LRAP: Duke Law School

How it Works
Duke Law School Loan Repayment Assistance Program (LRAP) participants are given a loan to cover the difference between their expected contribution and their actual obligation under the federal government’s income-based repayment (IBR) plan. Assuming the participant remains eligible for the entirety of that financial year, the full amount of the loan is forgiven.

Graduates are eligible for up to ten years after graduation and may come in and out of the program without penalty.

Eligible Jobs
In order to be eligible for Duke’s LRAP, graduates must be employed full-time in a law or law-related government or nonprofit position. Eligible jobs are sorted into two “tiers” which receive different funding priority.

“Tier one” employment is defined as “employment in the public interest.” Those working for nonprofit public interest organizations or as prosecutors and public defenders are included in this tier. Tier one receives funding priority over tier two.

“Tier two” employment is defined as “public service employment.” This includes work for local, state, or federal governmental agencies. Once all in tier one have received their benefits, those in tier two will receive their benefits (subject to remaining availability of funding).

Eligible Debt
In order to qualify for Duke’s LRAP, the graduate must have at least $20,000 in debt incurred from the cost of law school. Only federal loans are eligible because only federal loans can be enrolled in IBR. Federal loans eligible for IBR include Stafford and GradPLUS.

While there is no longer a cap on the amount of benefits you may receive, you cannot receive more in benefits than what you initially borrowed to fund law school.

Calculation of Expected Participant Contribution
If your income is below $60,000, you are eligible for the full benefit under LRAP. In other words, so long as funding allows, you will not be expected to contribute to your repayment under IBR. The full amount will be covered by a forgiven loan from Duke.

For incomes between $60,000 and $75,000, a sliding scale is implemented to determine the amount of your benefit. Unfortunately, Duke Law School has not published this scale. It is possible that the scale differs each year depending on available funding.

The income figure used for calculation of LRAP benefits is adjusted for marital status and dependents, but the nature of these adjustments is again not published by Duke Law School. Assets may also affect your award total.

In order to understand the benefits under Duke’s LRAP, you should also know something about IBR. TLS has its own explanation of IBR here. The basics of what you need to know are included below.

Payments under IBR are capped at 15% of everything above 150% of the federal poverty line. The federal poverty line varies with family size1. For example, if your income is $60,000 and you have two people in your family (yourself and a spouse), your payments under IBR would be 15% times ($60,000 – (150% of $14,570)) = $5,722.

The downside of IBR is that you may be making little to no progress on your loans. Because your monthly payments can be so low, it is possible that your payments only go towards interest instead of the principal balance. If you do not end up having your loans forgiven (most likely because of leaving qualifying employment before ten years), you may have as much or even more debt than you had to start.

Availability of Funds
Starting during the 1997/1998 academic year, Duke Law School committed itself to providing $150,000 of funding per year for their LRAP. Each year, the amount was supposed to grow by $10,000. That is, in 1998/1999 they would add $160,000 to the funding, the next year $170,000, etc. Assuming this goal has been met, the LRAP should have received $280,000 for the 2010/2011 academic year.

In some years demand may exceed the funding while in others the supply of funding more than accounts for the demand. In the first scenario, funds are distributed pro rata as need be with “tier one” receiving priority over “tier two” until funding is exhausted. If all available funds are not used in a given year, the excess amount rolls over and becomes available for use the next year.

Hypothetical Scenarios
Let’s explore a few hypothetical scenarios to see how Duke’s LRAP might function. Because the amount you are expected to pay under IBR varies with household size and income, it is difficult to capture all possibilities. You should familiarize yourself with how IBR functions. In the meantime, let’s explore a limited number of hypothetical scenarios. Also note that all these hypotheticals assume that the demand for funding does not exceed the supply. (On the table of contents page you will find links to websites I used to calculate federal tax burden and yearly student debt obligations. Using these, you can input your own variables. Keep in mind that the take-home income amount does not reflect state or local taxes. Treat all hypothetical scenarios and amounts as approximations.)

Scenario One
An unmarried graduate with no undergraduate debt
Salary: $45,000
Salary less Taxes: ($45,000 - $7,438) = $37,562
Actual Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Actual Yearly Debt Obligation (on ten-year repayment): $13,810
Yearly Debt Obligation under IBR: (($45,000 – 1.5*$10,830)*.15) = $4,313
Graduate’s Expected Contribution: $0 (does not meet $60,000 threshold)
LRAP Award: $4,313
Take-home Income: $37,562

Scenario Two
An unmarried graduate with no undergraduate debt.
Salary: $65,000
Salary less Taxes: ($65,000 - $12,438) = $52,562
Actual Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Actual Yearly Debt Obligation (on ten-year repayment): $13,810
Yearly Debt Obligation on IBR: (($65,000 – 1.5*$10,830)*.15) = $7,313
Graduate’s Expected Contribution (Estimate): (33% of $7,313) = $2,438
LRAP Award (Estimate): ($7,313 - $2,438) = $4,875
Take-home Income: ($52,562 - $2,438) = $50,124

Scenario Three
An unmarried graduate with an annual undergraduate debt obligation of $4,000.
Salary: $75,000
Salary less Taxes: ($75,000 - 14,938) = $60,062
Actual Law School Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Actual Yearly Law School Debt Obligation (on ten-year repayment): $13,810
Yearly Law School Debt Obligation on IBR: (($75,000 – 1.5*$10,830)*.15) = $8,813
Graduate’s Expected Contribution: $8,813 (above $75,000 threshold)
LRAP Award: $0
Take-home Income: ($60,062 - $8,813 - $4,000) = $47,249
I would normally do a few more hypotheticals for married graduates, but since we don’t know exactly how spousal income affects the calculations, this would not be particularly helpful.

Final Thoughts on the Duke Law School Loan Repayment Assistance Program
If you are strongly considering Duke Law School and intend to rely on its LRAP, I would suggest you contact the admissions office and request information on the level of funding and how well the demand for funding is being met. In years where funding is adequate, the LRAP appears to be fairly strong compared to peer schools’ LRAPs.

     1                            $10,830
     2                            $14,570
     3                            $18,310
     4                            $22,050
     5                           $25,790