LRAP: University of Chicago Law School

Published May 2010

Hormel Public Interest Program

How it Works
Graduates apply to become a participant in the Hormel Public Interest Program (HPIP) by December 1^st for the following year. An interest-free loan of up to $10,000 is disbursed in January, and this loan must be used to pay off student debt incurred to attend law school.1 If the participant remains in qualifying employment (see below) for the minimum of nine months of the year, the loan is forgiven in full one year after disbursement.2 If the participant leaves qualifying employment before the completion of nine months, he/she will be required to pay the HPIP loan back in full within 12 months (during which time interest will accrue at 6% per year).3

Eligibility Requirements
In order to qualify for the Hormel Public Interest Program, the graduate must:
(1) be employed in a job that generally requires a law degree
(2) be working for the public interest
(3) be working for a non-profit organization4, government office5, or a “comparable international organization”
(4) be working full-time (40 hours per week)6
(5) maintain a qualifying job for nine months of the calendar year
(6) be within seven years of graduation from the Law School7

The Law School’s Financial Aid Committee determines whether an applicant meets these criteria.

Salary Requirements
Graduates are eligible for the full benefit of $10,000 if they have a salary of under $60,000 for that year. Above $60,000, graduates are eligible for proportionally decreasing benefits up until the salary cap of $72,000. Those making above $72,000 are ineligible for benefits.

Hypothetical Scenarios
Let’s explore a few hypothetical scenarios to see how HPIP 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
Salary: $45,000
Salary less Taxes: ($45,000 - $7,438) = $37,562
Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
HPIP Benefits (estimate): $10,000
Actual Debt Payments: $6,572
Take-home Income: ($37,562 - $6,572) = $30,990

Scenario Two
Salary: $55,000
Salary less Taxes: ($55,000 - $9,938) = $45,062
Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
HPIP Benefits (estimate): $10,000
Actual Debt Payments: $6,572
Take-home Income: ($45,062 - $6,572) = $38,490

Scenario Three
Salary: $65,000
Salary less Taxes: ($65,000 - $12,438) = $52,562
Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
HPIP Benefits (estimate): $5,000
Actual Debt Payments: $11,572
Take-home Income: ($52,562 - $11,572) = $40,990

Scenario Four
Salary: $75,000
Salary less Taxes: ($75,000 - $14,938) = $60,062
Debt: $120,000 on a ten-year repayment plan at 6.8% interest
Yearly Debt Obligation: $16,572
HPIP Benefits: $0 (exceeded salary cap of $72,00)
Actual Debt Payments: $16,572
Take-home Income: ($60,062 - $16,572) = $43,490

Final Notes on the Hormel Public Interest Program
Remember that you are only eligible for HPIP for seven years after graduation. The maximum amount you might be awarded is $70,000. If you are still making nearly $1400 monthly student loan payments in years eight, nine, and ten of your ten-year repayment plan on a $60,000 salary, your take-home income would be under $33,000. Under HPIP, it might be advantageous to have an extended repayment plan, assuming your yearly debt obligation would remain at or above $10,000 so that you can be eligible for the full benefit. (Of course, the amount you would pay in interest over the life of the loan would increase.)

On the positive side, HPIP does not take into account spousal income or (as far as I could tell) assets. And, unlike some LRAPs, HPIP loans are forgiven after a relatively short period of qualified employment.

Also note that HPIP benefit calculations above are estimates. If your salary is under $60,000, you qualify for the full $10,000 benefit. This does not imply that you are guaranteed that full benefit. If you make between $60,000 and $72,000, I truly do not know what you can expect to receive in the way of benefits, except that it is proportionally less as you approach the cap of $72,000.

If you are admitted to the University of Chicago Law School and plan on benefiting from HPIP down the road, remember that the Financial Aid Committee of the Law School must approve all benefits and determines Program eligibility.

Additional Financial Support for Public Interest
In addition to HPIP, University of Chicago Law School students are eligible for 1L summer funding. The Heerey Fellowships provide a $6,000 loan for students working in a qualifying public interest position. Half of this loan ($3,000) is forgiven if the student remains in qualifying employment for at least four full-time weeks of the summer. The entire $6,000 loan may be forgiven if the student is in qualifying employment for ten weeks of the 2L summer. For more information, see http://www.law.uchicago.edu/financialaid/summerfunding.

i Loans from family and friends are not covered.
ii “It is the responsibility of the Program participant to determine whether payments under HPIP should be included in taxable income…”
iii A longer repayment schedule may be approved in certain situations.
iv Teaching positions are ineligible.
v Judicial clerkships are ineligible, although an additional year of eligibility is granted.
vi “Part-time work may, on a case-by-case basis, be eligible for the Program on a reduced, proportional basis, and with the inclusion of other income.”
vii One-year extensions can be granted for medical or family leave, or a judicial clerkship.