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Can Feds Use the Student Loan Repayment Benefit For Their Kids?

Yes, as it turns out.

I’ve been writing recently about the federal student loan repayment benefit since House Republicans again targeted it for elimination this month. The benefit, which helps eligible federal employees pay off federally insured student loans, has been around for more than a decade. But it’s not a widespread perk because it’s not implemented in the same way across government. Some agencies don’t offer it at all because they don’t need to (they don’t have problems recruiting or retaining highly-skilled employees for hard-to-fill jobs), or they simply lack the funds to do so. Others agencies, like the Food and Drug Administration, actively encourage employees to apply for the benefit and hold an annual “Open Season” for it.  

One interesting question that has cropped up among Government Executive readers so far: Can federal employees use the benefit to help repay their children’s outstanding student loans? Yes, as it turns out -- a fact that may surprise some of you. But you can’t use the benefit if you’re an employee and your parents need help repaying their student loans.

Here’s what the Office of Personnel Management has to say about it:

Q: May a parent who bears a PLUS loan obligation for his son or daughter qualify for loan repayment benefits under the student loan repayment program?

A: The statute authorizing this program states that this incentive is to be used for employees of a given agency who have outstanding student loans.  Thus, if the employee has a PLUS loan for his or her child, the loan would qualify for repayment.  However, if a PLUS loan is held by an employee’s parent, the employee is not eligible for loan repayment benefits for the parent’s PLUS loan.  While a PLUS loan an employee has previously taken out to help pay for his or her child's education is a qualifying student loan under 5 U.S.C. 5379(a)(1)(B) and 5 CFR 537.102, an agency may specify in its agency loan repayment plan that it will not offer to repay PLUS loans under its student loan repayment program.

It’s not clear how often the benefit is used for this purpose, as OPM does not make that distinction in the data it reports to Congress. While it’s legal, agencies can decide not to offer that particular perk within the perk, as OPM points out. OPM oversees the program, but individual agencies process the paperwork and the payments. Another important fact about the program: Employees do not touch any money. The repayment checks are sent directly to the loaner to keep things on the up and up.

Agencies have the authority to grant up to $10,000 a year for a total of $60,000 in student loan repayments in return for a promise of three years of service from workers. Thirty-five agencies provided the benefit in 2012 at an overall cost of $70.3 million, less total money than in 2011 and 2010. The average individual payout that year was $6,670 -- $421 less than in 2011. Statistics show that most federal employees receiving the perk work at one of three departments: Defense, Justice and State. Those agencies paid out more than 70 percent of the total $70.3 million in 2012.

Stay tuned for more upcoming news and analysis on the federal student loan repayment benefit.

Military Kids’ Health Coverage

TRICARE beneficiaries who want more information about maternity and well-child coverage can tune into a webinar on Thursday. The information session, hosted by TRICARE and Military OneSource, is at 1 p.m. EST. To sign up, go to https://www2.gotomeeting.com/register/618994314. Maternity care includes coverage for all medical services related to conception and delivery of a child. TRICARE covers well-child care from birth to age six.

(Image via karen roach/Shutterstock.com)

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