A lawyer who defaulted on a $4,000 student loan in 1978 was hired by the Department of Education a few months later at $22,000 a year, and promoted twice since then, despite angry letters to the department and Attorney General William French Smith from Rep. Edward J. Derwinski (R-Ill.).
The attorney is now earning almost $35,000 a year as a GS13, but still hasn't repaid Uncle Sam.
A Kentucky farmer who defaulted on a $5,400 agriculture loan the same year was hired by the Department of Agriculture two years later, and has yet to repay his debt, despite a court judgment against him.
These are among the examples of the federal government's failure to collect defaulted loans from tens of thousands of its own employes, including those in the military, that will be examined at a Senate subcommittee hearing today.
The problem is that under current federal law, the government cannot force an employe to repay a debt by attaching his salary, even after winning a court judgment against the worker because the law does not allow collection for general debts.
Sen. Charles H. Percy (R-Ill.) is pushing a bill that would allow a federal agency to offset a worker's salary without going to court.
But federal employe unions oppose it, and the House Post Office and Civil Service Committee has yet to move the bill out of committee.
Private companies are also unable to collect delinquent debts from federal employes by attaching their salaries. Court decisions have said the sovereignty of the government, and by extension its workers, prevents such garnishments.
Federal employes owe tens of millions of dollars to the government. In 1980, a computer match found that more than 17,000 federal employes had defaulted on student loans administered by the Department of Education. About 66,000 federal workers had defaulted on loans from the Veterans Administration.
Among the delinquents were 5,000 doctors, including 25 on the faculty of the Harvard Medical School, according to a recent federal audit.
Since the 1980 audit, only 1,363 of the education loans have been paid in full; 7,724 of the VA loans are being repaid.
At least $20 million and perhaps $40 million in defaulted loans to federal employes remain unpaid, according to figures prepared for the hearing.
The Percy bill and a companion measure sponsored by Derwinski would set up an administrative procedure under which up to one-fourth of an employe's salary could be withheld to repay debt.
Vincent L. Connery, president of the 120,000-member National Treasury Employes Union, told the Senate committee last year that his group opposes the measure as "totally unnecessary and unfair."
If enacted, he said, federal workers would be discriminated against by being the only group in the country to have their pay withheld without a court action.
A Percy aide said court action on relatively small loan defaults already is overburdening federal prosecutors. Government agencies could take administrative action to collect debts while protecting workers' due process rights at a hearing, he contended. The bill would not apply to private creditors.
A House committee aide said there was little enthusiasm for the administrative approach to debt collection without a court judgment because the administration hasn't pushed it.
"The members here are sympathetic to federal employes and aren't likely to do anything that's anti-federal worker unless there's pressure," he said. "There hasn't been any."