LRAP: Berkeley School of Law

Published May 2010

Loan Repayment Assistance Program

How It Works
Graduates of UC Berkeley School of Law who are engaged in qualifying employment may make use of the Loan Repayment Assistance Program (LRAP). The graduate must enroll in the Income Based Repayment (IBR) plan in order to receive benefits. Berkeley will provide a loan which covers the difference between your imputed contribution and the actual repayment amount under IBR.

Loans are given once every six months and forgiven at the end of each six month period, provided the graduate has remained in qualifying employment. Graduates may participate for up to ten years after graduation, at which point their loans would be forgiven by the federal government (Public Service Loan Forgiveness).

Eligible Jobs

In order to qualify for LRAP, the graduate must be employed:
(1) more than half-time;
(2) in a law-related position;
(3) for a nonprofit or government agency or overseas equivalent.1

Judicial Clerkships
There are two situations in which a judicial clerkship will qualify for LRAP:
(1) the clerkship is intended to last for two or more years2;
(2) the graduate intends to take qualifying employment (as defined above) after completion of the clerkship.

In the second situation, the loan has an 8% interest rate and is forgiven over a period of three years of post-clerkship LRAP participation (i.e. 33% of the loan is forgiven each year). If the graduate leaves qualifying employment before the loan is fully forgiven (or never takes qualifying employment after the clerkship), the remaining balance of the loan becomes due within one year.

Eligible Debt
In order for loans to be eligible for LRAP benefits, they must:
(1) be federal loans utilizing IBR (Stafford, GradPlus);
(2) not have been taken out in excess of the student budget.

Berkeley will also cover educational loans that were taken out prior to law school, provided they meet the above criteria.

Calculation of Expected Participant Contribution
The income figure used for calculation of LRAP benefits is either the income of the participant or one-half the joint income (if married), whichever is higher. If said figure is below $65,000, the graduate is not expected to contribute anything towards eligible debt. The graduate is expected to contribute 35% of anything made over $65,000 (i.e., if the graduate makes $74,000, they are expected to pay $3,150, which is 35% of $9,000). Those who make over $100,000 are no longer eligible for LRAP benefits.

Payments under IBR are capped at 15% of everything above 150% of the federal poverty line. The federal poverty line varies with family size3. 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.

Allowances are given for graduates with dependents. For the first child, $6,000 will be subtracted from the income figure used for calculations. For all subsequent children, $4,000 will be subtracted.

Hypothetical Scenario
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.)

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 $65,000 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 under IBR: (($65,000 – 1.5*$10,830)*.15) = $7,313
Graduate’s Expected Contribution: $0
LRAP Award: $7,313
Take-home Income: $52,562

Scenario Three
A married graduate with no undergraduate debt. 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
One-Half of Joint Income: ($70,000 + $85,000 - $10,000 for dependent allowances) = $72,500
Graduate’s Actual Debt: $100,000 on a ten-year repayment plan at 6.8% interest
Graduate’s Actual Yearly Debt Obligation (on ten-year repayment): $13,810
Yearly Debt Obligation under IBR: (($77,500 – 1.5*$22,050)*.15) = $6,664
Graduate’s Expected Contribution: (35% of $12,500) = $4,375
LRAP Award: ($6,664 - $4,375) = $2,289
Graduate’s Take-home Income: ($56,312 - $4,375) = $51,937

Scenario Four
An unmarried graduate with $25,000 in undergraduate debt.
Salary: $95,000
Salary less Taxes: ($95,000 - $20,320) = $74,680
Actual Debt: $125,000 on a ten-year repayment plan at 6.8% interest
Actual Yearly Debt Obligation (on ten-year repayment): $17,262
Yearly Debt Obligation under IBR: (($95,000 – 1.5*$10,830)*.15) = $11,813
Graduate’s Expected Contribution: (35% of $30,000) = $10,500
LRAP Award: ($11,813 - $10,500) = $1,313
Take-home Income: ($74,680 - $10,500) = $64,180

Final Thoughts on the UC Berkeley Loan Repayment Assistance Program
It is difficult to compare LRAPs which relies on IBR with those that do not. While the take-home income per year will usually be more generous for Berkeley than schools like Columbia and Harvard, you are actually making more significant progress on your loans under those schools’ programs. For instance, if you worked for five years in the public sector at a low salary and then left, you likely would have close to the same amount of debt as you did to start (under Berkeley’s program). However, under an LRAP that does not rely on IBR, you will have actually paid off half of your debt (assuming a ten-year repayment plan).

For those graduates who are confident that they will remain in public interest employment for ten years and receive loan forgiveness, Berkeley’s LRAP is undoubtedly a wonderful program.

i If employed by a foreign government or NGO, LRAP benefits will be available for 25 years rather than 10 because this work does not qualify for Public Service Loan Forgiveness.
ii Perkins loans and ParentPlus loans are not eligible for IBR. Perkins loans are eligible if they are consolidated with other eligible loans.
iii Currently:
Number in Family || Poverty Guideline
              1                  $10,830
              2                  $14,570
              3                  $18,310
              4                  $22,050
              5                  $25,790
iv This is the federal poverty line for a family of one.