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MLaw Launching Improved Loan Repayment Program

Plan available this fall, will dovetail with federal guidelines

April 26, 2011
Contact: John Masson, 734.647.7352, jpmasson@umich.edu

ANN ARBOR, Mich.—Michigan Law is rolling out an improved Loan Repayment Assistance Program (LRAP), carefully tailored to mesh with newly revised federal guidelines, for public-service graduates and others whose legal careers provide lower salaries.

Among the plan's key provisions: loan repayment assistance for graduates earning up to $88,000, with no out-of-pocket contributions for those earning less than $50,000; availability to students working in both the public and private sectors; and federal loan forgiveness for graduates working in the public sector after 10 years.

The plan is designed to help ensure that Michigan Law graduates aren't deterred by student debt from using their top-tier legal educations to pursue their dreams.

"Our overall goal is to make it feasible for people to pursue the careers they want," said Prof. Jim Hines, who led the committee that designed the program. "Another goal, quite honestly, is to allay people's fears about debt. We want to provide a form of insurance, so they don't have to be as concerned as they might otherwise be."

Michigan's new program was specifically designed to enhance the federal loan program, known as the Income Based Repayment Plan. Under the Michigan program, income—not career type—is the key factor. Further, under the federal program, if the salary is low enough, the required payments don't cover the interest on the original loan—so the principal actually increases. Michigan's program is designed to avoid that problem by making the entire required payment if the graduate's salary is $50,000 or less—about what a GS-11 entry-level federal attorney might expect to earn. Furthermore, Michigan's program creates a reserve account for each graduate. The law school deposits money to cover unpaid interest accruing on the debt into these reserve accounts, and graduates who leave the LRAP program after two or more years can ask that the funds be applied toward the unpaid interest.

The program remains in effect as earnings increase. For graduates earning between $50,000 and $75,000, for example, the law school pays the entire interest payment and the graduate pays down the principal, if necessary. The law school continues to help those earning more than $75,000 as well. So Michigan's program means a graduate carrying, for example, $100,000 of federal debt and earning $65,000 would be responsible for an annual out-of-pocket payment of just $90. Michigan Law would pay the rest.

Alumni like Sarah DeYoung, a Wayne County assistant prosecutor who graduated in 2001, said the administrative team at Michigan Law is constantly seeking new ways to make sure their students have every advantage. The new loan repayment program should be no different, she said.

"Given what I know about Michigan and the way they work the system to everyone's benefit, I'm sure it's fabulous and will be great for students," DeYoung said of the new program. "They really want their students to have every opportunity, and to actually be able to seize those opportunities."

She added that the assistance she's received in paying off her educational loans means "I have had a job for the last 10 years that I have loved waking up and going to."

The improved plan is scheduled to roll out this fall. Graduates covered by the old plan will have the option to choose which plan they use.

Answers to frequently asked questions about Michigan Law's new income-based loan repayment assistance program are available. Or read an overview and PowerPoint presentation about the program.

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