Repayment of Student Loans Sharpens Agencies' Edge in Hiring, Retention

The student loan repayment program, expanded by Congress last year to help federal agencies become more competitive in hiring, appears to be gaining traction.

Federal agencies used student loan repayments in fiscal 2003 to recruit and retain three times as many workers as they did the previous year, a recently released report from the Office of Personnel Management shows.

Last year, federal agencies provided more than $9.1 million in loan repayments to 2,077 employees, OPM said.

The majority of the reimbursements were made by the State Department (660 individuals), Defense Department (469), Securities and Exchange Commission (257), General Accounting Office (231) and the Justice Department (160).

The State Department provided the benefit to 472 Foreign Service officers in hard-to-fill overseas posts and to 188 civil servants working in jobs where it is hard to recruit and retain staff, the OPM report said.

The Justice Department, which made only one student loan repayment in 2002, expanded the program dramatically last year, making payments on behalf of 61 lawyers and 46 special agents, OPM said.

Several agencies told OPM that being able to offer the reimbursement for education debt had allowed them to remain competitive with the private sector in recruiting talented workers.

One Defense agency, which was not identified in the report, said its acceptance rate by job applicants rose from 42 percent to 60 percent last year, apparently because of the student loan repayment program. Eight of the 20 people hired by the agency cited the repayment program as their top reason for accepting a job with Defense.

Kevin Simpson, executive vice president of the nonprofit Partnership for Public Service, called the expanded use of the repayment program "good news" and "a wake-up call" to agencies that do not offer the benefit.

"What you see is leadership," he said of the agencies that offer loan repayments. "It's Colin Powell at State saying, 'I am going to remake my Foreign Service corps and do a lot to make sure I recruit the right people.' "

The partnership has been an advocate for paying off student loans and is urging Congress to revise the program so recipients do not have to pay income tax on the benefit.

Under the program, agencies can repay as much as $10,000 for an employee in a year, up to a lifetime total of $60,000. In return, the employee must agree to remain with the agency for at least three years.

Despite the program's expansion, only 24 agencies provided student loan repayments in 2003, up from 16 agencies in 2002.

A number of agencies lack funding for the benefit or say other hiring incentives keep them competitive in the labor market.