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Congress spends millions to pay down workers’ student loans

June 18, 2013 in Detroit Free Press

by Paul Singer, USA Today

Cross-posted on June 18, 2013 in WBIR.comon June 18, 2013 in WUSA9.com; on June 18, 2013 in News 10; on June 18, 2013 in DigTriad.com; on June 18, 2013 in AZCentral.com; on June 19, 2013 in Asbury Park Press; and on June 19, 2013 in USA Today.

Congress may let student loan interest rates double July 1, but some federal workers and congressional staff likely will be 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.

Created more than 10 years ago, the benefit was designed to make government jobs more appealing to job candidates who could earn more in the private sector. The 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.

A review of congressional spending records by USA TODAY and the nonprofit Sunlight Foundation, a watchdog group, showed that the House of Representatives spent almost $15 million last year to pay down staffers’ student loans, while the Senate spent almost $6 million. Members of Congress are not eligible for the program.

Federal agencies — which provide more detailed information — spent about $72 million in 2011, the last year for which data are available, to pay down student loans for 10,134 federal workers.

Federal officials defend the program as a crucial benefit that helps the government recruit and retain top talent. Congressional sources point out that participants are not protected from interest rate increases.

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

“It is really not hard to find a large number of applicants for any position on the Hill,” Schatz said. These jobs “are very prestigious” and staff are much more likely to take the job for a few years and then move on to another position out of government.

Nationally, the amount of student loan debt has grown steadily, according to a report Tuesday by the congressional Joint Economic Committee. Two-thirds of 2011 college graduates have student loans, and overall “student debt has increased significantly in recent years, nearly doubling from $550 billion in the fourth quarter of 2007 to just under $1 trillion in the first quarter of 2013,” the report said.

Congress established the student loan repayment program in 1990 for federal employees as a way to recruit and keep good workers. The program was not implemented for more than a decade. Congress extended the program to Senate staffers in 2002, once federal agencies started to offer the benefit, and the House followed suit in 2003.

Participation in the 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 more than $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 does not provide detailed reports on how many staff members have their loans repaid or the cost. Records of House payments indicate how much is paid to individual student loan providers, but neither the staffers’ names nor the employers are included. An analysis of 2012 reports by USA TODAY and the Sunlight Foundation indicated that about 2,400 staff members were paid about $14.9 million or about $6,000 a year for each staffer.

Senate reports indicate a $6-million maximum for student loan payments in 2011 and 2012 with total payments slightly less than that. If each staffer received a maximum of $6,000 a year, then about 1,000 staff members received the payments.

Aaron Smith, executive director for the youth advocacy group Young Invincibles, said the loan repayment program is a great idea, but it also leaves Congress “protected from the interest rate hike in a way that ordinary Americans are not.”

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% back to the 6.8% 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.