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LRAP: University of Virginia School of Law

Published June 2010

Virginia Loan Forgiveness Program

How It Works
Those University of Virginia School of Law graduates in qualifying employment can enroll in the Virginia Loan Forgiveness Program (VLFP) within two years of graduation or the completion of a clerkshipi. Participants may remain in the program for up to ten years after initial enrollment.

Assistance comes in the form of a forgivable loan the amount of which depends on the graduate’s income and total eligible debt level. Assuming the program participant remains in eligible employment for the duration of the year for which the loan has been issued, the loan is completely forgiven. If the participant becomes ineligible before the end of the year, she must repay a prorated portion of the loan.

Eligible Jobs
In order to be eligible for VLFP, graduates must be employed in a paid position that requires the use of their legal skills. Eligible positions include public service, broadly construed as government or nonprofit work. Also included is private practice within the state of Virginia, provided the practice focuses on representing underserved populations.

Part-time employment is eligible on a pro rated basis. For example, if the participant is working ¾ time, they are eligible for ¾ benefits.

Temporary (one- or two-year) judicial clerkships are not covered under the program.

Eligible Debt
Eligible loans are law school loans only. Furthermore, these loans must be on the federal government’s income-based repayment (IBR) plan. Loans which qualify for IBR include Stafford and GradPLUS.

Non-law school debt is ineligible.

Calculation of Benefits
VLFP will cover the difference between the actual payments on eligible debt and what the participant is expected to contribute.

The amount the participant is expected to contribute is based on income. The income used for calculations is the higher of the participant’s income or ½ of the joint income, if married. The joint income is the participant’s income plus the spouse’s income minus the spouse’s yearly graduate (not undergraduate) school debt obligation.

If this income is below $55,000 per year, the participant is not expected to contribute towards repayment and will receive an award equal to the actual IBR loan payment. There is an income cap of $75,000, above which graduates are ineligible for benefits. For incomes between $55,000 and $75,000, benefits are prorated. Unfortunately, this prorated formula has not been published.

In order to understand the benefits under VLFP, 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 sizeii. 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.

Assets
Personal assets are excluded from consideration under VLFP.

Hypothetical Scenarios
Let’s explore a few hypothetical scenarios to see how VLFP 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. (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 to be used for comparative purposes.)

Scenario One
An unmarried graduate.
Salary: $45,000
Salary less Taxes: ($45,000 - $7,438) = $37,562
Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation (on ten-year repayment): $13,810
Debt Obligation under IBR: (($45,000 – 1.5*$10,830)*.15) = $4,313
VLFP Award: $4,313 (under $55,000 threshold)
Take-home Income: $37,562

Scenario Two
An unmarried graduate.
Salary: $65,000
Salary less Taxes: ($65,000 - $12,438) = $52,562
Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation (on ten-year repayment): $13,810
Debt Obligation under IBR: (($65,000 – 1.5*$10,830)*.15) = $7,313
Graduate’s Expected Contribution (estimate): (50% of $7,313) = $3,656
VLFP Award (estimate): $3,657
Take-home Income: ($52,562 - $3,656) = $48,906

Scenario Three
A married graduate. The graduate’s spouse has $8,000 in graduate school debt obligation per year. The couple has no children.
Graduate’s Salary: $35,000
Graduate’s Salary less Taxes: ($35,000 - $4,938) = $30,062
Spouse’s Salary: $65,000
Joint Income: ($35,000 + $65,000 - $8,000) = $87,000
[Since ½ the joint income ($43,500) is more than the participant’s income ($35,000), this figure will be used in VLFP calculations.]
Graduate’s Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Graduate’s Yearly Debt Obligation: $13,810
Debt Obligation on IBR: (($35,000 – 1.5*$14,570)*.15) = $1,972
VLFP Award: $1,972 (under $55,000 threshold)
Graduate’s Take-home Income: $30,062iii

Final Thoughts on the University of Virginia Loan Forgiveness Program
The University of Virginia Loan Forgiveness Program combined with IBR makes it possible for graduates to pursue public interest work. Interested prospective applicants should make sure to do their research on the levels of funding available and the competitiveness of the application process by contacting UVA directly.

iThe clerkship must take place immediately after graduation and may not be longer than two years.
iiCurrently:
Number in Family || Poverty Guideline
             1                         $10,830
             2                         $14,570
             3                         $18,310
             4                         $22,050
             5                         $25,790

iiiThis figure does not include the spousal income which would be $44,562 after taxes and educational loan payments. This is assuming the couple files taxes separately. If filing jointly, the calculations would be much different because the IBR payment would be adjusted.