School LRAP Programs
Published on October 1, 2020
Introduction to LRAPs
Loan Repayment Assistance Programs (LRAPs) are offered by some schools to help graduates with low incomes manage their debts. Traditionally, schools offer these programs only to graduates working legal jobs that serve the public interest, e.g. jobs at non-profits or in government. LRAPs are distinct from debt management programs offered by the federal government, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE), as well as debt relief programs such as Public Student Loan Forgiveness (PSLF).
How do LRAPs work?
Generally, participating law schools will subsidize a portion or all of a graduate's monthly student loan payment. The subsidy depends on the nature of the graduate's employment and their income. Annual applications for assistance may be required to ensure continued eligibility. Qualifying graduates will receive a periodic check from the school to meet the loan obligations.
Not all LRAPs are the same!
Ultimately, you must familiarize yourself with the LRAPs offered by the schools under your consideration to see which LRAPs, if any, best suit your goals. Typically these programs are income sensitive, thus the subsidy amount changes with your income, often with a cap. Some LRAPs cover non-legal positions, though they may require that the position be J.D. preferred/advantage. Others do not consider spousal income or assets when determining eligibility, while many do.
Note that many schools combine their LRAPs with IBR, PAYE, REPAYE, and PSLF. If a school has an LRAP program that relates to these government hardship programs, examine how the program terms treat government elimination or limitation of any relevant hardship program.
According to Heather Jarvis, a student loan expert, in a piece in the ABA Student Lawyer:
Law School-Based Loan Repayment Assistance Benefits Are Usually Not Taxable
Most law schools structure their Loan Repayment Assistance Program (LRAP) awards as forgivable loans, rather than as grants, to meet the requirements of [Internal Revenue Code] Section 108(f) and permit LRAP recipients to avoid taxation of benefits. In 2008, the IRS published Revenue Ruling 2008–34, recognizing that a law school loan made under an LRAP generally satisfies the requirements of Section 108 of the Tax Code.
Nevertheless, consult a tax advisor to be sure.
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It is incredibly important for prospective students to become familiar with the intricacies of the various LRAPs offered by law schools across the country, especially if you're borrowing a lot of money or if you're considering a career in a non-lucrative field. You should also follow the development of the government hardship programs that may account for a significant portion of the monthly assistance you would receive.
By Omar Guzman-Toro