Loan Repayment Assistance Program (LRAP)

V-4. Loan Repayment Assistance Program (LRAP)

A.        Mission

Consistent with its mission of encouraging faith-based social justice initiatives, the University of St. Thomas School of Law is committed to a substantial loan repayment assistance program. This program will enable UST law graduates to take public service jobs that will promote social justice consistent with the law school’s mission and teachings of the Catholic Church.

B.        Program Features

1.         General Eligibility: Any UST Law School graduate who is licensed to practice law within the United States, who meets the program requirements, and who graduated within 10 years of application is eligible for loan repayment assistance for a 10-year period.

2.         Requirements

a.         Qualifying Employment: To qualify for loan repayment assistance, the applicant must document full-time employment (at least 35 hours per week) at a qualifying public interest organization, which is: 1) a non-profit organization exempt from federal income taxation under IRC § 501(c)(3); 2) a local, state, or federal governmental entity; 3) a Native American tribal government, court system, or public interest organization; or 4) an international organization (governmental or non-governmental). The employment must be employment as a lawyer: 1) providing legal advice or representation to clients based on financial eligibility, or 2) representing a qualifying public interest organization that in turn provides legal services to clients based on financial eligibility. A position as a lawyer includes employment in a position that converts into an attorney position upon passage of the bar examination within twelve months of commencement of employment.

b.         Exhaustion of Other Sources: Except for funds available from Minnesota-LRAP, applicants who are eligible for loan repayment assistance from other sources must apply to and exhaust those resources before applying for assistance from UST-LRAP. To be eligible for Minnesota-LRAP funds, graduates from the University of St. Thomas School of Law must first exhaust their UST-LRAP eligibility.

c.         Covered Debt: Student loan debt incurred for tuition in the JD program at the University of St. Thomas is eligible. The amount of JD tuition paid is the lesser of 1) total JD tuition less UST Law scholarships or 2) student loans incurred while in law school. Student loan debt for courses pursued in a joint-degree program in another school or college is not covered.

Examples

i.          During the three years in law school, a student receives no scholarship, borrows $30,000 in student loans while in law school, and pays $66,000 in tuition. The covered debt is $30,000.

ii.         During the three years in law school, student receives a full tuition scholarship and pays no tuition. The student borrows $20,000 in student loans while attending law school. The covered debt is 0.

iii.        During the three years in law school, a student receives a $20,000 tuition scholarship, borrows $25,000 in student loans while in law school, and pays $46,000 in tuition. Total tuition is $66,000. The covered debt is $25,000.

iv.        During the three years in law school, a student receives a $40,000 tuition scholarship, borrows $40,000 in student loans while in law school, and pays $26,000 in tuition. Total tuition is $66,000. The covered debt is $26,000.

v.         A student receives no scholarship, borrows $80,000 in student loans while in law school, and pays $66,000 in tuition. The covered debt is $66,000.

vi.        A student receives no scholarship, enrolls for and completes a JD/MBA joint degree, borrows $100,000 while in law school and at theCollegeofBusiness, and pays $86,000 in tuition. Of this amount, $66,000 is allocable to law courses and $20,000 is allocable to business courses. The covered debt is $66,000.

vii.       A student begins law school with student loan debt of $50,000 incurred as an undergraduate. The student borrows another $40,000 in student loans while in law school. The student pays $66,000 in tuition. The covered debt is $40,000.

d.         Consistency with Mission: The employment undertaken must be consistent with the law school’s mission and cannot contradict the teachings of the Catholic Church. Applicants will be required to certify that their employment is consistent with mission and not inconsistent with Church teachings. Applicants will agree to repay UST-LRAP assistance in the event that the certification was false or erroneous.

3.         Application Cycle: UST-LRAP will run a twice-a-year grant cycle. Applications for recent graduates who have taken the July bar exam will have a deadline in November. The second grant cycle will have a deadline in May.

4.         Payment of Benefits, Promissory Note, and Taxation: Benefits will be paid in quarterly installments based on the annual award. To provide exclusion of the benefits from the federal gross income of applicants, the applicant must sign promissory notes for each quarterly payment and agree to repay the benefits if the applicant does not continue in qualifying employment for the quarter. This requirement will be treated as met if the applicant’s position is terminated and if the applicant cannot find other employment during the award cycle.

5.         Period of Eligibility and Renewal of Benefits: Applicants who continue to meet the employment requirement and also come within the income guidelines and the benefits caps, are eligible to receive benefits under this program for up to ten years from the first year of application. Renewal of benefits will require annual applications.

6.         Income Guidelines and Cap: UST-LRAP is a need-based program. As the adjusted income of an applicant rises, the benefits decrease. In addition, the cap on the benefits also declines as adjusted income increases. Subject to the cap, benefits decline as annual adjusted income increases above $27,000. No benefits are available to applicants with adjusted income above $52,000. As adjusted income increases, the applicant is expected to contribute 20% of the excess over $27,000 towards the covered debt.

The cap on annual benefits begins at $6,000 per year and declines as adjusted income increases above $27,000. The decrease is equal to 20% of the excess over adjusted income of $27,000.

The income guidelines and benefit caps may be adjusted for inflation in reasonable increments.

This chart shows how these need based calculations work:

AI                    Applicant’s Contribution           Cap

20,000                         -0-                                6,000

27,000                         -0-                                6,000

28,000                         200                              5,800

29,000                         400                              5,600

30,000                         600                              5,400

31,000                         800                              5,200

33,000                      1,200                              4,800

35,000                      1,600                              4,400

37,000                      2,000                              4,000

40,000                      2,600                              3,400

44,000                      3,400                              2,600

47,000                      4,000                              2,000

52,000                      5,000                              1,000

Above 52,000: no benefits

Calculation of Adjusted Income

 Adjusted Income (AI) = BI - DA + IA

BI = Base Income

Base Income (BI) equals income from all sources minus $3,000 for each dependent (excluding the applicant and the applicant’s spouse). Income used to compute BI will be based upon the applicant’s income from Qualifying Employment plus all other sources of income (including alimony, other part-time jobs, rental income, interest, dividends, etc.). A prior year’s LRAP award is not included in the calculation of BI. Loan repayment assistance from other sources is not included in BI, but may be subtracted from the total LRAP award.

DA = Daycare Allowance

Estimated daycare costs, supported by adequate documentation, will be deducted from the applicant’s Base Income up to a maximum amount established by UST-LRAP each year. For this application, the maximum amount is $10,000.

IA = Included Assets

Twenty-five percent (25%) of the applicant’s assets in excess of $15,000 will be added to the Base Income. Excluded are home, car, farm (if it is applicant’s residence), and retirement accounts (such as IRAs, pensions, etc.). Only one home/residence will be excluded, but the applicant is not required to live in the home/residence. Loss and/or gain on includable assets will be applied to income and must be reported by the applicant.

7.        Calculation of Annual Benefit: The annual benefit will be based on a 15-year amortization schedule of the covered debt and will assume a reasonable rate of interest determined by UST-LRAP. This amount will be reduced by the applicant’s contribution and subject to the cap, which is calculated from the applicant’s adjusted income.

Examples

a.         The applicant is eligible and has qualifying employment. The applicant’s covered debt is $30,000, and adjusted income is $25,000. The assumed interest rate is 6%. The applicant’s deemed annual loan payment is $3,037.88 (assuming 15-year amortization at 6%). The applicant’s contribution is 0. The cap at the applicant’s level of adjusted income is $6,000. Therefore, the loan repayment assistance is $3,037.88. The benefits will be paid in four quarterly installments, and the applicant will be issued a promissory note requiring repayment of these amounts unless the applicant continues in the qualifying employment.

b.         Same facts as example “a” above, except that the applicant’s adjusted income is $37,000. The applicant is expected to make a contribution of $2,000 toward the annual liability on the covered debt. The cap is $4,000. Therefore, the loan repayment assistance is $1,037.88 ($3,037.88 - $2,000.00 = $1, 37.88).

c.         Same facts as example “a” above, except that the applicant’s adjusted income is $47,000. The required applicant’s contribution would now be $4,000. This exceeds the annual obligation on the covered debt, and the applicant receives no loan repayment assistance.

d.         The applicant is eligible and has covered debt of $66,000. The applicant’s adjusted income is $27,000. The assumed interest rate is 6%. The applicant’s deemed annual loan payment is $6,683.35 (assuming 15-year amortization at 6%). The applicant’s contribution is 0. The cap is $6,000. Therefore, the loan repayment assistance is $6,000.

e.         Same facts as example “d” above, except that the applicant’s adjusted income is $37,000. The applicant’s contribution is $2,000 and the cap is $4,000. Therefore, the loan repayment assistance is $4,000 ($6,683.35 - $2,000 = $4,683.25, but subject to a cap of $4,000).

f.          Same facts as example “d” above, except that the applicant has $27,000 in a bank CD. Of this amount, $3,000 (25% of $12,000, which is the amount by which $27,000 exceeds $15,000) is added to base income. This increases the applicant’s adjusted income by $3,000 to $40,000. The applicant’s contribution is $2,600 and the cap is $3,400. Therefore, the loan repayment assistance is $3,400 ($6,683.35 - $2,600 = $4,083.35, but subject to a cap of $3,400).

g.         Same facts as example “d” above, except that the applicant’s adjusted income is $52,000. The applicant’s contribution is $5,000 and the cap is $1,000. Therefore the loan repayment assistance is $1,000 ($6,683.35 - $5,000 = $1,683.35, but subject to a cap of $1,000).

C.        Eligibility Changes

Applicants have an affirmative duty to notify UST-LRAP within 30 days of circumstances that change eligibility. Examples of eligibility changes are 1) going from full-time to part-time, 2) changing jobs, 3) increase in salary for the applicant, but only if this causes a change in the calculation of the applicant’s household income. When an UST-LRAP awardee has a salary increase during an award cycle, the awardee’s eligibility will be reviewed. If the increase renders the awardee ineligible (based upon actual income during the award cycle), the award will be terminated at the time the change goes into effect. If the person remains eligible, there will be no change in the award amount during that award cycle.

D.        Leave of Absence Policy

Once an applicant has received benefits from the program, periods of non-participation will not count against the ten-year eligibility period so long as the period of absence is on account of good cause. Examples of good cause include an absence to start a family or to recover from a serious illness.

E.         Parental and Family Leave

In the case of an applicant or an applicant’s spouse having a child during the period of receipt of benefits, the applicant will be treated as engaged in qualifying employment for a period of 180 days following the birth of the child even if the applicant terminates employment within 60 days prior to such birth or at any time 180 days thereafter.

For purposes of the full-time employment requirement, an applicant will be treated as working full-time for a cumulative period not to exceed six years if the applicant’s employer allows commencement or continuation of employment on a part-time basis to facilitate care of one or more of the applicant’s children. Part-time is defined as work for a minimum of 15 hours per week. In determining calculation of AI, the applicant’s salary will be annualized on a fulltime basis. For example, an applicant working 17.5 hours per week so that he can care for his children will be treated as making double his salary (35 hours is fulltime and 17.5 hours is half that).

For purposes of these rules on parental leave, the adoption of a child will be treated the same as the birth of child.

The administrator of this program will provide appropriate accommodations for family medical leave (required to be given to the applicant by federal or state law or provided to the applicant by the employer) so that leaves of absence will not be treated as an interruption or termination of qualifying employment.

Examples

1.         Applicant is in the third year of receiving UST LRAP benefits. In the middle of the third year, the applicant has a child and terminates her employment one month before the child’s birth. The applicant is deemed to have been in qualifying employment for the entire year

2.         Applicant is in the third year of receiving UST LRAP benefits. In the middle of the third year, the applicant has a child and receives a three-month leave of absence under the employer’s family leave policy. When applicant returns to work, she works 20 hours per week under an agreement with her employer that allows her to work part-time and to care for her child part-time. The three-month leave will not be treated as a change in eligibility.

3.         Applicant secures qualifying employment and works 17.5 hours and works part-time to care for two of the applicant’s children. The employer pays the applicant $20,000 per year. This is treated as qualifying employment. In calculating BI, the applicant is deemed to make 200% of the salary received. Accordingly, the amount added to the applicant’s BI is $40,000 (200% x $20,000).

F.         Special Guidelines for Clinical Fellows

The UST-LRAP program will be administered to provide assistance to clinical fellows serving in the Interprofessional Clinic at UST School of Law. For the term of their fellowship, clinical fellows will be subject to the following guidelines:

1.         Covered debt includes all student loans, undergraduate and graduate, law and non-law. Law scholarships do not affect the amount of covered debt.

2.         Fellows will not be required to make a contribution toward their student loan payments, but a cap, described below, will limit benefits.

3.         Fellows will be subject to an initial cap of $8,000 in annual benefits that is reduced by 20% of the amount of adjusted income in excess of their UST Fellows salary.

4.         The adjusted income limit for a fellow is set equal to their current UST salary as a fellow.

5.         At the end of a fellowship, a former clinical fellow may apply for UST-LRAP or Minnesota LRAP benefits based on new qualifying employment and any remaining covered debt.

Examples

a.         The clinical fellow has unpaid student loans of $80,000, $30,000 toward the undergraduate degree and $50,000 toward the law degree. The clinical fellow’s salary is $37,000. The fellow’s adjusted income is $37,000 (base income of $37,000 with no adjustments). The fellow’s deemed student loan payment is $8,899.32 (assuming 15-year amortization at 7.5%). The fellow’s contribution is zero because of the “no-contribution” rule. The cap is $8,000. Therefore, the fellow receives assistance of $8,000.00. The benefits will be paid in four quarterly installments, and the fellow will be issued a promissory note requiring repayment of these amounts unless the fellow continues in the position for at least one year from the date that employment begins.

b.         Same facts as example “a”, except that the fellow’s student loans are $120,000 ($30,000 from undergraduate and $90,000 from law school). The fellow’s deemed loan payment is $13,348.98 (assuming 15-year amortization at 7.5%). The fellow receives assistance of $8,000 because the deemed annual payment on the student loan is in excess of the $8,000 cap.

c.         The clinical fellow’s salary is $37,000. The fellow has $55,000 in non-retirement mutual fund accounts. The fellow’s student loan debt is $80,000. The fellow’s deemed loan payment is $8,899.32 (assuming 15-year amortization at 7.5%).

BI=$37,000

IA = $10,000 ($10,000 = 25% of $40,000 – assets in excess of $15,000 = $55,000 Less $15,000)

AI=$47,000

The cap is $6,000 ($8,000 minus 20% of $10,000, which is the excess of $47,000 over $37,000). Therefore, the fellow receives $6,000 in assistance because that is the cap for that amount of adjusted income.

d.         Same facts as c above, except that the fellow and the fellow’s spouse have two minor children and no additional assets. The fellow has $5,000 in documented daycare expenses. The fellow’s final adjusted income is:

BI=$31,000 ($37,000 of fellow’s salary minus $6,000 for the two children as dependents)

DA=$5,000

AI=$26,000 ($31,000 minus $5,000=$26,000)

The cap is $8,000 because AI is below $37,000. The assistance is $8,000.00 (the amount of the deemed payment) and is not reduced by the cap.

G.        Funding and Budget

The program has sufficient funds for the first five years of operation. After this period, funding of the program at the level described in this proposal will require substantial fundraising. The Dean has identified LRAP as one of the three fund-raising priorities. This proposal assumes that UST will have an LRAP endowment of about $2 million in the sixth year growing to $12-$14 million by the fifteenth year of the program’s operation. In the event that this fundraising is unsuccessful, the program benefits may have to be reduced.

H.        Program Administration by Minnesota-LRAP

Minnesota-LRAP is a separate section 501(c)(3) organization, organized and operated to provide loan repayment assistance to lawyers working in public service jobs. The eligible recipients of benefits are lawyers who work in qualifying public service jobs and who 1) are graduates of one of the fourMinnesotalaw schools no matter where their jobs may be or graduates from any law school who work inMinnesotaand 2) meet the Minnesota-LRAP income guidelines. The current Minnesota-LRAP and the UST-LRAP income guidelines are very similar, except that UST is generally more generous in its benefits and reduces the cap as adjusted income rises. Minnesota-LRAP, unlike UST-LRAP, covers all student loan debt.

Minnesota-LRAP and UST School of Law have agreed that Minnesota-LRAP will administer the UST-LRAP program. A dean’s committee at UST School of Law will screen all UST-LRAP applications for mission consistency. Acceptable applications then will be forwarded to Minnesota-LRAP for full administration, which will include financial eligibility determinations, payments, issuance of promissory notes, cancellation of notes, record keeping, and modification for changed circumstances.

Under this agreement, UST School of Law graduates must first apply to UST-LRAP. If the UST applicant is ineligible or if the UST-LRAP program does not provide assistance for all of the applicant’s student loan debt, then those UST School of Law graduates will be eligible to apply for Minnesota-LRAP benefits.

Adopted by the Law Faculty, April 19, 2004
Revised by the Law Faculty, September 14, 2009

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