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LRAP: New York University School of Law

Published May 2010

Melvyn and Barbara Weiss Loan Repayment Assistance Program

How it Works

NYU School of Law graduates in eligible employment are given an interest-free loan to cover the amount between their expected contribution and their qualifying debt service. These loans are disbursed quarterly and forgiven after three years of participation in the Loan Repayment Assistance Program (LRAP). All subsequent loans are forgiven one year after disbursement. If the participant leaves eligible employment prior to loan forgiveness, interest begins to accrue at 8% and the full loan amount must be repaid. Participants must be within ten years of graduation to participate.1

Eligible Jobs

In order to qualify for LRAP, the graduate must be employed:

(1) in a paid position full-time2
(2) for a government agency, nonprofit organization, or international non-governmental organization
(3) in a position that involves law, as determined by NYU

Private sector work may qualify if the graduate and organization serves underrepresented clients over half of the time. Self-employment is treated on a case-by-case basis.

Judicial clerkships are only covered if the graduate intends to pursue eligible employment afterward. As opposed to the interest-free loans generally given to participants, loans disbursed to judicial clerks accrue interest at 8% annually. If the graduate does indeed continue on to eligible employment, the interest is forgiven after one year and the clerkship period counts towards the three years needed for loan forgiveness. Loans become immediately payable if the clerkship is not followed by eligible employment.

Eligible Debt

Law school loans approved and recognized by NYU are covered under LRAP. Loans for up to $10,000 for bar-related expenses are also covered. No personal loans, parental loans, or consumer debt is eligible.

The amount of “qualifying debt” used for LRAP calculations is either the graduate’s actual debt3 or the maximum LRAP-eligible debt (an amount equal to three years of the student budget minus aid received minus the student contribution4), whichever is less.

For example, let’s say a student has $140,000 in law school debt. This is their actual debt. The maximum LRAP-eligible debt would be three years of the student budget (~$200,000) minus any aid amount received (let’s say $30,000 over three years) minus the expected student contribution. Having made $22,000 after 2L summer, $7,000 of that is added to the original student contribution of $7,000. So the maximum LRAP-eligible debt for this student is $156,000 ($200,000 minus $30,000 minus $14,000). Since this student’s actual debt ($140,000) is less than their maximum LRAP-eligible debt ($156,000), the actual debt figure is used for calculation of LRAP benefits.

LRAP benefits are calculated using an imputed or actual ten-year repayment plan on the amount of the qualifying debt.

Assets

In order to be eligible for LRAP, the graduate cannot have a net worth (assets minus debts) of more than $20,000. For most with significant law school debt, this should not pose much of an issue. If married, half of the combined net worth must not exceed $20,000. Retirement accounts are protected from consideration.

Calculation of Expected Participant Contribution

For single graduates, the figure used for LRAP benefits calculation is simply any income from employment. If the graduate is married or has a domestic partner, either the graduate’s income or half of the joint income is used, whichever is higher. In calculating the spouse’s income, up to $5,000 in undergraduate student debt obligation is subtracted. If two NYU LRAP participants are married, their income is treated separately.

If a graduate’s income is less than the income “base” dictated by the LRAP program, the graduate is not expected to contribute anything towards his/her qualifying debt obligation. The base is currently set at $50,770. The graduate is to contribute 40% of any additional income between $50,770 and $70,770 and 50% of any additional income between $70,770 and $80,770 to qualifying debt service. Those with incomes above the cap of $80,770 are not eligible for LRAP benefits.

The base is to go up at least 10% in the fourth and seventh years after graduation to allow for salary raises. The difference between the base and cap will remain at $30,000 and expected participant contribution will be calculated accordingly.

Up to $5,000 per year is directly subtracted from the expected contribution based on annual educational debt service from undergraduate or other graduate debt. See Hypothetical Scenario Three to see an example of this.

Hypothetical Scenarios

Let’s explore a few hypothetical scenarios to see how NYU’s LRAP might work. (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 other educational debt.
Salary: $45,000
Salary less Taxes: ($45,000 - $7,438) = $37,562
Qualifying Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
Graduate’s Expected Contribution: $0 (does not meet income base of $50,770)
LRAP Award: $16,572
Take-home Income: $37,562

Scenario Two
An unmarried graduate with no other educational debt.
Salary: $55,000
Salary less Taxes: ($55,000 - $9,938) = $45,062
Qualifying Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
Graduate’s Expected Contribution: (40% of $4,230) = $1,692
LRAP Award: ($16,572 - $1,692) = $14,880
Take-home Income: ($45,062 - $1,692) = $43,370

Scenario Three
An unmarried graduate with $4,000 in undergraduate loan payments per year.
Salary: $65,000
Salary less Taxes: ($65,000 - $12,438) = $52,562
Qualifying Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
Graduate’s Expected Contribution: (40% of $14,230) = $5,692
Adjusted Expected Contribution: ($5,692 minus $4,000 for undergraduate loan payments) = $1,692
LRAP Award: ($16,572 - $1,692) = $14,880
Take-home Income: ($52,562 - $1,692) = $50,870

Scenario Four
A married graduate has no other educational debt. Her spouse has $2,000 in undergraduate debt payments per year.
Graduate’s Salary: $75,000
Graduate’s Salary less Taxes: ($75,000 - $14,938) = $60,062
Spousal Income: ($65,000 - $2,000 for undergraduate debt payments) = $63,000
[Because the graduate’s salary is greater than half of the combined income, the $75,000 figure is used for calculations.]
Qualifying Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
Graduate’s Expected Contribution: (40% of $20,000 + 50% of $4,230) = $10,115
LRAP Award: ($16,572 - $10,115) = $6,457
Graduate’s Take-home Income: ($60,062 - $10,115) = $49,947

Final Notes on the NYU Loan Repayment Assistance Program

There are certainly many scenarios under which an LRAP participant would benefit greatly from the Program. In some cases, the total amount awarded could match the entire loan amount of over $100,000. However, those who do not qualify because they make more than the current cap of $80,770 may experience difficulty paying off over $15,000 of student loans per year.

Additional Financial Support for Public Interest

In addition to LRAP, NYU offers guaranteed funding for 1L and 2L summers for those working in a qualifying public interest position for at least ten weeks. The amount of this funding is not listed on the website. For more information, see http://www.law.nyu.edu/financialaid/summerfunding/index.htm.

There are also a number of prestigious and large scholarships assigned to incoming students with a desire to enter public interest law. See http://www.law.nyu.edu/financialaid/scholarships/jdscholarships/index.htm for details.

i Or up to twelve years after graduation in the case of deferments, which may be granted for up to two years for continuing education, economic hardship, involuntary unemployment, temporary disability, or parental leave.
ii Full-time is at least 35 hours per week. A participants who is the caretaker of a child under the age of six is eligible if working at least half-time in an otherwise eligible position. The income used for LRAP calculations is an imputed full-time salary. Participants can also receive benefits for up to six months of parental leave.
iii The original principle of your law school loans.
iv The student contribution is the amount the student is expected to contribute to his/her law school education (as calculated prior to enrollment) plus any amount made above $15,000 during a particular law school summer (including the summer after 3L).
v That is, 40% for anything up to $20,000 over the base and 50% for anything between $20,000 and $30,000 above the base.