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LRAP: Northwestern University Law School

Published June 2010

Public Service Fellowship Program

How it Works
NU Law graduates enrolled in the Public Service Fellowship Program (PSFP) are given a loan to help meet their loan obligation under the federal government's income-based repayment (IBR) plan. This loan is forgiven at the end of each year, provided the graduate has remained in eligible employment. If any interest remains unpaid after the IBR payment, PSFP may cover all or some of it in the first five years of repayment, depending on the graduate's income and total debt.

Graduates may remain in PSFP for up to ten years, at which point their loans may be forgiven under the loan forgiveness provision of the College Cost Reduction and Access Act of 2007.

Eligible Jobs
To enroll in PSFP, the graduate must start work as an attorney or manager immediately following graduation or the completion of a clerkship. Furthermore, the graduate must be employed with a nonprofit or government agency.

Judicial clerkships are not eligible for funding.

Eligible Debt
Since only federal loans can be enrolled in IBR, those are the only loans eligible under PSFP.

Calculation of Expected Participant Contribution
The first step in calculating your benefit is to find your NU Adjusted Gross Income (AGI). This is your salary minus $5,000 for each dependent child minus $5,000 for your spouse or life partner minus your annual undergraduate debt obligation. The salary used in this calculation is either your own salary or ½ the joint salary, if married.

The PSFP benefit depends on your NU AGI and your law school debt, according to the table below:

Law School Debt >$150,000 $100,000 - $149,000 $50,000 - $99,999 <$50,000

NU AGI

>$45,000 100% of IBR + 75% of unpaid interest 100% of IBR + 50% of unpaid interest 100% of IBR + 25% of unpaid interest 100% of IBR
$45,000 - $54,999 75% of IBR + 75% of unpaid interest 75% of IBR + 50% of unpaid interest 75% of IBR + 25% of unpaid interest 75% of IBR
$55,000 - $64,999 50% of IBR + 75% of unpaid interest 50% of IBR + 50% of unpaid inerest 50% of IBR + 25% of unpaid interest 50% of IBR
$65,000 - $74,999 25% of IBR + 75% of unpaid interest 25% of IBR + 50% of unpaid interest 25% of IBR + 25% of unpaid interest 25% of IBR
>$75,000 50% of unpaid interest 50% of unpaid interest 50% of unpaid interest 50% of unpaid interest

Remember that the contribution to unpaid interest is only given in the first five years of repayment. The amount given must be spent on educational loans, whether federal or private.

It is unclear whether or how assets would affect your benefit amount.

You can find a more thorough introduction to IBR [link] here [/link], but here are some of the basics:

Payments under IBR are capped at 15% of everything above 150% of the federal poverty line. The federal poverty line varies with family size. 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. This is why NU will in some cases contribute toward your unpaid interest.

Hypothetical Scenarios
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 few hypothetical scenarios to see how PSFP might function. (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 within five years of entering the program.

Salary: $45,000
Salary less Taxes: ($45,000 - $7,438) = $37,562
Law School Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation (on ten-year repayment): $13,810
Yearly Debt Obligation under IBR: (($45,000 – 1.5*$10,830)*.15) = $4,313
PSFP Award: (75% of $4,313) = $3,235
Graduate’s Contribution: ($4,313 - $3,235) = $1,078
Take-home Income: ($37,562 - $1,078) = $36,484
If your payment of $4,313 doesn’t meet the interest on your loans, an amount equal to 50% of the remaining interest will be added to your forgivable loan.

Scenario Two
An unmarried graduate with no undergraduate debt within five years of entering the program.

Salary: $65,000
Salary less Taxes: ($65,000 - $12,438) = $52,562
Law School Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation (on a ten-year repayment): $13,810
Yearly Debt Obligation under IBR: (($65,000 – 1.5*$10,830)*.15) = $7,313
PSFP Award: (25% of $7,313) = $1,828
Graduate’s Contribution: ($7,313 - $1,828) = $5,485
Take-home Income: ($52,562 - $5,485) = $47,077
If your payment of $7,313 doesn’t meet the interest on your loans (which is unlikely), an amount equal to 25% of the remaining interest will be added to your forgivable loan.

Scenario Three
A married graduate with no undergraduate debt seven years after entering the program. The couple has two children.

Graduate’s Salary: $70,000
Graduate’s Salary less Taxes: ($70,000 - $13,688) = $56,312
Spouse’s Salary: $85,000
Half the joint income: ($70,000 + $85,000)/2 = $77,500
NU AGI: ($77,500 - $10,000 for dependent children - $5,000 for spouse) = $62,500
Graduate’s Law School Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Graduate’s Yearly Debt Obligation (on ten-year repayment): $13,810
Yearly Debt Obligation under IBR: (($77,500 – 1.5*$22,050)*.15) = $6,664
PSFP Award: (50% of $6,664) = $3,332
Graduate’s Take-home Income: ($56,312 - $3,332) = $52,980
Since the graduate has been in the program for seven years, he/she is no longer eligible to have partial coverage of unpaid interest.

Final Thoughts on the Northwestern University Law School Public Service Fellowship Program
It seems as though those who are unable to find work immediately following their clerkship or graduation may be ineligible for PSFP. Given the current state of the legal market, interested applicants should contact the Law School for clarification.

iCurrently:
Number in Family || Poverty Guideline

              1                       $10,830

              2                       $14,570

              3                       $18,310

              4                       $22,050

              5                       $25,790







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