Agencies dish out more in student loan repayments

The number of federal employees receiving student loan repayment benefits increased by 34 percent between 2009 and 2010, a new report from the Office of Personnel Management shows.

In an analysis of calendar year 2010 reports, OPM found that federal agencies provided more than 11,000 employees a total of $85.7 million in student loan repayments. That represents a 38 percent increase in overall spending compared to 2009. The average recipient received $7,542 in 2010.

Many agencies use student loan repayment programs as a recruitment incentive, particularly as more and more federal employees become retirement eligible, leaving workforce gaps. Agencies must submit annual reports on their repayment programs in an effort to ensure those funds are used in the most cost-effective way.

“It is important for agencies to closely monitor the cost of using discretionary tools such as student loan repayments,” OPM Director John Berry said in a letter accompanying the report to Congress. "This is especially true during periods of strained fiscal resources such as the one we are currently enduring.”

Thirty-six federal agencies submitted responses to OPM’s request for calendar year 2010 information; OPM followed up with the agencies with the largest student loan repayment programs -- the Defense, Justice and State departments -- asking for additional information about how they used the loan repayments as recruitment incentives.

According to the report, Defense increased its investment in student loan repayments by $15.5 million between 2009 and 2010. The department retained 94 percent of benefit recipients for three years or longer.

“These metrics indicate the value of student loan repayment benefits in helping DoD to compete with private sector employers for top talent in key occupations,” the report said.

Justice and State achieved similar retention results. Justice told OPM that its student loan repayment spending represents “merely a fraction” of its total appropriated budget for employee salaries and the incentive “is used judiciously and for its intended purposes.” The State Department reported that it has long used the incentive to help recruit for specific Foreign Service posts, but it increased its spending on the repayments by $2.4 million between 2009 and 2010, a choice driven by a hiring initiative to increase the size of the Foreign Service by 25 percent over a three-year period.

“The incentive strongly influenced the post-bid selection of Foreign Service employees and, for many considering public service, the program is the reason they opted for a career with [State],” OPM noted.