Life After Law School: Loan Repayment and Forgiveness for Public - - PowerPoint PPT Presentation

Life After Law School:

Loan Repayment and Forgiveness for Public Interest Graduates

Berkeley Law Financial Aid Office Amanda Prasuhn, Associate Director of LRAP March 4, 2020

Road Map

• I. Repayment Plans
• II. LRAP
• III. PSLF
• IV. Action Items
• V. Resources

Three Different Programs at Play

Income-Driven Repayment (IDR) Loan Repayment Assistance Program (LRAP) Public Service Loan Forgiveness (PSLF)

• Federal program
• Determines your

monthly payment amount

• Available to any

borrower regardless

• f employment,

plans to pursue PSLF,

• r participation in

LRAP

• Berkeley Law

program

• Provides funding to

help make IDR payments

• Eligibility depends on

income and employment

• Available whether

pursuing PSLF or not

• Federal program
• Method for obtaining

loan forgiveness after 10 years of qualifying payments

• Eligibility depends on

employment

• Available to any

borrower regardless

• f income or

participation in LRAP

• 1. Income Driven-Repayment

Federal Repayment Plans

Standard 10-Year

• Based on loan debt (“debt-driven”)
• Monthly payments are in a fixed amount
• After making payments for 10 years, loans will be paid in full

Income-Driven

• Based on income (“income-driven”)
• Monthly payments vary year-to-year based on income
• Whether these payments result in your loan balance

increasing, decreasing, or staying the same depends on your loan debt and income

Repayment Strategies

Standard 10-Year

• Results in loans being paid off entirely
• But, depending on your loan debt, your loan payments might

be unaffordable, especially for those working in public service jobs.

Income-Driven

• Payments become affordable
• But, oftentimes results in your loans growing in size.

Therefore, this option is best for those with plans to pursue loan forgiveness through PSLF.

• Those who want to pay off their loans likely need to pay

more than the minimum amount due under an IDR plan.

Income-Driven Repayment: The Basics

• Multiple IDR plans to choose from
• LRAP-eligible plans are Income-Based Repayment (IBR) and Pay

As You Earn (PAYE)

• Federal government uses your tax return to determine your income
• May have a $0 monthly payment the first 1-2 years of

repayment

• Family size and tax filing status taken into account
• Most plans will never give you a payment higher than the Standard

plan  more affordable!

• IDR plans last 12 months. Reapply each year with your updated

income.

How much will you pay?

Example monthly payment amounts, Standard v. PAYE:

$100,000 loan debt, $60,000 income $100,000 loan debt, $80,000 income Standard 10-year plan: $1,000/month Income-driven plan: $300/month Standard plan: $1,000/month IDR plan: $500/month $200,000 loan debt, $60,000 income $200,000 loan debt, $80,000 income Standard plan: $2,000/month IDR plan: $300/month Standard plan: $2,000/month IDR plan: $500/month

• 1I. Loan Repayment Assistance Program

LRAP: The Basics

• LRAP is a program designed to support Berkeley Law graduates

working in the public interest.

• LRAP provides funding to help you pay your monthly IDR

payments.

• Support comes in the form of a forgivable loan in a lump sum.
• Open to all Berkeley Law J.D. graduates with eligible loans and

employment.

• Must enter within 3.5 years of graduation
• Once in the program, can utilize up to 120 months of LRAP

support (cumulatively)

LRAP: Eligible Loans

• All federal direct student loans are eligible for LRAP
• support. This includes Graduate Plus loans, Stafford loans, and

direct subsidized and unsubsidized loans.

• Private loans or other types of federal student loans are

not covered.

• There is no maximum loan debt.
• Federal direct loans from undergrad or other previous

institutions are included.

• Must be enrolled in an income-driven repayment plan

LRAP: Eligible Employment

• You must work in a law-related position at a nonprofit or in

government.

• Clerkships count! If you clerk for ≥2 years, there are no

post-clerkship job requirements. If you clerk for <2 years, you must immediately enter qualifying public interest employment after clerking to be eligible for LRAP .

• Some public interest law firms and international NGOs can

qualify–but do not qualify for PSLF!

• You must work greater-than-half time, but only full-time

employment qualifies for PSLF!

LRAP: Income

• Those making $70,000 or less will receive 100% LRAP
• support. Those making greater than $70,000 will receive

a prorated amount of support.  You’ll contribute 35% of your income over $70k to your loans out of pocket, with LRAP covering the rest of your IDR payment amount.

• If you’re married, we’ll average your two incomes if your

spouse earns more than you.

• $100,000 income cap

How much LRAP support will I get?

Some examples:

$400 monthly payment, $60,000 income $400 monthly payment, $80,000 income Out-of-pocket contribution: $0/month LRAP support: $400/month Out-of-pocket contribution: $290/month LRAP support: $110/month $600 monthly payment, $60,000 income $600 monthly payment, $80,000 income Out-of-pocket contribution: $0/month LRAP support: $600/month Out-of-pocket contribution: $290/month LRAP support: $310/month

• III. Public Service Loan Forgiveness

Federal Forgiveness Plans

Public Service Loan Forgiveness

• Requires 120 months of qualifying payments made while working

in qualifying employment.

• Not a taxable event. If you are approved for PSLF, your

remaining loan balance (principal and interest) will be forgiven and is not considered taxable income.

20-25 Year Forgiveness

• Built in to the IDR plans
• No employment requirements
• A taxable event. Any remaining loan balance that is forgiven is

considered taxable income in that year. If you pay a low IDR amount for 20-25 years, your remaining loan balance (and therefore, your tax burden) may be sizable.

Public Service Loan Forgiveness

• Created by Congress in 2007 to encourage borrowers to

pursue public service careers.

• Only Congress has the authority to change PSLF.
• Must have 1) qualifying loans in a 2) qualifying payment

plan, and 3) make 120 qualifying payments while in 4) qualifying employment.

• Payments can be cumulative, not consecutive.
• After 120 qualifying payments, you can apply for PSLF with the

Department of Education.

Qualifying Loans

• Direct Federal student loans are the only eligible

loans.

• Private student loans or refinanced loans are not eligible.
• Perkins or FFEL loans are not eligible (but ask us how to

convert them!).

Qualifying Payment Plans

• All of the income-driven repayment plans qualify for

PSLF.

• The standard 10-year repayment plan qualifies
• But you probably won’t have a remaining balance

after 10 years.

• Graduated, extended, or alternative plans do not qualify.

Qualifying Employment

• 501(c)(3) nonprofit or government
• Any level: federal, state, local, tribal, clerkships
• Full-time
• Your position or time spent on particular job duties do

not matter–the only thing that matters is your employer.

• No income cap or requirements for PSLF!

Qualifying Payments

(The trickiest part!)

• You must have 120 separate monthly qualifying payments.
• Lump sum payments don’t count
• Paid ahead status doesn’t count
• Must be in the correct amount (what your IDR plan says to pay, or more!)
• Must be on-time
• No late payments
• Payments must be made while enrolled in a qualifying plan.
• Payments must be made while employed full-time by a qualifying

employer.

• Must have a payment due
• Payments made while in school or during a grace period, deferment,
• r forbearance do not count.

Documenting Employment

• To indicate your interest in PSLF and

document your employment, you should submit a PSLF Employment Certification Form to the Department of Education.

• Submit one annually
• Submit one each time you leave a

job (including an end date)

• Will transfer you to FedLoan
• Servicing. FedLoan Servicing is the

ONLY loan servicer administering PSLF!

Applying for PSLF

• You will not actually apply for PSLF until you have 120

qualifying payments.

• No partial forgiveness–you must work in qualifying

employment for 10 years and make 120 qualifying payments.

• Must continue working in qualifying employment until

your application is approved.

Issues with PSLF

• Mostly due to bad guidance in the early years of the program.
• Borrowers didn’t know what loans, repayment plans, or

employment qualified.

• The process was more complicated in 2007: the primary type of loans
• ffered were not Direct loans; electronic payments were less common;

the Employer Certification Form wasn’t created until 2012; etc.

• Getting 120 qualifying payments simply takes time. 58% of denied PSLF

applicants didn’t have enough qualifying payments when they applied.

• This has all resulted in very low success rates for those in applying for

PSLF so far. The vast majority of applicants simply have not met the qualifications.

• Expect higher success rates as the program continues!

Successfully Obtaining PSLF

• Know and follow all requirements exactly
• Use your legal skills to read and understand the rules and advocate for

yourself

• Read all communications from your loan servicer
• Recertify your IDR plan on time every year
• Submit a PSLF Employment Certification Form at least annually
• Download and save your loan payment history at least annually (you
• ften cannot see payments >12 months old on your loan servicer’s

website)

• Enroll in autopay
• Track your months of qualifying payments and contact FedLoans if you see

any discrepancies

• Continue working in qualifying employment until your PSLF application is

approved

• Document everything!

The Future of PSLF

• Congress is nowhere near changing the statute that governs PSLF.
• Any proposed changes should include a grandfathering provision

for existing borrowers–otherwise there would be a due process issue.

• No reason to think PSLF will not apply once you’ve signed

your Master Promissory Note.

• There is widespread support for PSLF across many professions

and all political ideologies. Plus, there is growing support for student loan reform.

• The bigger issue is making sure you meet all of the PSLF

requirements!

PSLF in your Master Promissory Note

Current LRAP Participant Employment

Disability Rights Washington Bronx Defenders Southern Poverty Law Center ACLU Centro Legal de la Raza EBCLC Earthjustice Catholic Charities Texas RioGrande Legal Aid Berkeley Law 9th Circuit Court of Appeals Oklahoma Attorney General California State Lands Commission Alaska Supreme Court United States Navy Orleans Public Defenders National Labor Relations Board Solano County Public Defender Minnesota Department of Revenue Oakland City Attorney’s Office

• IV. Action Items

Your Role as an LRAP Participant

• Enroll in federal income-driven repayment (“IDR”).
• Apply to Berkeley Law’s LRAP.
• Annually, reapply for IDR, reapply for LRAP, and submit

an application to forgive your previous LRAP loan.

Timeline: Graduation Year

Action Suggested Timeline Grace period Lasts for 6 months after graduation (May – November) Apply for Income-Driven Repayment 2 months before repayment (approximately in September) Apply for LRAP 1+ months before repayment (approximately October) Repayment Begins 6 months after graduation (November/December)

Action Items Annually Thereafter

Action Recertify your income with your loan servicer for your IDR plan Apply for renewed LRAP support Apply for LRAP loan forgiveness Submit a PSLF Employment Certification Form

Other Action Items

Create a Federal Student Aid account

• See all your federal student loan types, balances, and

interest rates

• See who your loan servicer is (the company handling

your loans) Create an account with your loan servicer

• Update your contact information

Check your credit report

• That’s where any private loans would be listed

• V. Resources

Resources

Financial Aid Office

• LRAP appointments by phone

and in-person

• Required before entering the

program!

LRAP website

• LRAP Handbook with all

guidelines

• LRAP eligibility calculator
• How to Apply for LRAP page
• LRAP application
• PSLF tips & best practices

More Resources

Studentaid.gov

• Apply for income-driven repayment
• Read PSLF rules
• Use the PSLF Help Tool

Your loan servicer

• Read communications about your loans
• Pay your bill
• Set up autopay
• Ask your servicer questions

Have a Dispute with your Servicer?

You have options!

• Escalate the issue with your servicer
• File a complaint or ask for an audit
• Keep records
• Send requests via certified mail with return receipt
• File a complaint with the Federal Student Aid Ombudsman
• Neutral party to resolve discrepancies and disputes
• Submit via the FSA Feedback System
• File a complaint with the Consumer Financial Protection Bureau
• File a consumer complaint with the California Attorney General’s

Office

More Resources

Student Loan Borrower Assistance

• Guidelines for repayment, consolidation, bankruptcy, credit

rehabilitation Student Borrower Protection Center

• Student loan policy advocacy group

Consumer Financial Protection Bureau

• PSLF toolkits for employers and employees

Equal Justice Works

• Student debt handbook, webinars, and articles

AccessLex Institute

• Webinars, calculators, guidebooks

Summary

I. Repayment Plans

• Standard 10-year plan
• Income-driven repayment

II. LRAP

• Eligible loans and employment
• LRAP support
• III. PSLF
• Qualifying loans, repayment plans, payments, and employment
• How to be successful
• The future of PSLF
• IV. Action Items
• Application timelines

V. Resources

Thank you!

Visit us at: Financial Aid Office 226 Law Building (across from the Reading Room) Email: lrap@law.berkeley.edu Call: (510) 642-1563 Appointments: berkeleylawfinaid.acuityscheduling.com

• V1. Additional Information

Marriage & Dependents

Marriage

• LRAP
• Spouse makes less than participant: only consider

participant’s income

• Spouse makes more: average two incomes
• IDR
• Tax filing status will determine how monthly payment is

calculated

Dependents

• $6,000 dependent deduction for first dependent
• $4,000 deduction for any additional dependent

International Employment

Many foreign jobs do NOT qualify for PSLF. International jobs do count as qualifying employment include:

• Working outside of the U.S., but for a U.S.-based 501(c)(3)

nonprofits

• A foreign not-for-profit organization that provides public services as its

primary functions, so long as the organization operates in the U.S. What does NOT count:

• Foreign government employment
• International or intergovernmental organization employment (e.g.,

United Nations, NATO)

• Foreign not-for-profits that do not operate in the U.S.

How much will my payment be?

Example monthly payment amounts, PAYE:

Annual Income Monthly PAYE Payment $40,000 $175 $50,000 $260 $60,000 $345 $70,000 $430 $80,000 $510 $90,000 $595 $100,000 $675

LRAP Out-of-Pocket Costs

Some examples:

Annual Income Annual Out-of-pocket Costs Monthly Out-of-pocket Costs $70,000 or less $0 $0 $75,000 $1,750 $146 $80,000 $3,500 $292 $85,000 $5,250 $438 $90,000 $7,000 $583 $95,000 $8,750 $729

Annual Timeline

Action Suggested Timeline Recertify your income with your loan servicer for your IDR plan ~3 months before your current IDR plan ends. Apply for renewed LRAP support ~1 month before your current LRAP contract ends. Apply for LRAP loan forgiveness The month after your current LRAP contract ends. Submit a PSLF Employment Certification Form Annually, and every time you leave a job (submit a final ECF including an end date for each job).