Ask the Lawyer received the following question (paraphrased for easier reading and clarity) from a reader on a legal matter that might be of interest to the entire audience.
I was employed with one federal agency (agency 1) and then quit to become an employee of another federal agency (agency 2). As an employee of Agency 1, Agency 1 made a direct payment to my student loans servicer in the amount of $10,000 pre-tax. I am now employed at Agency 2 and am being told by Agency 1 that I owe them for the student loan payment. Is this correct?
The federal student loan repayment program permits agencies to repay federally insured student loans as a recruitment or retention incentive for candidates or current employees of the agency. 5 U.S.C. 5379. Each agency is authorized to set up its own student loan repayment program. An employee receiving this benefit must sign a service agreement to remain in the service of the paying agency for a period of at least 3 years. An employee must reimburse the paying agency for all benefits received if he or she is separated voluntarily or separated involuntarily for misconduct, unacceptable performance, or a negative suitability determination under 5 CFR Part 731. 5 C.F.R. § 537.107. The service agreement may specify any other employment conditions the agency considers to be appropriate, e.g. duties expected to perform, level of performance. The service agreement must contain a provision addressing whether the individual would be required to reimburse the paying agency for student loan repayment benefits if that individual voluntarily separates from the paying agency to work for another paying agency before the end of the service period. 5 C.F.R. § 537.107. Whether or not such individual would be required to repay the student loan payment in such circumstances is left to the agency’s discretion. 5 C.F.R. §§ 537.107 and 537.109.
Therefore, in the above scenario, the individual should review the service agreement with Agency 1 to determine whether he or she owes them for the student loan payment Agency 1 made on his or her behalf. In particular, you should review the number of years that were agreed to remain in the service of Agency 1 and whether he or she would be required to reimburse Agency 1 the student loan benefit if the employee voluntarily resigned from employment before the agreed-upon service years had elapsed.
Bill Bransford is managing partner of Shaw, Bransford & Roth, PC.
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