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Student Loan Repayment Program

This topic has been updated to reflect changes in how student loan repayments will be disbursed.

The Student Loan Repayment program provides Agencies the authority to repay student loans of Federal employees as an incentive to recruit and retain highly qualified personnel. Departments/Agencies are responsible for developing and implementing their policy/plan for determining eligibility and monitoring the Student Loan Repayment program (questions regarding eligibility should be referred to the Office of Personnel Management (OPM)). This includes monitoring the $10,000 calendar year maximum benefit and the $60,000 maximum career benefit.

The student loan repayment will be issued to the lending institution through electronic transfer (EFT); therefore, the employee is responsible for obtaining the lending institution's EFT routing number and an appropriate loan account number, so the student loan repayment is applied correctly. It is suggested that Agencies confirm the following information with the lending institution and/or the employee before submitting the data to NFC for payment:

  • Outstanding student loan balance
  • Lending institution account number and the employee's student loan account number
  • Lending institution's EFT routing number

To process a student loan repayment, the Agency can process this payment in SPPS Web.

If the employee is separated, the Agency should submit a request through SPPS Web for NFC to process and include the necessary information listed below:

  • Lump sum amount for the student loan repayment
  • Accounting data to be charged
  • Lending institution account number and the employee's student loan account number
  • Name of the lending institution for the student loan
  • Lending institution's payment mailing address

Each lump sum transaction will be edited in NFC's SPPS Web to limit the amount of that lump sum transaction to the $10,000 calendar year maximum benefit imposed by OPM regulations. NFC's SPPS Web tracks multiple transactions per person to limit the total amount of payments to the $10,000 maximum calendar year benefit and the $60,000 maximum career benefit imposed by OPM regulations.

Even though NFC's SPPS Web will edit the $10,000 calendar year maximum benefit and the $60,000 maximum career benefit, the Agency authorizing the benefit is still responsible for ensuring that the student loan repayment regulations are adhered to. This includes monitoring and tracking the $10,000 and $60,000 maximum benefits, as well as ensuring that the student loan repayments do not exceed the outstanding student loan balance.

Agencies must also monitor the calendar year and career maximum benefits for employees who transfer into PPS and have already had student loan repayments. PPS only captures student loan repayments that were made by Agencies serviced by NFC.

To assist Agencies with monitoring and tracking the student loan repayments, NFC will provide Agencies, upon request, with all payment data pertaining to student loan repayments processed through NFC's SPPS Web. Inquiries on student loan repayments can be submitted through SPPS Web.

The student loan repayment will be disbursed as a lump sum payment. The lump sum payment is considered supplemental wages; therefore, the appropriate taxes are withheld from the lump sum payment. The flat-rate method will be used to calculate the amount of tax withholding. Federal tax is computed at 25 percent of the gross amount. State and Local taxes are computed at 2 percent, and Medicare and Social Security at their current rate.

The following budget object classification codes (BOCC) will be used for the student loan repayment:

  • BOCC 1298, Student Loan Repayment, Gross Amount
  • BOCC 8191, Student Loan Repayment, Net Amount

The TC 56, Prefix 00, Student Loan Pmt-Benefit will display in the Statement of Earnings and Leave (EARN) System and on the employee's Form AD-334, Statement of Earnings and Leave, in the pay period the student loan repayment is processed.

The lump sum amount of the student loan repayment (supplemental wages) is included in the following boxes on the employee's Internal Revenue Service (IRS) Form W-2, Wage and Tax Statement:

  • Box 1, Wages, Tips, Other Compensation
  • Box 3, Social Security Wages
  • Box 5, Medicare Wages and Tips

The supplemental wages will also be included in the State, City, and county wage boxes, as applicable, and the taxes withheld will be reported in the applicable boxes on the W-2.

The PINQ program, PQ32, Payroll Listing, may be used to verify the student loan repayment.