In 1989, the National Commission on the Public Service found that the federal government experienced difficulties in recruiting and retaining a quality workforce. The commission recommended that a student loan forgiveness program be established, and the SLR program was proposed in response to that recommendation. The reasons underlying enactment of the federal SLR program continue today and include the impending retirements of large numbers of federal workers and the difficulty, at times, in attracting the right individuals to public service to help fill the gaps. Today’s college graduates are entering the workforce with even more substantial education loans than in 1989, and studies indicate that educational debt prevents many graduates from choosing employers in which they are interested but that provide lower salaries. A 2002 Congressional Budget Office study concluded that federal employees in selected professional and administrative occupations tend to hold jobs that paid less than comparable jobs in the private sector. The report stated that the jobs that show the greatest pay disadvantage for federal workers make up an increasing share of federal employment. The provisions of the federal student loan repayment program legislation authorize student loan repayments as recruitment or retention incentives for highly qualified federal job candidates or current employees. In retention situations, however, the SLR program may be used only when an employee is likely to leave for employment outside the federal government, not to another federal agency. As mentioned previously, agencies are authorized to provide an employee with a maximum repayment amount of $10,000 per calendar year up to a total of $60,000, with the payments included in gross income for both income and employment tax purposes. An employee who separates voluntarily from the agency, who does not maintain an acceptable level of performance, or who violates any of the conditions of the service agreement becomes ineligible to continue to receive the benefit and must reimburse the agency for the total amount of any repayment benefits received. Under the law, student loans made, insured, or guaranteed under the Higher Education Act of 1965 or health education assistance loans made or insured under the Public Health Service Act are eligible for repayment. The SLR program legislation covers executive and select legislative branch agencies and government corporations such as the Pension Benefit Guaranty Corporation. Authorizing legislation also requires OPM to annually report to Congress on agency program use. According to OPM, the Department of Health and Human Services was the only agency to make a student loan repayment in fiscal year 2001. More agencies began using the program in fiscal year 2002, with 16 of them reporting to OPM that they had repaid some employees’ student loans. Participation increased again in fiscal year 2003 with 24 agencies distributing more than $9.18 million among a total of 2,077 recipients. During fiscal year 2004, 28 agencies provided 2,945 employees with a total of more than $16.42 million in student loan repayments. Compared to fiscal year 2003, this represents a 42 percent increase in the number of employees receiving the benefit and a 79 percent increase in the agencies’ overall financial investment in the program. As figure 1 shows, five agencies invested the most funding on student loan repayments in fiscal year 2004. These five agencies also made the greatest number of loan repayments. As with other human capital flexibilities, Congress has directed that agencies use the incentive strategically; therefore, some agencies may not need to make large numbers of student loan repayments to use the program effectively, or need to use the program at all to manage their workforces. GAO is one of the top five agencies accounting for most of the student loan repayments made in fiscal year 2004. GAO implemented its SLR program in fiscal year 2002 for employees who indicated interest and were willing to make a 3-year commitment to stay with the agency. The objective of the program is to facilitate the recruitment and retention of highly qualified employees by (1) providing an incentive for selected candidates to accept a GAO position that may otherwise be difficult to fill and (2) retaining highly competent employees with knowledge or skills critical to GAO. At the current time, GAO’s program is used mostly to retain top talent. The goal is to retain employees longer than 3 years, after which they are more likely to consider a longer-term career at GAO. The agency focuses on retaining recently hired staff because of the considerable time and effort expended on selecting these employees and the substantial amount of money required to train new hires who will replace retiring employees. The program’s operating plan specifies groups or categories of employees who will be considered for student loan repayment for retention purposes based on job series. Analysts and financial auditors, for example, generally received the same amount of loan repayment, $5,000 in fiscal year 2004. Employees in often hard-to-fill job series—such as economists and attorneys—are considered for GAO’s maximum loan repayment, $6,000 in fiscal year 2004, on a case-by-case basis. To help measure the effectiveness of its program, GAO distributed a survey to program recipients in 2004. More than 50 percent of respondents confirmed that the program had some influence over their decision to stay with GAO. Pending legislation in the House of Representatives and the Senate would exclude student loan repayments from gross income for federal tax purposes. The Generating Opportunity by Forgiving Educational Debt for Service bill would, in effect, increase the amount of the student loan repayment benefit by relieving federal employees of the obligation to pay income tax on the repayments their federal agencies have provided them. Those in favor of eliminating the tax argue that, with the current program, the federal government is taxing its own ability to recruit and retain employees. They also note that loan repayments made by educational institutions or nonprofit organizations to encourage public service are not counted as taxable income for the recipient. Legislation was also introduced but not passed in the last Congress to authorize a separate SLR program for federal employees in national security positions. The Homeland Security Federal Workforce Act would grant authority to the heads of selected agencies to establish a pilot SLR program to recruit or retain highly qualified professional personnel employed by their agencies in national security positions. This pilot program, which would remain in effect for 8 years, would be limited to agencies with national security responsibilities, namely national security positions in the Departments of Defense, Energy, Homeland Security, Justice, State, and the Treasury; the Central Intelligence Agency; and the National Security Agency. The proposed SLR program is similar to the existing one except that the legislation will authorize the appropriation of funding specifically for the loan repayments. However, actual funding of the loan repayments may be at the discretion of Congress via annual appropriations acts. The legislation also requires that, no later than 4 years after its enactment, the OPM Director report to the appropriate congressional committees on the status of the programs established and the success of such programs in recruiting and retaining employees for national security positions. DOS, DOJ, and SEC used the SLR program more extensively and primarily as a broad-based tool to retain more recently hired employees in specific positions that require knowledge or skills critical to the agency. GSA, DOE, and DOT, on the other hand, used it in on a case-by-case basis as an incentive to either recruit selected highly qualified candidates or retain employees with skills critical to the agency. Commerce recently started to offer repayments, also on a case-by-case basis, for recruitment and retention. At this time, SSA, EEOC, and SBA were satisfied with their efforts using other recruitment and retention tools and have not needed to use the program. DOS heads the list of federal agencies in the number of employees participating in, and funds expended on, student loan repayments. The department began using the program in fiscal year 2002 and reported making loan repayments for 734 employees in fiscal year 2004. Repayments totaled approximately $3.6 million. Officials from DOS noted that many of their recently hired employees have student loan debts. For example, most of the Presidential Management Fellows entering the department have eligible student debt, which automatically qualifies them for the benefit. DOS uses its program primarily to recruit current employees for foreign service hardship posts, and also to retain employees in civil service positions that are difficult to fill. The department has determined that offering the program to candidates who accept or remain in positions at the most difficult posts, such as those experiencing hazardous political or health-related conditions, helps attract candidates to seek these assignments or encourages employees to remain in them. Employees, or potential employees, in certain historically difficult-to-fill civil service occupational series may also qualify for the program. These positions range from those requiring historians with a Ph.D. in history to passport and visa examiners working throughout the country. While DOS primarily uses the program for retention, its recruiters also report that the SLR program is of great interest on college campuses across the country, thereby indirectly helping recruiting. The department noted that student loan repayments are only one of several incentives and benefits available to those considering a State Department career, but that the repayments are an important part of its overall benefits package. While DOJ made only one student loan repayment in fiscal year 2002, it began using the program extensively in fiscal year 2003. In fiscal year 2004, the department reported making 331 repayments totaling approximately $1.9 million, with the majority of payments made on behalf of attorneys, special agents, and intelligence analysts. DOJ’s use of the SLR program is unique in that there is a centrally administered departmentwide program for attorneys, as well as unit-run programs for a variety of other positions. According to the attorney SLR program officials, DOJ uses the program mostly to retain experienced attorneys. About 10 percent of the loan repayments is being used for recruitment, including qualifying new attorneys entering the department under the Honors Program. An attorney SLR program manager reported that DOJ advertises the program heavily to law students because it perceives the program to be an effective indirect recruiting tool.