Grad school debt and HYS LRAP Forum

[Rigo]

Also interested in people on non-integrated Columbia with grad/separate undergrad debt, since the basic logistics would be similar.

Does anyone have any experience with how grad school debt is tackled?
I've seen that you can roll a certain amount of undergrad debt into their LRAP, but haven't seen grad debt discussed. I'm assuming it isn't allowed. Please correct me if I'm wrong.

But then how does it work tackling your grad debt using PSLF? Law school debt isn't integrated with IBR, but would I be on a separate IBR-PSLF plan for the grad debt and on a COAP/LIPP (school LRAP) plan for the law debt?

How are people with significant (over $30k) undergrad debt but also on LRAP doing it?

For non-HYS people, are you on two separate IBR plans? The school pays your law school one and you pay your non-law one, or are they all thrown together since its income-based and the payment is the same no matter what?

[Nebby]

You can't be on two separate IBR plans. All of your federal debt is in one payment plan. I.e., all of your undergrad, grad, and law debt would be either on standard repayment or an IBR plan.

For instance, I have undergrad and law debt. All of my debt is on PAYE. My CLS LRAP benefits are calculated at a 10 year repayment, so I pay more on my PAYE debt per month than my PAYE payment, because the 10 year repayment benefit (for me) is ~$2200/month whereas my PAYE required payment is ~$300

I am confused about your PSLF question. PSLF just requires you to make 120 qualifying payments on your federal debt and the rest is forgiven.

[Rigo]

Yeah maybe I'm missing something and not fundamentally understanding it, so that's why I asked.

I was asking for schools that have their own programs (so Yale, Harvard, Stanford mainly) but your non-law school debts aren't covered. So essentially you will be on two separate repayment plans (one paid by HYS and forgiven) and another where you are on your own it seems.

So law debt is $150k and prior grad debt is $50k for $200k total. HYS would only be on the hook for forgiving $150k. I'm wondering what happens with the $50k. Do you just keep chugging along on your own repayment PSLF plan independent of HYS, so basically having two separate payments--making COAP/LIPP contributions with one hand and making separate IBR payments with the other?

I get its a specific question and I'm probably not articulating it properly since I don't have a firm grasp on how it works myself.
Thanks for trying to help.

[Nebby]

Here's how it works under a proxy LRAP similar to HYS' & CLS' LRAP plan.

LRAP: Your benefit is calculated at the 10 year payoff of your federal law debt. Let's pretend your benefit is $20,000/year. Your school pays you $20,000/year and you must use those funds solely for paying off your federal debt.

IBR or standard repayment: All of your federal debt must be either in standard repayment or IBR plans. You can't have two plans. I.e., you can't have an IBR plan for your undergrad debt and standard 10 year repayment for your law debt.

PSLF: A forgiveness plan that requires 120 qualifying payments and then remaining debt is forgiven. PSLF is not a "plan." You do not participate in PSLF until you have made 120 qualifying payments. Think of PSLF as wholly separate from either LRAP and IBR.

Hypothetical:

Under the 10 year repayment plan, you have to pay $30,000/year. $20,000 of that is for law, $10,000 is for undergrad. Therefore, your school will pay you $20,000/year in LRAP benefits. (for simplicity's sake just pretend that you're in a plan that doesn't roll in undergrad debt).

What if you're unable to afford the extra $10,000/year ($833/month) in undergrad payments? Your only option then is to get on an IBR plan.

Under PAYE, let's say your income qualifies you for a $300/month payment for all of your debt (law and undergrad). You sign up for PAYE. Under PAYE your annual debt burden is now only $3600/year. You still must pay $20,000/year towards your debt, because that is how much your LRAP benefit is and you must use it towards your debt. Therefore under this new repayment plan your LRAP covers your entire monthly PAYE repayment obligation (law and undergrad).

FAST-FORWARD 10 YEARS

By the time your 10 year LRAP eligibility expires, you should be at or near 120 qualifying payments. Once you hit 120, you apply for PSLF and your remaining debt is forgiven.

[Rigo]

And Stanford includes all debt so I guess im really just asking about H & Y.

[Rigo]

Oh okay. Your hypothetical is what I was looking for. Thanks!

[Nebby]

Do you understand that HYS & CLS LRAP simply sends you a check and you're responsible for using it on debt repayment yourself?

[Npret]

Yeah maybe I'm missing something and not fundamentally understanding it, so that's why I asked.

I was asking for schools that have their own programs (so Yale, Harvard, Stanford mainly) but your non-law school debts aren't covered. So essentially you will be on two separate repayment plans (one paid by HYS and forgiven) and another where you are on your own it seems.

So law debt is $150k and prior grad debt is $50k for $200k total. HYS would only be on the hook for forgiving $150k. I'm wondering what happens with the $50k. Do you just keep chugging along on your own repayment PSLF plan independent of HYS, so basically having two separate payments--making COAP/LIPP contributions with one hand and making separate IBR payments with the other?

I get its a specific question and I'm probably not articulating it properly since I don't have a firm grasp on how it works myself.
Thanks for trying to help.

Well Harvard does include up to $30,000 of undergrad loans for starters.

The schools give you the money to make the payments to the government. The debt is still from the government and the government doesthe forgiving.

Maybe I don't understand are you borrowing from the school?

[Nebby]

Also just so it's clear: PSLF is not a repayment plan. While you have to plan ahead in order to take advantage of PSLF, PSLF itself is simply a forgiveness mechanism you can trigger once you've satisfied its conditions.

[Nebby]

Also, it's very smart of you to ask these questions this early. LRAP/IBR/PSLF all work together, but it's very important to understand how they work together, since it is actually much more complex than it appears on the surface.

Understanding how they work together is important for minimizing the amount you'll have to pay out of pocket before your debt is forgiven. For instance, that hypothetical I provided above is one way to use HYS & CLS LRAP programs to minimize the amount of out of pocket payments on non-law debt.

[Rigo]

Well Harvard does include up to $30,000 of undergrad loans for starters.

The schools give you the money to make the payments to the government. The debt is still from the government and the government doesthe forgiving.
Maybe I don't understand are you borrowing from the school?

No you're right, and I was misunderstanding that even if a plan isn't integrated with IBR does not mean that you dont still have federal loans and utilize the basic IBR framework.

I guess my remaining point of confusion now is that your debt is being reduced each year with COAP/LIPP (Y/H) and you won't be on the hook for the total debt if you leave PI employment after 7 years, let's say. So in that scenario you won't get PSLF, but the payment you've been making via the school's LRAP are still good. At other schools that are integrated with IBR, you'd be on the hook for the full amount of the 10 years. Is it just that the government would refund the 7 years of payments to the school and you'd have to start all over again solo?

I'm attracted to Y & H because their repayment plans cover more than just strictly legal jobs. So I may not be PSLF eligible the full 10 years but still qualify for COAP/LIPP. In that case, the school would just keep paying IBR I guess with no formal forgiveness by the government.

& The loans in question are grad so wouldn't be covered like undergrad would. Nebby helped clarify that repayment aspect for me though, so my original question has been answered.

This discussion is hypothetical as of now since I'm merely waitlisted. I'm just toying with what would happen if I chose to resume my master's in a gap year but still end up going to a top law school.

[Rigo]

Do you understand that HYS & CLS LRAP simply sends you a check and you're responsible for using it on debt repayment yourself?

I get that now thanks. I kind of blanked on the basics when I added a new moving part (grad school) into the mix.

[curious109]

Nebby, technical question regarding your hypothetical:

Let's assume that your school's LRAP formula says that you're supposed to pay $4000/year toward your debt, and it's going to pay the $20,000 that you mentioned. Is it the case that your school assumes you will pay the full $24,000/year when (re)calculating each year how much debt you have left? In that case, you will very possibly pay off your full debt in less than 10 years (or whatever your loan term is) -- let's say it's 8 years. Now what if you opted NOT to pay your $4000 share, but just paid the $20,000 each year -- then after 8 years, you would still have some debt left, but according to your school, you "should" be at 0. So does this mean they make no more LRAP payments at that point?

[Nebby]

I guess my remaining point of confusion now is that your debt is being reduced each year with COAP/LIPP (Y/H) and you won't be on the hook for the total debt if you leave PI employment after 7 years, let's say. So in that scenario you won't get PSLF, but the payment you've been making via the school's LRAP are still good. At other schools that are integrated with IBR, you'd be on the hook for the full amount of the 10 years. Is it just that the government would refund the 7 years of payments to the school and you'd have to start all over again solo?

I don't know if this answers completely, but here's another hypothetical.

Under NYU's LRAP, you must be on an IBR plan (like PAYE) and your benefit is calculated at the IBR plan repayment. (This is unlike HYS & CLS where you can get on IBR but are still paid a benefit calculated at a 10 year repayment plan)

So say you're the same student from the hypothetical above ($20k law debt $10k undergrad debt annual repayment). You're required to be on PAYE (let's say its $300/month). NYU will send you a benefit equivalent to $200/month (because your law debt is 2/3 of your total debt), and you would have to pay the $100/month out of pocket. Let's say you make 120 qualifying payments. You'll apply for PSLF and your remaining debt is forgiven.

With this hypothetical done, can you rephrase your question? There is no scenario where the government will refund anything. If you're ever obligated to pay back part of your LRAP benefits, that obligation will be to pay back the school. For example, pretend I get a $20k LRAP benefit from CLS but only stay in PI for one year. I paid that $20k to the government. I am now obligated to pay CLS back, since all LRAP benefits are in the form of a forgivable loan, and CLS was the loan provider. (They are structured this way so that LRAP benefit payments are not considered taxable income).

[A. Nony Mouse]

Re: plans integrated with IBR - the government isn't going to pay anything back to the school or anything like that. I think the issue is the difference between a plan that pays the full standard 10-year plan amount, so that your debt is paid off once 10 years is up, versus a plan that pays just the IBR amount and assumes you will do PSLF after 10 years - and thus if you don't end up getting PSLF you won't really have made a big dent in the debt. So if your debt is $200k, a non-PSLF plan will pay your standard 10 year payment if you qualify, and if you qualify for 10 years, your debt is gone; a PSLF-tied plan will pay your income-based payment for 10 years, so if for 10 years you make $40-50k, your income-based payment won't really make a dent in $200k. That's fine if at the end of the 10 years you get forgiveness, but not good if you decide after 8 years to ditch qualifying employment. But the problem isn't going to be that anyone has to pay anything back, it's that your debt won't have gone anywhere (it may well have grown - my interest has outpaced my payments).

(Probably scooped)

[Nebby]

Nebby, technical question regarding your hypothetical:

Let's assume that your school's LRAP formula says that you're supposed to pay $4000/year toward your debt, and it's going to pay the $20,000 that you mentioned. Is it the case that your school assumes you will pay the full $24,000/year when (re)calculating each year how much debt you have left?

First, "expected contribution" in an LRAP plan does not mean you are obligated to pay it. So in your hypothetical, let's say the annual repayment amount under the 10 year standard repayment is $24,000. Your salary is high enough that your LRAP calculates your expected contribution as $4000. Therefore, your LRAP benefit is (24k - 4k) $20k. Your LRAP program will send you a check for $20k a year.

However, if you're under my PAYE hypothetical, that $20k benefit still covers your entire PAYE obligation, and you don't actually have to contribute anything out of pocket.

In that case, you will very possibly pay off your full debt in less than 10 years (or whatever your loan term is)

No, you will not. Under our merged hypothetical, in order to pay off the debt in 10 years you must pay $24k/year. However, you'd only be making $20k/year payments. Therefore it is impossible to pay off the full debt in less than 10 years.

Now what if you opted NOT to pay your $4000 share, but just paid the $20,000 each year -- then after 8 years, you would still have some debt left, but according to your school, you "should" be at 0. So does this mean they make no more LRAP payments at that point?

The LRAP pays you for 10 years worth of benefit and no more. So if there is any debt left, you will have to pay it yourself.

That is why you should have hopefully accumulated 120 qualifying payments so you can apply for PSLF and have the remaining debt forgiven shortly after the LRAP benefits stop.

[Rigo]

Thanks Nebby and Nony. Just talking through it has made me understand it more. I wanted input from people actually on these plans instead of just trying to figure it out based on the terms of each LRAP program. (And I can't really call the relevant schools' advisors since I am not actually an accepted student yet.)

I'm now just left with the reality that if I am able to get into Y/H and still get a non-legal career covered that I may end up unfortunately being on the hook for the full grad school debt if I unfortunately end up being non-PSLF eligible.
It seems that gray area loophole would only realistically occur (for me) if I were to take a strictly political non-government job down the line (like a political advisor).

[Nebby]

The fact that H/Y define public interest beyond PSLF is great, but you are right that if you have any other debt, it could lead to more out of pocket expenses than if you worked in traditional public interest (government/501c3).

Glad we could help. LRAP is complicated and to properly make use of all benefits it requires a pretty fine-tuned understanding of how it works and how it complements other programs like PAYE and PSLF.