Turns out, paying back student loans can result in more and better candidates for job openings within the federal workforce and better retention and satisfaction once they’re hired.

As the No. 1 federal department in helping employees pay back their student loans, the Department of Defense cities the program designed for doing so as a major factor in recruiting and retaining civilian personnel.

“We believe the program has positively impacted the quality and number of candidates applying for civilian jobs with the Department of Defense, particularly in mission-critical occupations such as engineering, contracting and financial management,” said Cmdr. Leslie Hullryde, spokeswoman at the DoD.

The Office of Personnel Management’s recent report, “Agencies’ Use of Student Loan Repayments During Calendar Year 2010,” found that 36 Federal agencies provided 11,359 employees with a total of nearly $85.7 million in student loan repayment benefits. More than 68 percent of all student loan repayment benefits were provided by DoD, State or Justice.

In testimony to Congress releasing the report, OPM Director John Berry suggested that Congress urge all federal agencies to take advantage of the student loan repayment program to attract and retain quality employees.

“In our current budget climate, agencies should be mindful that the use of discretionary tools such as student loan repayments must be evaluated for their costs and benefits,” he said.

Derrick Dortch, president of the Diversa Group, a career consulting company, said incentives such as student loan repayments will become even more important as the economy improves and the government starts to compete again with the private sector for talented employees.

“The advantage is, as we start looking toward private sector renewal, the market for young professionals … is going to be more competitive over the next three to five years,” he said. “The student loan repayment dynamic can be the incentive for young people to go to agencies.”

The report was released about a month after OPM issued final regulations for the Student Pathways program, which is designed to provide a blueprint to recruit students into the federal workforce.

The State Department is another agency that’s seen success as a result of the benefit. The agency ran second to the DoD in utilizing the loan payback program.

“We know our program works from the positive employee feedback that we receive through surveys, said spokeswoman Brenda Greenberg. “More than 10,000 employees have benefited from the program since 2002 and hundreds have had their loans paid off, she said, noting that employees who sign up have a lower attrition rate.

At the opposite end of the working career spectrum, retirements are leading to the need to replace employees with younger people.

According to the report, the DoD responded to that need by adding nearly 2,000 intern positions in “mission-critical” occupations such as engineering and contracting. ” Consistently, employee feedback has indicated that the student loan repayment program is a major factor in recipients’ decisions to accept a position with DoD. In addition, DoD has retained 94% of student loan repayment recipients for three years or longer.”

Under the program, both the employer and employee participate in paying back the loan. And the program is not a “tuition assistance” plan – employees must be in the payback phase of their loans, with the education already completed.

At State, Greenberg said, the program, “is marketed as a ‘can’t lose’ partnership – to qualify for assistance, the employee must continue to make their own independent payments toward their loan debt.”

Dortch pointed out that many mid-career workers also have student debt because of going back to school recently. “A lot of people went back to school in the down market and are now debt-ridden professionals . To attract mid-level workers, not necessarily entry-level, agencies should be looking at that (loan program).”