[Code of Federal Regulations]
[Title 5, Volume 1]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR537.106]

[Page 489-490]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
                CHAPTER I--OFFICE OF PERSONNEL MANAGEMENT
 
PART 537--REPAYMENT OF STUDENT LOANS--Table of Contents
 
Sec. 537.106  Procedures for making loan repayments.

    (a) Conditions for payments. Payments will be at the discretion of 
the agency and are subject to such terms, limitations, or conditions as 
may be mutually agreed to in writing by the agency and employee. 
Payments may be applied only to the indebtedness outstanding at the time 
the agency and the employee enter into an agreement, and may not begin 
before the employee enters on duty with the agency. Student loan 
repayment benefits must be in addition to basic pay and any other form 
of compensation otherwise payable to the employee involved. Tax 
withholdings must be deducted or applied at the time any payment is 
made. Tax withholdings may not be spread out over time. Since these tax 
implications could create a financial hardship for the recipient of the 
repayment benefit, agencies can lessen the impact of tax withholdings on 
an employee's paycheck in one of the following ways:
    (1) Agencies can make smaller payments at periodic intervals 
throughout the fiscal year rather than issue payments under this part in 
one lump sum;
    (2) Employees can write a check to the paying agency to cover their 
tax liability rather than have the tax liability withheld from the 
employee's paycheck;
    (3) Agencies can deduct the amount of taxes to be withheld from the 
loan repayment benefit before issuing payment to the holder of the loan.
    (4) Agencies are strongly advised to consult the Internal Revenue 
Service for further details concerning these options as well as the tax 
withholding implications of payments under this part.
    (b) Loans to be repaid. Before authorizing loan repayments, an 
agency must verify with the holder of the loan that the employee has an 
outstanding student loan that qualifies for repayment under this part. 
Agencies should verify remaining balances to ensure that loans are not 
overpaid. An agency may repay more than one loan as long as the loan 
repayments do not exceed the limits set forth in paragraph (c) of this 
section.
    (c) Size of payments. In determining the size of the loan payments, 
an agency should take into consideration the employee's value to the 
agency, and how far in advance the agency can commit funds. If budgetary 
considerations are an issue, agencies have the discretion to determine 
the repayment benefit amount given to an employee each year. This type 
of arrangement must be included in the written service agreement with 
the employee. The amount paid by the agency is subject to all the 
following maximum limits:
    (1) $6,000 per employee per calendar year; and
    (2) A total of $40,000 per employee.
    (d) Employee responsibility. The employee will be responsible for 
making loan payments on the portion of the loan(s) that continues to be 
the employee's responsibility. Payments under this part do not exempt an 
employee from his or her responsibility

[[Page 490]]

and/or liability for any loan(s) the individual has taken out. The 
employee will also be responsible for any income tax obligations 
resulting from the loan repayment benefit.