If you’re highly qualified and interested in working at a government agency you could be eligible for the federal employee student loan repayment program. In this guide, we’ll cover everything you need to know about this federal employee student loan forgiveness option.
What is the federal student loan repayment program?
The federal student loan repayment program is designed to attract top talent to serve in the public sector and encourage retention as an additional employee benefit. Federal agencies can designate funds and offer student loan repayment assistance to highly qualified candidates.
Employees who are eligible for the federal student loan repayment program can receive up to $60,000 over a period of six years. So in other words, you can get up to $10,000 per year. Only federal student loans are eligible for federal employee student loan repayment, so sorry private student loan holders.
Good news for Parent PLUS borrowers though, who can also take advantage of this program if they’re an employee at the federal agency and took out federal loans on behalf of their child.
The important thing to note is that whether the funds are available and who the funds are available for are dependent on the agency. So it’s not something that everyone in the public sector working full-time can get, like Public Service Loan Forgiveness (PSLF).
Your work has to have a program in place, and you’d have to qualify and pass the eligibility requirements below.
Though this type of student loan forgiveness for government employees can be a huge perk considering the fact that the total award could be $60,000, one potential snag could be a higher tax bill. Unfortunately, the student loan repayment assistance is not tax-exempt and is included as part of your gross income on your tax return.
Who is eligible for this type of federal employee student loan forgiveness?
Federal employees are eligible for this program if they are considered “highly qualified”. The federal agency that you work for decides on an individual basis to provide student loan repayment assistance. The federal agency will make the student loan payments directly to the student loan holder.
There are more than 20 independent agencies that participate in this type of federal employee student loan forgiveness, as well as 15 cabinet-level departments. The federal agency may be looking for employees with specific degrees or for talent that serve in hard-to-fill positions.
Qualified candidates must sign a service agreement and commit to working for three years at the agency that’s offering student loan repayment. In order to continue the student loan repayment assistance, employees must meet job performance standards set by their employer.
In other words, if your performance is suffering at work you could lose this benefit. If you quit or get let go from the agency you have to hand-over those benefits and pay them back!
How to apply
If you have a hefty student loan balance and are interested in working in the public sector the federal student loan repayment program can seem like a godsend. It’s a great benefit, but it’s not as accessible as other types of student loan assistance.
Unlike income-driven repayment or Public Service Loan Forgiveness (PSLF Program), there’s no application for federal employee student loan repayment.
What you can do instead is to look into the various federal agencies. You can check their websites to see if any information is posted about the federal student loan repayment program. You can also contact the agency directly to see what they’re looking for in a prospective employee as it relates to this benefit.
If you’re already working for a federal agency, talk to your supervisor for details on the program. As noted above, this program can vary by agency and may be offered on a case-by-case basis for a hard-to-fill position.
Alternatives to the federal student loan repayment program
If you do not currently qualify for this program but would like some type of student loan forgiveness for government employees, consider the Public Service Loan Forgiveness program.
Under this program, you must work in the public sector at an approved agency with a qualifying employer for 10 years. For example, you may work at a government organization, family service agency, in public health, public interest law services, law enforcement, or at non profit organizations.
Part-time jobs, working in worship services, religious instruction or any form of proselytizing do not qualify. Additionally, working at partisan political organizations or labor unions disqualifies you from this program.
After making 120 qualified payments and meeting your service commitment, you can get the remainder of your student loans forgiven. You can fill out the Employer Certification Form each year to stay on track with your employment.
Unlike the federal student loan repayment program, under PSLF there are no tax consequences to worry about thanks to current Internal Revenue Code. If you’ve applied for PSLF and didn’t get approved, you can check out Temporary Expanded Public Service Loan Forgiveness (TEPSLF).
You can also consider student loan forgiveness programs through an income-driven repayment plan. These qualifying repayment plans include Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Revised Pay As You Earn (REPAYE), and Pay As You Earn (PAYE). These plans are designed for high-balance borrowers who may have trouble making their payments affordable.
These repayment options make your monthly payment a small percentage (10 to 20 percent) of your discretionary income, so it’s more affordable than the 10-year standard repayment plan. After making payments for 20 to 25 years, you’re eligible for loan forgiveness if you have a remaining balance. Student loan forgiveness for government employees is possible through this option, but there are also tax consequences to keep in mind. Talk to your student loan servicer to discuss your options.
Evaluate your options
If you’re not sure what the best option is for your student loan repayment plan, consider these student loan forgiveness for government employees and federal employee student loan forgiveness options side by side.
Look at the pros and cons and evaluate them against your personal and financial goals. If you need to put payments on pause, consider deferment or forbearance. To make repayment more manageable, you can also look into a Direct Consolidation Loan and student loan refinancing. You can also book a consultation with us to get an individualized plan that is unique to your situation.
Are you a federal employee? What do you think of these student loan repayment options? Comment below.