan Forgiveness after 10 years of timely payments made while employed full time with the government (among other employers). But if you’ve got $60,000 or less in federal student loans outstanding and can get into this program, your payments effectively go away immediately.
You’ve got to work anyway, so why not consider Uncle Sam as your employer of choice?