Tax Break on Student Loan Repayments Proposed

Several House civil service leaders have announced they want to make payments under the federal employee student loan repayment program tax-free, which would effectively increase the value of those payments. The program-first authorized a decade ago but effective launched only last year–allows agencies to pay up to $6,000 a year and $40,000 lifetime, in exchange for service commitments of at least three years, but the payments currently are deemed taxable income. Similar legislation (S-1817) already is pending in the Senate. The House proposal (HR-3893) comes as agencies are due to soon report on the value of student loan reimbursements as a recruitment or retention tool, a reporting requirement designed in part to encourage agencies to use the authority. Only a few agencies so far have even put out policies on how they determine employee eligibility.