NCPA - National Center for Policy Analysis

Taxpayers Pay Millions for Fed Workers' Student Loans

June 21, 2013

Congress may let student loan interest rates double July 1, but some federal workers and congressional staff likely are protected from the impact by a taxpayer-funded benefit that provided more than $20 million last year for them to pay down their college debts, says USA Today.

  • Congress created the benefit more than 10 years ago to make government jobs more appealing to job candidates who could get higher-paying jobs in the private sector.
  • Meanwhile, a 2007 law that cut student loan interest rates in half will expire July 1, and Congress has been unable to reach a deal to extend it.
  • Federal agencies spent about $72 million in 2011, the last year for which data are available, to pay down student loans for 10,134 federal workers.

The program may make sense for some federal jobs, but it should be limited to those where the benefit really makes a difference, says Tom Schatz, president of the non-profit Citizens Against Government Waste. It is harder to defend for congressional staff, Schatz says.

Participation in the federal program and its costs grew rapidly between 2002 and 2010, statistics kept by the Office of Personnel Management show.

  • In 2002, 690 employees received the loan payments at a total cost of a little over $3 million.
  • By 2010, more than 11,000 workers in 36 federal agencies had received loan payments totaling $85.7 million. That number dropped to $71.8 million in 2011.

Congress lowered student loan interest rates in 2007 as part of an economic stimulus effort, but as of July 1 they will jump from 3.4 percent back to the 6.8 percent in place before Congress acted. The Republican-controlled House has passed a bill to peg new interest rates to market rates for other loans, but Democrats and the White House objected, saying the Republican plan would allow lending rates to fluctuate and create uncertainty for borrowers.

Democrats are calling for a two-year extension of current loan rates to allow more time for Congress to figure out a better plan. The Senate rejected both Democratic and Republican student loan bills earlier this month.

Source: Paul Singer, "Taxpayers Pay Millions for Fed Workers' Student Loans," USA Today, June 19, 2013.


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