Whether you’ve already attended college or are thinking about how you’re going to pay for higher education, the Federal Student Loan Repayment Program (FSLRP) is an option you may want to consider. With United States student debt over $1.5 trillion, students across the nation are looking for ways to get a well-rounded education without putting themselves in decades of debt.
Here, we’ll cover the basics of the FSLRP, including the procedure, eligibility, and limits. We’ll also discuss several alternatives to the FSLRP to help you pay off your student debt.
How Does the Federal Student Loan Repayment Program Work?
Let’s review the basics of the FSLRP. The FSLRP is a program that permits government agencies to repay federally issued student loans. According to the United States Office of Personnel Management (OPM), these agencies use the FSLRP as an incentive to recruit or retain employees.
Essentially, the FSLRP is another benefit government agencies can provide, along with insurance, retirement, and vacation time. As private-sector jobs often pay more than those in the public sector, the government uses the FSLRP as a tool to attract the top talent.
What Types of Loans Are Eligible?
According to the OPM, all student loans made, insured, or guaranteed under parts B, D, or E of title IV of the Higher Education Act of 1965 or a health education assistance loan made or insured under part A of title VII or part E of title VIII of the Public Health Service Act are eligible for FSLRP.
If you’re not sure whether your loans qualify, below are the most common eligible loans:
- Subsidized Stafford Loans
- Unsubsidized Stafford Loans
- Federal PLUS Loans
- Federal Consolidation Loans
- Direct Subsidized Stafford Loans
- Direct Unsubsidized Stafford Loans
- Direct Federal PLUS Loans
- Direct Subsidized Federal Consolidation Loans
- Direct Unsubsidized Federal Consolidation Loans
- Defense Loans (made before July 1, 1972)
- National Direct Student Loans (made between July 1, 1972, and July 1, 1987)
- Perkins Loans
- Nursing Student Program Loans
- Health Professions Student Program Loans
- Health Education Assistance Loan Program Loans
It’s important to note that private student loans don’t qualify for the FSLRP. If you originally used a private lender or refinanced your student loans, you won’t be able to take advantage of this program.
Who Can Qualify for the FSLRP?
Most employees of federal agencies can qualify for student loan repayment. However, some employees may not be eligible because of the confidential or policy-related nature of their job. Other individuals might not qualify if they’re working under a time-limited appointment. If you’re interviewing with a government agency, make sure to ask whether your position would disqualify you from taking advantage of the FSLRP.
Additionally, agencies have service requirements – they only agree to start making loan payments after you’ve worked with the agency for a certain amount of time. Service periods are typically at least three years. During the service period, employees must maintain an adequate level of performance to receive their student loan repayments. Periods when the individual is on leave do not count toward the fulfillment of the service requirement.
Even if a government agency offers student loan repayment, they may reserve the benefit for high-qualified employees. You’re not entitled to the FSLRP just because you work for an agency that has paid down loans for other workers.
What Is the Maximum Amount of Loan Repayments?
Each individual may only receive $10,000 worth of loan repayments per year, with an overall maximum of $60,000 per person. Individual agencies may have lower maximum loan repayment amounts they determine internally.
Who Receives the FSLRP Check?
The employing agency sends the FSLRP check directly to the lender. The employee never receives the check.
Are Workers Taxed on FSLRP Wages?
Yes. The federal agency paying the loans is required to withhold 25% of the amount it pays to the loan holder on the employee’s behalf. According to the OPM, the paying agency may use several strategies to ease the employee’s tax burden. If you’re concerned with the tax liability, ask your employing agency if there’s anything they can do for you.
Are There Any Other Limitations?
The FSLRP isn’t the same as total loan forgiveness. If the employee leaves the agency before paying their entire loan, or if the individual has more than $60,000 worth of debt, he or she will still have to pay off the remaining balance.
Plus, if an employee voluntarily separates from the government agency before their agreement has been fulfilled – or is fired for cause – the individual may have to repay the agency for the full amount of the loan repayment benefits provided.
Alternatives to the Federal Student Loan Repayment Program
While the FSLRP might be a worthwhile option for some individuals, its scope is narrowly restricted to federal government employees. Let’s take a look at a few other ways you can pay down your student debt.
Public Service Loan Forgiveness
If you work in the public sector or for a nonprofit organization, you might be eligible to pursue Public Service Loan Forgiveness (PSLF). After making 10 years’ worth of payments (120 payments) pursuant to an income-driven repayment plan, the federal government may forgive your student debt entirely. Plus, the IRS won’t tax the loan forgiveness, saving you from a hefty bill when tax day comes around.
However, relying on PSLF may be risky. As of June 2019, less than 1% of people who applied for PSLF actually had their loans forgiven. Many people complain about complex procedures and unfulfilled government promises, so you’ll want to make sure you’re doing everything by the books and understand the process. Additionally, President Trump has repeatedly suggested ending the PSLF program for government and nonprofit employees. Make sure to check the current status of PSLF before applying.
State-Sponsored Loan Repayment Programs
Some individuals may be able to get help from their resident state. Many states offer specialized programs designed to help college graduates repay their student loans.
Teacher Loan Forgiveness Program
Full-time teachers in low-income public schools may be eligible for up to $17,500 of Teacher Loan Forgiveness if they work for five consecutive academic years. To qualify, teachers must have taken out federal Direct or Stafford Loans after October 1, 1998.
Nurse Loan Forgiveness
Nurses have various options for loan forgiveness, including Public Service Loan Forgiveness, Perkins Loan cancellation, and the Nurse Corps Loan Repayment Program.
Military Student Loan Forgiveness
Individuals in the Army, Navy, Air Force, National Guard, and Coast Guard may be eligible for loan forgiveness programs specific to each branch of the military. Military individuals can also take advantage of programs like the FSLRP and PSLF.
The government will also forgive student loans of veterans who become completely disabled. The debt forgiveness process is automatic unless the veteran declines debt forgiveness to avoid state tax liability. However, veterans who have their loans forgiven by this option don’t have to pay a federal tax liability.
Industry Loan Repayment Assistance Programs
Individual industries may provide special loan repayment programs for certain professions. For example, the National Institute of Mental Health offers up to $50,000 in loan repayment to highly educated health professionals who conduct biomedical or behavioral research funded by domestic nonprofit or government organizations. Over 1,600 individuals take advantage of the program per year.
Lawyers may also get access to state-based loan assistance programs. The American Bar Association is a useful resource for law graduates looking for help paying down their student loans.
Income-Driven Repayment Plans
If you have a lot of student debt but don’t qualify for any of the programs mentioned above, you might want to consider income-driven repayment. The federal government offers several types of income-driven repayment, each of which caps payments at a certain percentage of your discretionary income and forgives your loans after 20 to 25 years of payments.
Get Help With Loan Repayment
If you or someone you know is in the college selection process or has already graduated and is trying to pay down their debt, visit College Finance. We have a wealth of in-depth resources helping students and parents with financial planning. Whether you want to learn about financial aid, student loans, or other financing options, our experts at College Finance can help you plan for a bright and successful future.