T-14 LRAP Overview Forum

[cavalier1138]

One important thing to keep in mind (just in case you guys aren't) re that 20k number from NYU is more of a net worth amount. Let's say you owe 100k, and like you said win the sweepstakes of 50k. You'd still be fine, since you're still at -50k overall.

Citation: "Participants must have total net worth (assets minus liabilities) of less than $20,000."

That's my understanding, anyway. Maybe there's another section which mentions you just can't accumulate any assets over 20k, but I could not find it on their LRAP program details page.

However, if you search "monopoly money LRAP TLS" on Google, you'll find a thread wherein a user talks about NYU forcing you to use your assets before you can even be on LRAP - a sort of "expected student contribution" thing. I could not find that section either on NYU's program page, but perhaps it is buried in the fine print somewhere.

The "expected student contribution" is a number they set with your financial aid offer (minimum of $15k). It's basically an amount of money that you're responsible for paying, either through direct payments, not taking out the full amount in loans, or through simply being solely responsible for paying off that portion of the loan yourself. Even if it's more than $15k, it's usually not much. It is also not something you need to pay off before you qualify for LRAP. It's just an amount of money that is not covered by LRAP.

Edit: And thanks for the clarification. I was having a mild panic attack because, again, financially illiterate. The net worth makes much more sense.

[James.K.Polk]

Can someone briefly explain what the 'vesting' component is (especially with relation to Penn)?

[crescentstars]

Jumping on the bandwagon to say that this thread is incredible - I've been trying to outline LRAP terms for a bunch of schools for a while, but it's been a bit of a headache. Thank you, Fliptrip and everyone else contributing to this thread! I'll look through my notes/keep researching and see if there's anything else to add.

[swampman]

Can someone briefly explain what the 'vesting' component is (especially with relation to Penn)?

If they require three years of participation in order to vest, if you leave the program within three years then you have to repay the benefits that you were given.

Most schools give benefits in the form of a private loan from the school, which is forgiven if you satisfy the terms. That is, if your loan payment is $500 a month, the school will lend you $500 a month to make that payment. Most schools would forgive that small loan at the end of the year when they verified your employment and income. Penn will wait until you have three years in the program to forgive any of the loans.

[TheKisSquared]

Can someone explain the pros/cons between straight am vs. IBR for Columbia? I'm confused as to why anyone wouldn't do IBR...

edit: assuming it's mainly the risk of negative am? anything else?

[fliptrip]

Can someone explain the pros/cons between straight am vs. IBR for Columbia? I'm confused as to why anyone wouldn't do IBR...

edit: assuming it's mainly the risk of negative am? anything else?

It's exclusively because of a desire to avoid negative amortization. If you can afford it, which it is pretty comparable to what you pay under Stanford's plan, it's worth it to take advantage of especially if you have a high loan balance. Columbia doesn't provide you any protection for negative amorization, so if you borrow $200k, earn roughly $65k in salary and make it 9 years, 364 days in the program and bail on that 365th day, you'll owe something like $270,000 that you'll have to deal with for another 10 years at least.

[somethingElse]

Can someone explain the pros/cons between straight am vs. IBR for Columbia? I'm confused as to why anyone wouldn't do IBR...

edit: assuming it's mainly the risk of negative am? anything else?

Negative amortization is by far the biggest con of the 100k cap IBR option. I suppose the other major con is that you're counting on the federal government not to change/get rid of PSLF; but it has been discussed on here (and is supported by precedents in other similar situations) that grandfathering is perhaps more likely than not. Though it's not guaranteed.

Also, negative amortization has its own 'resulting cons' if you will. Things like buying a house will be more difficult than being on the straight am option.

I personally think the way to go as far as Columbia's LRAP goes is the 'second option' of combining the straight am with IBR/PSLF. This second option is what I mentioned on the first page of this thread. Basically though, this option seems to allow you to use the straight am income cap while still being on PSLF/IBR. Columbia will write you a bigger check than what is required for IBR, and you are thus able to make bigger payments towards your loans. So you will still be making the 120 monthly payments that are required for PSLF, but you will be making bigger payments than the minimum (IBR). It seems like in this scenario, Columbia is still helping you pay down your loans and thus you avoid negative amortization. Kind of a 'best of both worlds' situation.

Also, this option allows for the ability to move over to the 100k cap if you want and still have whatever payments you had made up to that point count towards the 120. This could be useful if you land a (theoretically high paying) federal government job a few years down the line, for example. Your loans will negatively amortize at that point though, of course.

I also personally think that IBR is the way to go if you are able to land a very stable job that you know you are going to make a career out of.

[crescentstars]

I don't want to get into a debate about the future of PSLF (I think there's been enough of that), but I want to make a quick note about the risk of IBR-integrated programs. Though we're likely to all get grandfathered into the program itself (I'm assuming most of us in this thread are 0Ls), I think there's a good chance that the amount of forgiveness will be capped in the not-too-distant future. That possibility plus guaranteed negative amortization of loans with some/most schools' LRAP plans could (/should IMO) be something to consider.

Anyway, I know this isn't the place for a policy debate, but I wanted to add that to the discussion re: risk and negative amortization.

[fliptrip]

Question about asset allowances (because I am largely financially illiterate):

Looking NYU's limits, it says that I cannot accrue more than $20,000 in assets during the program. So how do the following hypotheticals work out?

A. I win a small sweepstakes of $50,000. I put the money in a savings account.

B. I win the same small sweepstakes and within the same tax year invest the money in a mutual fund.

C. Same money. This time I use it as the down payment for a condo within the same tax year.

Do all three of those result in me being taken out of the program? Or is there a difference based on how the money ends up being reported on my taxes?

I would be very interested to see what they consider to be a liability against any assets you have. If they include your student loans as a liability, that leads to a somewhat absurd scenario in which you could have $200k in the bank and $200k in loans and be on LRAP. On IBR, that liability actually goes up, so you could keep feathering your bed of cash?

If they exclude your student loans from your liabilities, that makes a lot more sense. This would keep you from relying on their assistance when you realistically can handle it yourself and also ensure that you are devoting maximum reasonable ongoing efforts to servicing your loans. So it definitely discourages savings outside of a retirement account and makes buying a house pretty tricky unless you can work out your payment plan such that you don't get more than $20k in equity at any point while your on LRAP. Realistically, $20,000 in net assets should allow you to keep a month and a half or so salary in savings and own a decent, non-luxury car outright.

Obviously, anyone seriously considering going to NYU and relying on LRAP should discuss this in detail, probably over several meetings, with the financial aid office, but, hey, we're here so why not try and speculate a little bit? Here's my best guess about what will happen under your three scenarios:

1. If you leave it in that savings account and your total debt on everything other than student loans is less than $30,000, you have >$20,000 net asset and you would be disqualified from the program.

2. Same situation as 1, a mutual fund is just a savings account with slightly greater risk. It's still a liquid asset.

3. This will depend on how much equity this creates in the condo for you. If that equity + your other assets doesn't exceed your other non-student loan debt by more than $20,000 you should be okay.

And by the way, if you did get that windfall and direct it exclusively toward paying your loans, the net asset question goes away because you've converted the asset into debt service on your loans. In terms of further implications, you'll report that $50,000 as income, which for that one year will change your AGI, your IBR payment and your amount of eligible support. So, that might be something you have to plan for. At NYU, anyway, that would be enough to knock you out of assistance for a year, but not out of the program.

Again, clearly, if you do end up winning $50,000 your first call should be to NYU's financial aid office to see what you should do with that money.

[somethingElse]

I didn't even consider that they would consider student debt to not be a liability, but I suppose it is possible?

EDIT: twenty! Glad to see you jump into this thread.

[twenty]

If they exclude your student loans from your liabilities, that makes a lot more sense.

I feel like there's a very strong chance this isn't how it works. You end up with about 25k/year just in cost of living expenses, and then 15k or so in bar loans towards the end. If the rule is "you can't have more than 20k in your bank account" then NYU's LRAP is worthless because almost no one will be making decent PI money but also be completely hand to mouth with no savings.

It makes sense to me that if a student has 250k in assets and 200k in debt that they wouldn't want that person using LRAP, but for someone with 50k in assets and 200k in debt? I can't imagine NYU would force you to divest yourself down to sub-poverty level limits in order to take advantage of their program.

[fliptrip]

(I feel the need to disclaim before every post that we are just speculating and don't really know. Again, contact NYU directly if you have questions.)

Having $20k in some non-retirement kind of asset is sub-poverty level? According to what standard? NYU wants your skin in the game, I'd imagine, so yeah, if you have $30k in something you could be putting towards your massive student loans, they are coming for it.

I think you're hitting on an inevitability of this whole thing. If you want their help, you don't get to define terms like "reasonable savings" on your terms, you have to use theirs. It's possible that to NYU, $20,000 is plenty enough in net assets to have a workable buffer and also be able to have a decent lifestyle. At some point, reality has to come in...if you're concerned about building wealth then PI and LRAPing is not for you. This would explain why we hear so often that most kids who end up in PI don't have loans at all. The LRAP tradeoffs might be too much for folks who have to depend on it.

[Tls2016]

If they exclude your student loans from your liabilities, that makes a lot more sense.

I feel like there's a very strong chance this isn't how it works. You end up with about 25k/year just in cost of living expenses, and then 15k or so in bar loans towards the end. If the rule is "you can't have more than 20k in your bank account" then NYU's LRAP is worthless because almost no one will be making decent PI money but also be completely hand to mouth with no savings.

It makes sense to me that if a student has 250k in assets and 200k in debt that they wouldn't want that person using LRAP, but for someone with 50k in assets and 200k in debt? I can't imagine NYU would force you to divest yourself down to sub-poverty level limits in order to take advantage of their program.

I know Harvard only allows 8k a year of assets so it wouldn't surprise me if NYU only allows $20,000.
I wonder if it's worth someone emailing these schools to get clarification on these questions? I'm sure if we said it was for a general guide for 0Ls on LRAP they would answer questions.

[Tls2016]

(I feel the need to disclaim before every post that we are just speculating and don't really know. Again, contact NYU directly if you have questions.)

Having $20k in some non-retirement kind of asset is sub-poverty level? According to what standard? NYU wants your skin in the game, I'd imagine, so yeah, if you have $30k in something you could be putting towards your massive student loans, they are coming for it.

I think you're hitting on an inevitability of this whole thing. If you want their help, you don't get to define terms like "reasonable savings" on your terms, you have to use theirs. It's possible that to NYU, $20,000 is plenty enough in net assets to have a workable buffer and also be able to have a decent lifestyle. At some point, reality has to come in...if you're concerned about building wealth then PI and LRAPing is not for you. This would explain why we hear so often that most kids who end up in PI don't have loans at all. The LRAP tradeoffs might be too much for folks who have to depend on it.

Law school also used to be a lot less expensive and before IBR schools just paid what you owed (if I remember correctly) and then PSLF forgave the balance. Is that right? Maybe it is irrelevant now. But I think the plans used to be a more certain deal.

[cavalier1138]

If they exclude your student loans from your liabilities, that makes a lot more sense.

I feel like there's a very strong chance this isn't how it works. You end up with about 25k/year just in cost of living expenses, and then 15k or so in bar loans towards the end. If the rule is "you can't have more than 20k in your bank account" then NYU's LRAP is worthless because almost no one will be making decent PI money but also be completely hand to mouth with no savings.

It makes sense to me that if a student has 250k in assets and 200k in debt that they wouldn't want that person using LRAP, but for someone with 50k in assets and 200k in debt? I can't imagine NYU would force you to divest yourself down to sub-poverty level limits in order to take advantage of their program.

I know Harvard only allows 8k a year of assets so it wouldn't surprise me if NYU only allows $20,000.
I wonder if it's worth someone emailing these schools to get clarification on these questions? I'm sure if we said it was for a general guide for 0Ls on LRAP they would answer questions.

I've gone ahead and e-mailed NYU for clarification, so I'll post here when I get the details.

[fliptrip]

If they exclude your student loans from your liabilities, that makes a lot more sense.

I feel like there's a very strong chance this isn't how it works. You end up with about 25k/year just in cost of living expenses, and then 15k or so in bar loans towards the end. If the rule is "you can't have more than 20k in your bank account" then NYU's LRAP is worthless because almost no one will be making decent PI money but also be completely hand to mouth with no savings.

It makes sense to me that if a student has 250k in assets and 200k in debt that they wouldn't want that person using LRAP, but for someone with 50k in assets and 200k in debt? I can't imagine NYU would force you to divest yourself down to sub-poverty level limits in order to take advantage of their program.

I know Harvard only allows 8k a year of assets so it wouldn't surprise me if NYU only allows $20,000.
I wonder if it's worth someone emailing these schools to get clarification on these questions? I'm sure if we said it was for a general guide for 0Ls on LRAP they would answer questions.

This is where having a little standing would help a ton. We have a big enough community that surely there's an NYU admit among us to ask these questions.

e: thank you cav!

[Tls2016]

If they exclude your student loans from your liabilities, that makes a lot more sense.

I feel like there's a very strong chance this isn't how it works. You end up with about 25k/year just in cost of living expenses, and then 15k or so in bar loans towards the end. If the rule is "you can't have more than 20k in your bank account" then NYU's LRAP is worthless because almost no one will be making decent PI money but also be completely hand to mouth with no savings.

It makes sense to me that if a student has 250k in assets and 200k in debt that they wouldn't want that person using LRAP, but for someone with 50k in assets and 200k in debt? I can't imagine NYU would force you to divest yourself down to sub-poverty level limits in order to take advantage of their program.

I know Harvard only allows 8k a year of assets so it wouldn't surprise me if NYU only allows $20,000.
I wonder if it's worth someone emailing these schools to get clarification on these questions? I'm sure if we said it was for a general guide for 0Ls on LRAP they would answer questions.

This is where having a little standing would help a ton. We have a big enough community that surely there's an NYU admit among us to ask these questions.

e: thank you cav!

Yeah. Thanks. I don't think it has to be an admit as no T14 school will want their program incorrectly described on a public forum. But of course an admit is better!

[fliptrip]

^^ I agree with you, 100%. I just think the admit especially right now is likely to get a very quick response. Flip's polite email might get pushed to the back of the queue to be replied to in May sometime, lol.

[texasellewoods]

When the spreadsheet says "need-based loans to cover COA at x school" what exactly does that mean..?
I know I'm not eligible for any need based aid because of family income (aka no grants), and will have to finance through loans, so does that mean I am not eligible for any of this loan repayment? Because that is a huge huge difference and the wording is getting me very stressed out.

[somethingElse]

When the spreadsheet says "need-based loans to cover COA at x school" what exactly does that mean..?
I know I'm not eligible for any need based aid because of family income (aka no grants), and will have to finance through loans, so does that mean I am not eligible for any of this loan repayment? Because that is a huge huge difference and the wording is getting me very stressed out.

I believe that what Flip means by that is that your loans can't exceed the school's estimated COA - any scholly you received (Flip correct me if I'm wrong). So you can't just like pull out extra loans for extra spending money and then have the school pay that back via LRAP.

[fliptrip]

When the spreadsheet says "need-based loans to cover COA at x school" what exactly does that mean..?
I know I'm not eligible for any need based aid because of family income (aka no grants), and will have to finance through loans, so does that mean I am not eligible for any of this loan repayment? Because that is a huge huge difference and the wording is getting me very stressed out.

I believe that what Flip means by that is that your loans can't exceed the school's estimated COA - any scholly you received (Flip correct me if I'm wrong). So you can't just like pull out extra loans for extra spending money and then have the school pay that back via LRAP.

This is right. One place this becomes tricky is with places that do need based awards, like HYS. Any borrowing you take to cover your student expected contribution might be excluded from LRAP, but your borrowing to cover an expected parent contribution seems to be fine to include in all cases.

[texasellewoods]

When the spreadsheet says "need-based loans to cover COA at x school" what exactly does that mean..?
I know I'm not eligible for any need based aid because of family income (aka no grants), and will have to finance through loans, so does that mean I am not eligible for any of this loan repayment? Because that is a huge huge difference and the wording is getting me very stressed out.

I believe that what Flip means by that is that your loans can't exceed the school's estimated COA - any scholly you received (Flip correct me if I'm wrong). So you can't just like pull out extra loans for extra spending money and then have the school pay that back via LRAP.

This is right. One place this becomes tricky is with places that do need based awards, like HYS. Any borrowing you take to cover your student expected contribution might be excluded from LRAP, but your borrowing to cover an expected parent contribution seems to be fine to include in all cases.

Ok awesome!! I think H has a minimum student contribution, but since I have no savings or assets of my own I can't imagine I will be responsible for much more than that. Thank you so much - I was getting a bit worried there for a minute haha.

[tsujimoto74]

This thread is awesome. Just to pile on, thanks flip (and everyone else who's added bits of wisdom).

[we'rebothmenofthelaw]

1. Thanks so much to fliptrip for making this. He's clearly a person who could get you a toe by 3:00...with nail polish.

2. Wondering if it might make sense to create a second Columbia entry since the programs are so different. Sorry to create extra work and happy to contribute if I can.

3. On Columbia, does anyone know when you have to decide which program to do and whether there is any switching between the programs?

4. Irrelevant comment on the net worth cap that may be of interest to those of you interested in poverty related law...the asset limit for people on SSI (safety net program for poor disabled or elderly people with limited work histories) is $2,000 except for some statutorily excluded resources with NO consideration of debt. Just to put things in perspective before we get too annoyed by this policy...

[cavalier1138]

Straight from the NYU Financial Aid Office:

"The $20,000 is your net worth. It will be calculated using your assets and debt. Your student loans will be factored into the calculation."

So in other words, yes, you can save up for a house if you're on IBR.