Congress may let student loan interest rates double July 1, but some federal workers and congressional staff likely are 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.
Congress created the benefit more than 10 years ago to make government jobs more appealing to job candidates who could get higher-paying jobs in the private sector. Meanwhile, a 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 non-profit 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 critical benefit that helps the government recruit and retain top talent. Congressional sources point out that participants are not protected from interest rate increases.
“This is a program designed to help attract talented people to careers in public service since they can generally find higher salaries in the private sector,” said Adam Jentleson, spokesman for Senate Majority Leader Harry Reid, D-Nev.
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 non-profit 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. Yet Congress makes up more than 20% of the total taxpayer expenditure on this program, despite having a small fraction of the federal workforce.
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 over $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 under that figure. If each staffer received $6,000 a year, that suggests about 1,000 staff members received the payments.
Federal employees can receive a maximum of $10,000 a year and a total of $60,000.
Members of Congress are not required to provide the benefit for their staff, but many do because it helps them recruit better employees, said Brad Fitch, president of the non-partisan Congressional Management Foundation.
“We know this is an important benefit,” Fitch said, in part because staff on Capitol Hill are paid anywhere from 20% to 100% less than private sector staff with similar responsibilities.
In a survey of congressional staff that CMF plans to release this summer, “we specifically asked which benefits are appealing … student loan benefits were at the top of the survey,” Fitch said. The foundation helps train members of Congress on how to run their offices.
The office of Sen. Tom Coburn, an Oklahoma Republican and federal spending hawk, does participate in the program, said John Hart, Coburn’s spokesman. But “we’ve also put it on the chopping block,” Hart said.
“We would be better off eliminating the program while, at the same time, rethinking the federal government’s relationship with education,” Hart said. “Student loan assistance programs are a circular subsidy that offsets the costs of Congress’ expensive desire to make education affordable. It’s government fixing one failed subsidy with another.”
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.
Democrats are calling for a two-year extension of current loan rates to allow more time for Congress to figure out a better plan. The Senate rejected both Democratic and Republican student loan bills earlier this month.
Follow @singernews on Twitter.