Georgetown Law’s faculty approved a plan that will enable graduates who work in the public sector for 10 years – and earn up to $75,000* a year in LRAP qualifying employment – to have all of their federal law school loans forgiven. The Loan Repayment Assistance Program (LRAP III) dovetails with the federal government’s Public Service Loan Forgiveness Program.
As a result of the two programs, Georgetown Law students who work for U.S.-based government agencies or nonprofit 501(c)(3) organizations for 10 years after graduation in a legally related capacity (JD degree must be preferred or required), and whose LRAP qualifying income remain less than $75,000*, can borrow the entire cost of attending law school in the form of federally-guaranteed loans and have all of their loan repayments reimbursed by Georgetown Law and the remaining principal balance forgiven by the federal government. Georgetown Law benefits would continue on a diminishing basis for incomes exceeding $75,000*.
Under the federal law, federally guaranteed loans can be repaid, after graduation, through either the Pay As Your Earn (PAYE)** or Income-Based Repayment (IBR) plan that generally limits repayment to approximately 6.67% or 10%, respectively, of the borrower’s annual income. At the end of 10 years of public service, the federal government will forgive the remaining balance.
Georgetown Law will reimburse out-of-pocket repayments for its graduates in eligible public service, effectively ending loan repayments for those who spend 10 years working in modestly paid public interest fields. Current students and those who entered the program in 2010 will receive the full benefit of this plan.
*The $75,000 income threshold is for single or married participants (with income earning spouses) filing separate tax returns, and not receiving any other loan repayment assistance from another entity.
**Pay As You Earn (PAYE) is another repayment plan that serves as an enhanced alternative to IBR for certain eligible borrowers. If you are eligible for this repayment, LRAP will require you to apply for this repayment plan. Under PAYE, the amount of discretionary income used to determine whether a borrower has a partial financial hardship and, if so, the monthly required payment obligation decreases from 15% under IBR to 10%. In addition, the maximum length of time a borrower is required to make monthly payments decreases from 25 years under IBR to 20 years (if you decide to leave public service). Otherwise, the two repayment plans function similarly, including the 10 year, or 120 on-time, scheduled payments, period for public service loan forgiveness.
A borrower is eligible for PAYE if, in addition to meeting all the requirements for IBR, they 1) did not borrow any federal student loans prior to October 1, 2007 or had entirely paid off all such loans as of that date and 2) had at least one federal Stafford or Graduate PLUS loan disburse on or after October 1, 2011 or applied for and completed a Federal Direct Consolidation loan on or after such date.
Married students interested in public service employment within the next year should strongly consider filing their federal tax returns separate from their spouses. The federal PAYE or IBR calculation will utilize your spouse's income if you file jointly. To reduce your payments as much as possible, only including your income (unless your spouse is not working) and filing separately is the best course of action.
If you decide to file your federal taxes jointly and your spouse has an income, we will use your income only and the household size to calculate your PAYE or IBR payment and LRAP III award.
If you have a non-working spouse and/or dependants the amount of income you can earn to receive 100% LRAP coverage is $75,000 + 150% of the HHS Poverty amount for each additional person (current amount for 2013 is $4,020).
As of January 2010, the only student loans that will be covered under the LRAP III program will be federal guaranteed student loans, and up to $100/month for Bar Loans with incomes up to $75,000.