Current and Former IRS Employees Owe Millions in Student Loan Repayment Benefits

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Summary

In July 2025, SLRP personnel identified more than 1,000 employees who owe approximately $8.2 million because they did not comply with some condition of their service agreement (e.g., the employee left the IRS before working the three-year commitment). To collect the debt, the IRS must first establish the debt in coordination with appropriate federal agencies (e.g., the IRS’s payroll processing center). However, the IRS waited nearly two years to initiate steps to collect the debt from some employees. If a student loan is repaid by the government, the amount repaid is considered taxable income. According to IRS management, debts were not originally established for employees because of concerns that it would impact the taxable income reported on their W-2, Wage and Tax Statement. However, the IRS could have issued corrected W-2’s, if necessary. During August and September 2025, the IRS established approximately $4.8 million in debt for 542 employees who did not comply with their service agreement. Approximately $3 million in debt for 399 employees still has not been established, and approximately $400,000 was resolved. In addition, the IRS waived nearly $10.6 million in unestablished debt for nearly 1,000 employees that separated because of the Deferred Resignation Program. In addition, the IRS has not extended the service agreements for 9 of the 75 employees in our statistical sample who were in a non-pay status. According to SLRP personnel, there is no formal internal guidance that describes adjusting the service agreement. However, the service agreement and interim guidance provide details on the impact of leave without pay and other non-pay status. In August 2025, the IRS began updating the SLRP Desk Guide to include information on how to calculate service agreement extensions, and when applicable, how the service agreements will be extended. If the IRS does not establish clear procedures to enforce the service agreement and debt policy, employees who committed to stay with the IRS may leave without repaying their loan benefit back to the IRS.