Complicated LRAP question (Yale) Forum

[curious109]

Most schools assume a flat 10-year repayment schedule when calculating their LRAP assistance. This would seem to work out fine if in fact you've set up your actual loans on a 10-year term. But what about a place like Yale, where they assume a 15-year repayment schedule for Years 1-5, and a 5-year schedule for Years 6-10 -- this could easily lead to a situation where their calculated assistance is GREATER than the amount you actually owe.

Example:
Say you have $100,000 in debt at 7% interest; for a 10-year term, this works out to an annual payment of $13,933 -- this is what you actually have to send to your lender each year. Let's say in you're in Year 6, and your income is $70,000.

Now at a place like Harvard, they use a flat 10-year schedule when calculating your assistance, meaning your "assumed" annual payment is also $13,933, exactly equal to your actual payment. Then using their formula at $70,000 income gives an implied student contribution of $8,400 and an implied LRAP contribution of $5,533. The two contributions exactly equal your actual annual payment of $13,933. All makes sense.

But at Yale, using a 5-year schedule for Year 6 means that your "assumed" annual payment is $23,761 (=annual payment on $100,000 at 7% over 5 years). Then using their formula at $70,000 income gives an implied student contribution of $3,750 and an implied LRAP contribution of $20,011. Together the two contributions are MORE than you actually owe ($13,933). So what happens now? Seems like there are several possibilities.
1) Maybe you get to pocket the difference. Seems unlikely.
2) Maybe Yale caps their actual payment to you at the difference between what you actually owe ($13,933) and your implied student contribution ($3,750), ie., $10,183.
3) Maybe you have to pay the full $23,761 to your lender, thereby decreasing the remaining balance owed on your loan, and so you will end up paying it off in less than 10 years.

Does anyone know which of these applies? Or maybe it's something else?

[Nebby]

The answer is #3.

[curious109]

That's what I thought, thanks!

[hammy393]

You can calculate your payments through COAP here: http://coapcalc.law.yale.edu/