Show Me the Money: Selecting a Loan Repayment Assistance Program (LRAP)

Loan repayment assistance programs (LRAPs) help hundreds of law graduates make their required student loan payments. These programs typically provide assistance to law graduates choosing low-paying public-service employment in spite of student debt.

Where to Find Sources of Loan Repayment Assistance

Look to your school, the state in which you plan to practice, and to potential employers for loan repayment assistance:

• More than 100 law schools administer LRAPs for the benefit of their graduates.
• Approximately 24 states run loan repayment assistance programs for local attorneys.
• A minority of nonprofit and government legal employers provide loan repayment assistance for employees.

Law students are encouraged to research each possible source of assistance:

• Law school LRAPs(http://americanbar.org/groups/legal_aid_indigent_defendants/initiatives/loan_repayment_assistance_programs/law_school_information.html): Your school’s financial aid office can provide you with information about any institutional LRAPs operated by your law school.
• State-based LRAPs(http://americanbar.org/groups/legal_aid_indigent_defendants/initiatives/loan_repayment_assistance_programs/state_loan_repayment_assistance_programs.html): In 2012, the American Bar Association published comprehensive information about state-based LRAPs. Check with individual programs for updates.
• Employer LRAPs: There is no comprehensive list of loan repayment assistance programs operated by employers. Your school’s career advisor is likely to know about programs operated by employers with whom the school has a relationship or guide you in how to ask prospective employers directly. The largest employer providing LRAP benefits for legal staff is the federal government (http://opm.gov/policy-data-oversight/pay-leave/student-loan-repayment).

How to Evaluate a Loan Repayment Assistance Program

Although some loan repayment assistance programs are quite generous, not every LRAP provides substantial benefits, so examine the eligibility requirements and program design carefully. To determine how much you might benefit, consider how the programs defines qualifying employment, how award amounts are determined, which loans are eligible, and whether awards are taxable as income.

Which employment is qualifying? Most LRAPs require that recipients work for pay in full-time positions, but some permit part-time workers to participate. Most LRAPs designed for law grads require recipients to practice law in a nonprofit or government position; very few permit those in private practice or non-law related positions to participate. Some programs have special rules regarding employment as a judicial clerk—be sure you understand the policies. A number of state-based programs are restricted to civil legal assistance attorneys, due to restrictions accompanying their funding source.

How are LRAP award amounts determined? Almost all LRAPs incorporate an element of financial need, generally by considering the applicant’s income, often considering a spouse’s income as well. Many LRAPs consider applicant’s required monthly loan payments and income when determining an award amount. Some programs instead provide a flat award amount to all participants. Some programs reduce award amounts for graduates with higher incomes or assets. A few programs make adjustments for cost of living differences, but most do not.

Which loans are eligible for loan repayment assistance? Many law-school-based LRAPs provide repayment assistance only for educational loans borrowed to fund the recipient’s legal education while attending the institution. Some also provide assistance with undergraduate debt. A few LRAPs will only consider federal student loan debt but exclude private student loan debt, like bar study loans, from eligibility.

Will I have to pay taxes on my LRAP benefits? Most law schools issue forgivable loans to LRAP recipients so that the funds are not treated as taxable income to the recipient. School LRAPs generally forgive these loans after a period of qualifying employment such as one year. State-based programs are often similarly designed to provide benefits tax free, but LRAP awards given by employers to employees are always taxable income. Law students should ask about and plan ahead for potential tax consequences.

Loan repayment assistance helps law grads earning low salaries in public interest positions manage monthly student loan payments. If you carefully evaluate the details of your school’s LRAP (if you have one), research state-based and employer LRAPs, and understand the details of federal Public Service Loan Forgiveness, you can successfully manage student loan debt while pursuing a career in public service.

Ask These Questions

• What employment qualifies?
• Must I have a law license?
• Must I be practicing law?
• Which student loans are eligible?
• Is there a minimum debt requirement?
• Is there an income cap and what is it?
• How is “income” calculated?
• Are assets considered?
• How is the LRAP funded?
• Is there a limit on how long I can participate?
• Is there a cap on total assistance?
• How are other LRAP benefits considered?
• How much assistance does the program provide?
• Is the award a forgivable loan or a taxable grant?
• What service obligation do I have and for how long?