Number: 

DAO 202-957

SECTION 1. PURPOSE.

.01 Title 5 United States Code (U.S.C.) 5379 and accompanying regulations found at 5 Code of Federal Regulations (CFR) 537, authorize agencies to repay student loans to recruit or retain highly qualified professional, technical, or administrative personnel. This Department Administrative Order (DAO) further authorizes Department of Commerce (the Department) operating units to make such payments. Payments are to be made by direct payment to the educational or lending institution on behalf of the employee and are not authorized as reimbursement to an employee for payments made by the employee prior to entering into a Student Loan Repayment Service Agreement with the agency.

.02 This revision increases the annual and aggregate limits on student loan repayments by agencies, pursuant to changes made by Public Law (P.L.) 108-123.

SECTION 2. POLICY.

Heads of operating units are delegated the authority to make the determination to repay a student loan as a recruitment or retention incentive. A total of up to $60,000.00 before taxes may be repaid for any eligible employee. Payments are not to exceed $10,000 before taxes in a calendar year. This authority may be re-delegated by operating unit heads to appointing officials designated in DAO 202-250. Heads of operating units or their designees must develop an operating unit implementation plan which incorporates all the elements of this DAO and includes operating unit specific elements, so long as those elements do not arbitrarily restrict participation in the program. The implementation plan, at a minimum, must identify approving authorities, and should further define the criteria in sections 6 and 7 that are specific to the operating unit. These officials also have the authority to require employee reimbursement of agency loan payments made on their behalf when one or more of the conditions apply as described in Section 12. of this Order.

SECTION 3. LABOR-MANAGEMENT RELATIONS.

In organizations where employees are represented by a labor organization accorded exclusive recognition, management is obligated to notify the labor organization of its intent to implement this policy and negotiate in good faith, as appropriate.

SECTION 4. COVERAGE.

.01 An operating unit may offer a student loan repayment incentive in order to fill a position with a highly qualified candidate or to retain a highly qualified employee. This incentive applies to employees as defined in 5 U.S.C. 2105 serving in full or part-time positions including:

a. temporary employees serving on appointments leading to conversion as term or permanent appointments;

b. term employees with at least three years remaining on their appointment;

c. permanent employees, including employees serving on full-time excepted appointments under the General Schedule, unless serving under a Schedule C appointment; and

d. employees serving on excepted appointments with conversion to term, career, or career conditional appointments (including, but not limited to Career Intern or Presidential Management Fellow appointments).

.02 Per 5 U.S.C. 5379(a) (2), a student loan may not be paid on behalf of an employee occupying a position excepted from the competitive service because of its confidential, policy-determining, policy-making, or policy-advocating character, such as Schedule C appointments.

SECTION 5. DEFINITIONS.

The terms referred to in the policy have the following meanings:

a. "Student Loan" means a loan made, insured, or guaranteed under parts B, D, or E of Title IV of the Higher Education Act of 1965 (as amended by the Higher Education Act of 1998, P.L. 105-244, October 7, 1998). This legislation covers major Federal student financial aid programs including (but not limited to) Stafford Loans, Supplemental Loans, Plus Loans, Federal Consolidation Loans, Defense Loans made before July 1, 1972, National Direct Student Loans made between July 1, 1972, and July 1, 1987, and Perkins Loans. Also included are Health Education Assistance Loan Program loans, Nursing Student Loan Program loans, and Health Profession Student Loan Program loans made or insured under the Public Health Service Act.

b. "Service Agreement" means a written agreement between the operating unit and an employee under which the employee agrees to a specified period of employment within the Department of not less than three years but no more than 15 years, depending upon the amount of the reimbursement by the operating unit, in return for payments toward a student loan previously taken out by the employee. The service agreement period begins when the first payment is made by the Department to the holder of the loan.

SECTION 6. CRITERIA FOR ELIGIBILITY.

.01 The criteria for authorizing repayments of student loans are:

a. For Recruitment:

1. the candidate possesses qualifications which meet an important need of the operating unit, as determined by the operating unit;

2. the candidate would not accept the position without receiving the student loan repayment incentive;

3. the candidate is not in default on repayment of the student loan; and

4. the student loan was used to pay tuition and related expenses for course work taken by the applicant.

b. For Retention:

1. the recipient is an employee of the operating unit;

2. the operating unit determines that the employee possesses high or unique qualifications or meets a special need of the operating unit;

3. in the absence of offering the student loan repayment benefit, the employee would very likely leave for employment outside the Department;

4. the departure of the employee would affect the agency's ability to carry out an activity or function deemed essential to the agency's mission;

5. the employee has no performance or conduct actions pending against him/her;

6. the employee's most recent performance appraisal of record using the Department's performance appraisal system established under part 430, subpart B of Title 5, is at least level three ("Fully Successful") on a five-level system, or "Eligible" or "Meets or exceeds expectations" under a two-level system;

7. the employee is not in default on repayment of the student loan; and

8. the student loan was used to pay tuition and related expenses for course work taken by the employee.

.02 Operating units may include additional criteria in their plan so long as the criteria are not used to arbitrarily restrict access to the program.

SECTION 7. CRITERIA FOR AMOUNT AND TIMING OF LOAN REIMBURSEMENT PAYMENTS.

In determining the amount of the loan reimbursement payments and the timing of the payments, operating units must consider the following factors:

a. the employee's current or potential value to the operating unit;

b. budgetary restraints such as how far in advance funds can be committed;

c. if payment extends beyond the current fiscal year, repayments are subject to the availability of funds;

d. the special skills the individual brings to the operating unit and how those skills enhance the ability of the organization to meet mission requirements; and

e. any other criteria or circumstances which enhance the value of the employee to the operating unit.

SECTION 8. APPLICATION AND SELECTION PROCEDURES.

Where operating units decide to allow employees to apply for this repayment benefit, they must publicize the application procedures to employees. The procedures must describe the threshold qualifications to meet the "high or unique qualifications" or "special need of the operating unit" standard for retention and the evidence required to show that the applicant/employee would be likely to leave the Department absent receiving the student loan repayment benefit. For example, the operating unit may determine that only employees in scientific and engineering positions at grades GS-5 through GS-9 meet both criteria, "high or unique qualifications" and "likelihood of leaving the Department" based on their pay being significantly below the market rate. In identifying certain categories of positions, the operating unit may further limit eligibility to those employees with their most recent performance rating at or above a certain level, for example, "commendable" or above for a five-level system. After establishing those criteria, the operating unit must then describe how selections will be made from those employees meeting the eligibility criteria. For example, selections may be based on length of service with the Federal Government, and/or the operating units, or based on other considerations such as the amount or recency of the outstanding debt. Regardless, the criteria must be applied uniformly and equally and be consistent with and adhere to the merit system principles. Operating unit employees should be notified regarding any changes in the application procedures prior to the changes becoming effective.

SECTION 9. JUSTIFICATION FOR STUDENT LOAN REPAYMENTS.

Requests for approval of a student loan repayment incentive must include a written justification addressing each of the criteria for eligibility and state the amount to be reimbursed. Repayment requests for new hires must be submitted by an authorized operating unit official and received by the servicing human resources office before the candidate actually enters on duty. The request must also identify other compensation options which have been considered and the reasons for their use or rejection.

SECTION 10. STUDENT LOAN REPAYMENT SERVICE AGREEMENT.

Before the operating unit initiates repayment of the student loan, the current or newly-appointed employee must sign a service agreement which requires completion of a minimum three year period of employment with the Department, if the amount to be reimbursed is for a total of $20,000 or less. For each additional $10,000 increment, the operating unit reimburses, a minimum of one, but not more than three, additional years of service must be added to the service agreement. The following table illustrates the application of the service agreement formula.

Service Requirement Table

Reimbursement Amount	Minimum Service Requirement	Maximum Service Requirement
0 - $20,000	3 years	3 years
$20,001- $30,000	1 additional year (4 years total)	3 additional years (6 years total)
$30,001 - $40,000	1 additional year (5 years total)	3 additional years (9 years total)
$40,001 - $50,000	1 additional year (6 years total)	3 additional years (12 years total)
$50,001 - $60,000	1 additional year (7 years total)	3 additional years (15 years total)

a. The additional service requirement is only applied when the reimbursement dollar threshold as shown in the Service Requirement Table is exceeded. Operating units are not authorized to prorate the service requirement to correspond with amounts that do not meet the next higher $10,000 increment.

b. Operating units may establish service requirements which are more restrictive than those in the Service Requirement Table. For example, an operating unit may require the minimum three year service requirement for the first $10,000 reimbursed and an additional one to three years for each additional $10,000 reimbursed. However, they cannot raise the maximum amount for the minimum three year service requirement above $20,000 or lower the minimum service requirement for the full $60,000 reimbursement below seven years or have the maximum service requirement exceed 15 years. Operating unit plans should include service requirements where they differ from the Service Requirement Table or state that their plan will follow the Service Requirement Table.

c. For new hires, when determining whether to require the minimum or maximum service requirement for each additional $10,000 beyond the minimum three year requirement, the operating unit should balance the value of the student loan repayment benefit as a recruiting incentive versus the interests of the operating unit in recouping their investment.

d. Where the operating unit utilizes the student loan repayment benefit for current employees, criteria must be included in the operating unit plan for determining whether the minimum or maximum service repayment amount will be required for each $10,000 increment. For instance, employees with 10 or more years of service with the Department and/or the operating unit might only be required to serve the one-year minimum for each additional $10,000 increment.

e. The agreement must also indicate the conditions under which the operating unit may recoup student loan repayments from the employee which are explained in Section 12, Employee Indebtedness to the Department.

f. The agreement must also contain a statement clarifying that the agreement in no way constitutes a right, promise, or entitlement for continued employment or noncompetitive conversion to the competitive service.

g. The agreement must indicate that subsequent years repayment are subject to availability of funds, and are not guaranteed.

h. The Repayment Agreement is to be sent to the servicing human resources office with a transmittal memorandum for payment and documentation which verifies the employee's liability for the loan and the outstanding balance. A copy of the service agreement will be filed in the left side of the employee's Official Personnel Folder for the duration of the agreement. If the amount of the reimbursement by the operating unit is increased from the original agreement, the service agreement must be extended consistent with the Service Requirement Table. In addition, the service agreement must be modified to reflect the increased benefit and filed in the left side of the employee's Official Personnel Folder. See Appendix A for a suggested Student Loan Repayment Service Agreement format.

i. The service agreement period begins on the date of the first payment by the operating unit to the lending institution.

SECTION 11. LOSS OF ELIGIBILITY FOR LOAN REPAYMENT BENEFITS.

An employee receiving loan repayment benefits from an operating unit will be ineligible for continued benefits if the employee:

a. separates voluntarily or involuntarily from the Department;

b. separates from the operating unit to another operating unit within the Department, if stated in the service agreement;

c. does not maintain an acceptable level of performance, as determined under standards and procedures prescribed by the operating unit head; or

d. violates any of the conditions of the service agreement.

SECTION 12. EMPLOYEE INDEBTEDNESS TO THE DEPARTMENT.

.01 An employee is deemed indebted to the Department for the amount of student loan repayments paid on the employee's behalf up until the time of separation if the employee:

a. is separated from the Department involuntarily on account of misconduct or poor performance; or

b. leaves the Department voluntarily without meeting the terms of the service agreement.

.02 This indebtedness provision also applies to an employee voluntarily separating from the Department to enter into the service of any other Federal agency.

SECTION 13. WAIVER OF EMPLOYEE INDEBTEDNESS.

Heads of operating units may waive, in whole or in part, the right of recovery of an employee's debt incurred for failure to meet a requirement of the service agreement if he or she determines that recovery would be against equity and good conscience or against the public interest, as determined by the operating unit. This authority may be re-delegated to an authorized appointing official within the operating unit.

SECTION 14. WAIVER APPLICATION PROCESS.

Repayment may be wholly or partially waived at the discretion of the operating unit head if recovery would not be in the public interest or would be against equity or good conscience (e.g., when an employee separates from service due to a disability).

The employee or former employee who fails to meet the terms of the Repayment Service Agreement may request a waiver of the debt. If the individual remains an employee of the agency, the employee must submit a written waiver request through their immediate supervisor to the head of the operating unit or the authorized appointing official within the operating unit with delegated waiver approval authority. Individuals who are no longer employed by the operating unit should submit a written waiver request directly to the head of the operating unit or the authorized appointing official delegated waiver approval authority. The request should contain a copy of the Repayment Service Agreement, the bill presented by the agency to the current or former employee or verification of the exact amount of debt where a bill has not been generated, and a narrative explaining why recovery by the agency would be against equity and good conscience or against the public interest. Collection of the debt will be suspended pending the decision on the waiver request. Operating unit plans must also include waiver procedures.

SECTION 15. PROCEDURES FOR PAYMENT.

.01 The National Finance Center (NFC), the Department's Personnel/Payroll System, will process repayments of student loans through their manual pay process. The loan repayments will be made as lump sum payments. The loan repayments will be treated as "supplemental wages" for payroll purposes; NFC will withhold a flat 28% for Federal tax, a flat 2% for State tax (if applicable), a flat 2% for City/Local tax (if applicable), a flat 6.2% for OASDI taxes (if applicable) and 1.45% for Medicare tax from the gross amount of the repayment. The net repayment will be sent directly to the lending institution. For example, where an operating unit is paying $10,000 of an employee's student loan, NFC will withhold 28% for Federal tax, 2% for State tax, 2% for City/Local tax, 6.2% for OASDI tax, and 1.45% for Medicare tax, and remit the net to the lending institution.

.02 NFC will establish a transaction code for the Earnings and Leave Statement so that the amount of the student loan repayment will be reflected on the employee's Earnings and Leave Statement.

SECTION 16. OPERATING UNIT RESPONSIBILITY FOR LATE FEES.

Operating units are not responsible for late fees assessed by the holder of an employee's student loan. Operating units should, to the extent possible, ensure that the timing of their payments to the lender coincides with the date the loan payment is due.

SECTION 17. RELATIONSHIP TO OTHER RECRUITMENT/RETENTION INCENTIVES.

A student loan repayment incentive may be paid in addition to a retention allowance, or recruitment and relocation bonus. The period of service required by a Recruitment Bonus Service Agreement or a Relocation Bonus Service Agreement are exclusive from the period of service required under a Student Loan Repayment Service Agreement. However, the specified period of service in a Student Loan Repayment Service Agreement may begin at the same time and run concurrently with other service agreements.

SECTION 18. ANNUAL RECONSIDERATION OF PAYMENT AMOUNT.

Operating units may reconsider individual employee payment amounts on an annual basis if budgetary considerations are an issue, if such an option is included in the employee service agreement.

SECTION 19. SEPARATION OF AN EMPLOYEE RECEIVING THE STUDENT LOAN REPAYMENT BENEFIT.

The operating unit of each separating employee who receives the student loan repayment benefit must notify the servicing human resources office of the impending separation date of the employee. The notification must indicate whether the employee has fulfilled the terms of the service agreement. If the employee has not fulfilled the terms of the agreement, the operating unit must indicate whether it will seek reimbursement and the amount it is seeking. If the operating unit waives the indebtedness amount, a signed waiver must be submitted from an authorized official containing the amount to be waived and a brief statement indicating why requiring the employee to reimburse the operating unit would be against equity and good conscience or against the public interest. Where the employee requests a waiver, the operating unit must notify the servicing human resources office immediately upon receiving the request. If the operating unit approves the waiver request, a copy of the approved waiver request, with the signature of the approving official, must be forwarded to the servicing human resources office and a copy provided to the employee. If the waiver request is disapproved, the operating unit must provide the servicing human resources office with documentation signed by the deciding official that the waiver request was disapproved. The employee must receive written notification of the disapproval.

SECTION 20. RECORDS AND DOCUMENTATION REQUIREMENTS.

.01 Each operating unit must develop and maintain a policy for the reimbursement of student loans. At a minimum, each policy must contain all the elements of this DAO plus an explanation of the selection process for determining which prospective and current employees shall receive the student loan reimbursement benefit.

.02 Documentation must be maintained by the operating unit for each employee receiving the reimbursement benefit for a period of three years after the date of the final payment to the educational or lending institution (if an employee leaves the operating unit within the three year period of the employment agreement, the retention period is extended indefinitely pending collection of any outstanding debt). The documentation must contain, at a minimum, the name, title, series and grade of the employee receiving the benefit, the name of the educational or loan institution receiving the reimbursement, the amount of the reimbursement, the date the first and last payments were made by the operating unit, the justification for awarding the reimbursement, and a signed copy of the service agreement.

SECTION 21. REPORTING REQUIREMENTS.

Before December 1 of each year, operating units must submit a written report to the Department's Office of Human Resources Management stating:

a. the number of employees selected to receive the benefit;

b. the job classifications of the employees selected to receive the benefits; and

c. the cost to the operating unit of providing the benefits under this policy.

SECTION 22. PROGRAM OVERSIGHT.

Operating units are required to regularly monitor and review the use of the student loan repayment benefit to ensure that payments conform to the criteria established under this guidance. The Department will conduct such oversight as necessary to ensure conformance with this policy.

SECTION 23. EFFECT ON OTHER ORDERS.

This Order supersedes Department Administrative Order 202-957, dated July 18, 2003, and any operating unit policy directives on these matters.

Signed by: Director for Human Resources Management

Approved by: Chief Financial Officer and Assistant Secretary for Administration

Office of Primary Interest: Office of Human Resources Management

APPENDIX A

DEPARTMENT OF COMMERCE
STUDENT LOAN REPAYMENT SERVICE AGREEMENT

EMPLOYEE__________________________________ SSN_____________________________
POSITION____________________________________ GRADE__________________________
DUTY STATION_________________________________________________________________ BUREAU________________________________________________________________________
EMPLOYMENT TERM____________________________________________________________
REQUIRED PERIOD OF SERVICE___________________________________________________
TYPE OF LOAN__________________________________________________________________
NAME/ADDRESS OF LOAN HOLDER______________________________________________
TOTAL LOAN REPAYMENT AMOUNT______________________________________________
TOTAL AMOUNT TO BE PAID IN CURRENT FISCAL YEAR (payment may be renewed for each fiscal year until the total repayment amount is reached, subject to availability of
funds) _____________________________

(Attach documentation showing that this is an authorized school loan in accordance with the definition in Title 5 U.S.C. 5379. The documentation must verify both the employee's liability and the outstanding balance. )

In return for accepting the benefit of the loan repayments specified above, I, the employee, hereby ACCEPT EMPLOYMENT WITH/AGREE TO REMAIN IN THE EMPLOYMENT OF the United States Department of Commerce, [NAME OF ORGANIZATIONAL UNIT] (the "AGENCY") under the following terms:

1. I will remain an employee of the AGENCY for a period of not less than three (3) years from the date of the first payment by the AGENCY under this agreement.

2. If, within said three year period I separate from the employment of the AGENCY, then I shall be indebted to, and hereby oblige myself to repay, the AGENCY for all funds received from or loan repayments made by the AGENCY as specified herein above.

3. Notwithstanding the foregoing, it is agreed that I shall not be so indebted and obligated if my separation of employment from the AGENCY is for any of the following reasons:

a. Acceptance of a position with another organizational unit within the Department of Commerce, provided, however, I remain within the employment of the Federal Government for the balance of said three-year period;

b. Separation from employment with the AGENCY is for the convenience of the Federal Government; or

c. Such other conditions, which as determined within the sole discretion of the head of the AGENCY or his/her delegate, are found to be against equity and good conscience or contrary to the public interest, so made in writing by the head of the AGENCY or his/her delegate.

4. If I separate from the employment of the AGENCY within said three (3) year period for any reason, it is agreed and understood that the AGENCY is immediately released from any obligation to continue making such loan repayments from the earlier of: (a) the date of separation from the employment of the AGENCY; or (b) the date of notice to the AGENCY of said impending separation of employment. The AGENCY may also cease making such loan repayments if: (a) I do not maintain at least a satisfactory rating on my most recent performance appraisal; or (b) I violate any other condition of this Service Agreement.

5. Should I become so indebted to the AGENCY, I agree that the AGENCY may recover the entire amount of any and all funds received from or loan repayments made by the AGENCY as specified herein above, and that such indebtedness shall bear interest from the date determined in accordance with Paragraph 3, above, at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of Treasury) of the average accepted auction price for the last auction of fifty-two (52) weeks United States Treasury bills settled immediately prior to said date. (This is the judgment rate of interest as set forth in 28 U.S.C. 1961.) The agency may also assess and collect other administrative costs and expenses as may be incurred by the AGENCY in the collection of such indebtedness.

6. I am responsible for any late fees assessed by the holder of my student loan for untimely payments made to the lender by the Department of Commerce.

7. I am responsible for any tax consequences or other obligations which may result from either the loan repayments made by the AGENCY hereunder and/or termination of such repayments and/or the collection of any indebtedness.

8. This Service Agreement in no way constitutes a right, promise, or entitlement for continued employment or noncompetitive conversion to the competitive service.

9. Repayments are subject to availability of funds, and are not guaranteed.

EMPLOYEE'S SIGNATURE___________________________ DATE________________

SUPERVISOR'S SIGNATURE____________________________ DATE________________

SECOND LEVEL SUPERVISOR'S SIGNATURE ____________________________________

DATE________________

(Optional)

A copy of this agreement must be sent to the servicing human resources management office for inclusion in the Official Personnel Folder.