Risks and LRAP Forum

[XxSpyKEx]

I don't really have anything to add except that I'm very interested in this conversation. Any other insight would be much appreciated.

+1

Interested as well. Also a discussion of the advantages and disadvantages of certain schools LRAPs

In the TLS profiles somewhere is a write-up that some guy did about basically everything you would ever want to or need to know about LRAP for the t14 schools. It's actually really useful and worth checking out if you haven't already done so.

[NoleinNY]

correct me if i'm wrong, but you could simply put the car/house/line of credit into your souse/significant other's name while you're in the 10-year period. that way you can still buy a house or car and take advantage of the benefits the IBR and LRAP offers.

Not saying you are wrong (I might be the one misinformed), but IIRC if you are married your spouse's income is factored into IBR. In that case, it is You+Him/Her = Income they judge your payments on. So if you have $100k debt, you make 50k and she makes 51k, you are no longer qualified... I think that is what it said on the IBR website.

Your spouse only counts if you file taxes jointly. If you file separately, you're fine.

Or just find someone who doesn't mind waiting to get married for 10 years. And who won't leave you homeless and possibly carless in the interim.

That seems less complicated than filing separate taxes...

[Adjudicator]

While LRAP is indeed risky, it is still much safer than the alternative: LARP.

[sidhesadie]

I think it's really critical you check into the specific school's guidelines.

For example, regarding the spousal income issue, at Lewis & Clark, in their program information, not only is spouse's income included (regardless of filing status) but so are domestic partners:

For LRAP income eligibility, a domestic partner’s income will be treated exactly the same as that of a married spouse. The term “partner” means spouse or domestic partner. A domestic partnership is defined as a partnership with all the following characteristics:
1. Two persons living together in an exclusive and committed relationship; 2. Who are financially interdependent; 3. Who are not related by blood or adoption; 4. Who are both at least 18 years of age and mentally competent, and;
5. Who are not legally married to anyone.

So don't just assume it won't matter. It might, depending on the program. Obviously, domestic partners aren't filing joint taxes, so filing status isn't necessarily the deciding factor, check your school's program carefully.
Also, according to their program married/living with a partner recipients income is calculated by either your income OR half the total combined joint income, whichever is HIGHER.
So, my boyfriend and I (who are domestic partners, I'm even on his health insurance as such) if my income is 40,000, so I'm under the cap, and his is 80,000, they would calculate MY income for LRAP purposes as 60,000.

[InvictusFortis]

I think it's really critical you check into the specific school's guidelines.

For example, regarding the spousal income issue, at Lewis & Clark, in their program information, not only is spouse's income included (regardless of filing status) but so are domestic partners:

For LRAP income eligibility, a domestic partner’s income will be treated exactly the same as that of a married spouse. The term “partner” means spouse or domestic partner. A domestic partnership is defined as a partnership with all the following characteristics:
1. Two persons living together in an exclusive and committed relationship; 2. Who are financially interdependent; 3. Who are not related by blood or adoption; 4. Who are both at least 18 years of age and mentally competent, and;
5. Who are not legally married to anyone.

So don't just assume it won't matter. It might, depending on the program. Obviously, domestic partners aren't filing joint taxes, so filing status isn't necessarily the deciding factor, check your school's program carefully.
Also, according to their program married/living with a partner recipients income is calculated by either your income OR half the total combined joint income, whichever is HIGHER.
So, my boyfriend and I (who are domestic partners, I'm even on his health insurance as such) if my income is 40,000, so I'm under the cap, and his is 80,000, they would calculate MY income for LRAP purposes as 60,000.

Well, tell him/her you can live together but can't practice strict monogamy.

[DeeCee]

Well, tell him/her you can live together but can't practice strict monogamy.

lol.....

[Eugenie Danglars]

So, I've been combing through info on IBR and various schools LRAP programs. Here's what I've got:

-Let's say I get a $45,000 qualifying public interest job
-Leave school with a debt of about $190,000
-I do IBR and pay about $360 a month for ten years (making no dent in the principal)
-Loan is forgiven completely in 10 years.

Depending on which school I attend and how their LRAP allots, I might pay all of that $360, none of it, or about 40% of it each month. All in all, this makes law school ridiculously cheap.

The problem is: I have to sit with $190,000 in debt for ten years.

The questions are: what are the disadvantages of sitting on that debt, even if repayment isn't the issue? How will it affect plans to get a house or a car? What are the other issues, cause it seems kinda too good to be true? (Considering that I'd pay about $4313 for law school...or less)

Ahh, good ole’ lawyer math. If you leave law school with $190k in debt and are only repaying 15% of your income for 10 years, your principal will increase substantially over the period of 10 years. I don’t really feel like busting out a calculator right now, but I’ll venture to guess you are going to owe over a half million 9 years out of law school.

It will most likely affect your ability to take on any additional debt. If you are the typical law student who is in his/her early 20s with no assets going into law school, then you are coming out of law school insolvent (i.e. you will have $190K in debt, and no assets). Any bank with even the slightest bit of common sense would not lend to you, an insolvent debtor. Granted you can’t discharge your student loans, you can discharge other debt, so I’d imagine most creditors aren’t going to be dumb enough to not realize that (and lend you additional money). I’d be surprised if you could even get a car from one of those scam infomercial dealers who claim to approve everyone (at heinous interest rates) with $190K in debt @ 8% interest and a job that only paying $45k /year or less.

IMO, non- all-or-nothing LRAP programs are a much better deal than PI IBR because if your plans change and you want to do something besides public interest 6 years out, you can without having something like $500K in student debt remaining that you have to repay. For example, if you have a few kids and decide you want to move into the private sector to increase your income, you would not be able to do that with 10 year PI IBR without getting stuck paying the entire remaining principal (which will be substantially larger than what it was when you left law school). Granted the 10 year repayment period does not have to be continuous, it is still 10 years, and you still have to make large loan payments those years you are not working in PI (and also are forced to return to PI at some point to get the loan forgiveness).

I did actually realize this, but, like you, I was to lazy to do even more math. The good news is you don't have to choose between "non- all-or-nothing LRAP programs" and IBR because you can likely do them together. Personally, I'd be more likely to end up kicked out of school LRAP than IBR because if things went south with my PI law job, I'd be more inclined to take a non-law PI job than a non-PI law job.

[sojasoph]

.

[vaperera]

In the TLS profiles somewhere is a write-up that some guy did about basically everything you would ever want to or need to know about LRAP for the t14 schools. It's actually really useful and worth checking out if you haven't already done so.

I think this is the link to the thread you mentioned: http://www.top-law-schools.com/forums/v ... 15&t=62094

[homestyle28]

So, I've been combing through info on IBR and various schools LRAP programs. Here's what I've got:

-Let's say I get a $45,000 qualifying public interest job
-Leave school with a debt of about $190,000
-I do IBR and pay about $360 a month for ten years (making no dent in the principal)
-Loan is forgiven completely in 10 years.

Depending on which school I attend and how their LRAP allots, I might pay all of that $360, none of it, or about 40% of it each month. All in all, this makes law school ridiculously cheap.

The problem is: I have to sit with $190,000 in debt for ten years.

The questions are: what are the disadvantages of sitting on that debt, even if repayment isn't the issue? How will it affect plans to get a house or a car? What are the other issues, cause it seems kinda too good to be true? (Considering that I'd pay about $4313 for law school...or less)

Ahh, good ole’ lawyer math. If you leave law school with $190k in debt and are only repaying 15% of your income for 10 years, your principal will increase substantially over the period of 10 years. I don’t really feel like busting out a calculator right now, but I’ll venture to guess you are going to owe over a half million 9 years out of law school.

It will most likely affect your ability to take on any additional debt. If you are the typical law student who is in his/her early 20s with no assets going into law school, then you are coming out of law school insolvent (i.e. you will have $190K in debt, and no assets). Any bank with even the slightest bit of common sense would not lend to you, an insolvent debtor. Granted you can’t discharge your student loans, you can discharge other debt, so I’d imagine most creditors aren’t going to be dumb enough to not realize that (and lend you additional money). I’d be surprised if you could even get a car from one of those scam infomercial dealers who claim to approve everyone (at heinous interest rates) with $190K in debt @ 8% interest and a job that only paying $45k /year or less.

IMO, non- all-or-nothing LRAP programs are a much better deal than PI IBR because if your plans change and you want to do something besides public interest 6 years out, you can without having something like $500K in student debt remaining that you have to repay. For example, if you have a few kids and decide you want to move into the private sector to increase your income, you would not be able to do that with 10 year PI IBR without getting stuck paying the entire remaining principal (which will be substantially larger than what it was when you left law school). Granted the 10 year repayment period does not have to be continuous, it is still 10 years, and you still have to make large loan payments those years you are not working in PI (and also are forced to return to PI at some point to get the loan forgiveness).

I did actually realize this, but, like you, I was to lazy to do even more math. The good news is you don't have to choose between "non- all-or-nothing LRAP programs" and IBR because you can likely do them together. Personally, I'd be more likely to end up kicked out of school LRAP than IBR because if things went south with my PI law job, I'd be more inclined to take a non-law PI job than a non-PI law job.

FWIW, 190k in debt, over 10 years, assuming no payments are made = about 421k in debt at 10 years. Most people will have less than that because they will be making payments against the interest. Obviously this doesn't negate the point that if you stop IBR at any point in the 10 years you'll likely owe more at that point than you did at graduation. However, it's not true that banks won't lend to you. While underwriters consider your total debt/income ratio, they also consider the kinds of debt, and the interest rate charged. I'm sure someone can find a bank who will essentially set aside the risk of 190k b/c it's school debt and really only takes a few hundred out of your monthly salary so affects you more like 50k in debt. Many banks will see you, a lawyer, as a potential long term client and will try to earn your business. They won't go crazy, but will look at your debt differently. I used to work for a bank and knew the underwriters, they had significant flexibility in what they did (I'm not arguing that this was always a good thing).

TL;DR: Things will be tight, but I bet you can secure some home& auto financing.