How To Get A Loan Repayment Assistance At Notre Dame Law School

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1 May 2015 Revision, effective for calendar years beginning 2016 Description of the Loan Repayment Assistance Program I. ELIGIBILITY AND DEFINITIONS A. Eligible Graduates. Any J.D. graduate of Notre Dame Law School who is working in or has accepted a position in qualifying employment, expects to have an adjusted annual income below $60,000 (based on full-time work), and owes principal on eligible loans may receive loan repayment assistance during the first ten calendar years following his or her graduation. A graduate who has not yet received an offer of qualifying employment before the November 1st application deadline but who has applied for such employment and expects to receive an offer by December 31st of that same year may apply for loan repayment assistance contingent upon receiving and accepting such an offer. Such a graduate must provide the Loan Repayment Assistance Committee ( the Committee ) with information about the specific jobs for which the graduate has applied and when a decision is expected. When sufficient funds are available, the Committee may extend the December 31 st deadline to a date no later than March 1 st. B. Qualifying Employment. An eligible graduate must hold or have accepted employment that directly uses the skills and knowledge gained from the graduate s legal education to perform public interest, public service or other similar employment. Public interest includes work for notfor-profit organizations that provide legal services to a low-income population or that serve the public good. Public service means work for a governmental body, including public defender and prosecutor positions and military employment. Public service does not include judicial clerkships for federal judges or at the highest court in a state (although a maximum of 2 years of a judicial clerkship(s) will be included for purposes of calculating the length of time spent in qualifying employment under the loan forgiveness schedule in Part III). Judicial clerkships here means so-called elbow clerk positions working for a single judge or justice as distinguished from staff attorney positions at the service of an entire court. The Law School has discretion to determine whether a position is considered qualifying employment, including the discretion to disqualify employment that contradicts the teachings of the Catholic Church. C. Eligible Loans. To qualify for loan repayment assistance, an eligible graduate must have personally incurred, while enrolled in the J.D. program at Notre Dame Law School, student loans totaling $10,000 or more, processed or approved as appropriate by the Office of Financial Aid, to finance the cost of the graduate s law school education. Loans incurred in connection with an L.L.M. or J.S.D. degree are not eligible for loan repayment assistance. D. Adjusted Annual Income. Adjusted annual income means gross income with the following modifications: 1. For unmarried graduates, subtract (a) non-notre Dame Law School educational loan payments, (b) an amount equal to the federal personal exemption for each child under the age of 1

2 24 claimed as a dependent on the graduate s federal tax return, (c) employee contributions to retirement plans in the form of payroll deductions or exclusions up to a maximum of ten percent of the graduate s compensation; (d) employee contributions to health care and dental plans; and (e) employee contributions to flexible spending arrangements for health care or dependent care assistance, to health savings accounts, or to acquire qualified transportation benefits. For graduates in military service, gross income includes base pay and any additional special pays and allowances, including but not limited to the Basic Allowance for Housing and the Basic Allowance for Subsistence. 2. For married graduates, compute each person s adjusted annual income under paragraph 1 above. Adjust the spouse s annual income by subtracting any of the spouse s law school educational loan payments and adding any loan repayment assistance the spouse will receive. If the graduate s adjusted annual income is higher than the spouse s adjusted annual income, use the graduate s adjusted annual income for purposes of computing the amount of loan repayment assistance under the Loan Repayment Assistance Program ( the Program ). If the spouse s adjusted annual income is higher than the graduate s adjusted annual income, compute the average of the resulting adjusted annual incomes and use that average in computing the amount of loan repayment assistance. 3. Two graduates who are married to one another, who are both in qualifying employment, and who are both applying for loan repayment assistance should compute their adjusted annual incomes under paragraph 1 as if they were unmarried graduates. E. Assets. Assets include cash, balances in bank accounts and the fair market value of investments, including trusts and any other property owned by the graduate and his or her spouse (if any), less any amounts owed on the property (unless the property is specifically excluded by this Program) ( Assets ). Assets do not include automobiles, household goods, retirement accounts, or the first $50,000 in equity in a graduate s primary residence. The Assets of a married graduate will be computed as 50% of the total of all Assets owned jointly or individually by either spouse. The Loan Repayment Assistance Program Administrator ( Program Administrator ) shall have the discretion to treat funds held temporarily by a graduate for the purpose of completing the purchase of a primary residence as equity in a primary residence. F. Maximum Loan Repayment Assistance Period. Eligible graduates may receive loan repayment assistance for a maximum of ten consecutive calendar years starting with the January immediately following their graduation from the Law School. G. Leaves of Absence. The Program Administrator, in consultation with the Committee chair, may grant a leave of absence from qualifying employment for up to six months. A leave of absence is a temporary period away from qualifying employment during which the graduate has the intention to return to qualifying employment. Any graduate wishing to take a leave of absence shall request such a leave in writing from the Program Administrator promptly upon learning of the circumstances justifying such a leave, and in no event later than two weeks after a change in circumstances. No leave is valid unless it has been approved by the Program Administrator. Leaves of absence from qualifying employment of six or fewer months taken by graduates during participation in the Program will not result in interruption of loan repayment 2

3 assistance from the Law School. Such assistance will be paid at the same level as the graduate received prior to the absence, provided that the graduate s income during the absence does not exceed the graduate s income while in qualifying employment. In addition, leaves of six or fewer months will be included for purposes of calculating the length of time spent in qualifying employment under the loan forgiveness schedule. Loan repayment assistance will terminate following the end of the sixth month of leave. Likewise, only the first six months of any leave will be included for purposes of calculating the length of qualifying employment under the loan forgiveness schedule. The Law School will not extend the maximum loan repayment assistance period of ten years for graduates based on any leave of absence from qualifying employment. II. LOAN REPAYMENT ASSISTANCE A. Program Loans. If the graduate s adjusted annual income is $50,000 or less, the Law School will provide the graduate with a loan ( LRAP loan ) to cover 100% of the graduate s actual payments on eligible loans that will become due during the year the repayment assistance is provided (calculated using a repayment period of at least 10 years on eligible loans). If the graduate s adjusted annual income exceeds $50,000, the percentage of the graduate s actual payments eligible for repayment assistance will be reduced by.01% for each dollar by which the graduate s adjusted annual income exceeds $50,000 as illustrated by the following table: Adjusted Annual Income $50, % $51,000 90% $52,000 80% $53,000 70% $54,000 60% $55,000 50% $56,000 40% $57,000 30% $58,000 20% $59,000 10% $60,000 0% Percentage of Current Year Loan Payments Eligible for Assistance The maximum loan repayment assistance percentages for graduates who hold part-time qualifying employment will be reduced based on the percentage of hours actually worked compared to a baseline of 1,750 hours per year. B. Reduction When Adjusted Assets Exceed Zero. If a graduate s Assets exceed zero after subtracting an amount equal to $10,000 plus $5,000 times the number of years since graduation ( Adjusted Assets ), the Law School will reduce the maximum amount that it would otherwise 3

4 loan a graduate under this Program. The reduction will equal the percentage determined by dividing the graduate s Adjusted Assets by the unpaid balance of the eligible loans. Graduates are not eligible for loan repayment assistance when their Adjusted Assets exceed the unpaid balance of the eligible loans. Within two weeks of unexpectedly receiving funds or property that increases the graduate s Assets, a graduate may ask the Program Administrator in writing for a reasonable amount of time (a) to allocate those funds or property into retirement funds, a primary residence or other resources that are not Assets, or (b) to repay educational loans, whether or not those loans are eligible for assistance from the Program, of the graduate or the graduate s spouse. If the graduate has promptly reported the change in his or her financial situation and the Program Administrator grants the time for managing all or some of the graduate s windfall, any reallocation or loan repayment shall be treated as having occurred at the time the funds were received. C. Reduction for Amounts Received from Other Loan Repayment Assistance Programs. The Law School will reduce the amount of any loan repayment assistance under this Program on a dollarfor-dollar basis for any other loan repayment assistance that a graduate receives, such as from an employer or state program. D. Allocation of Limited Resources. This Program is operating on limited funding. The total amount available for loan repayment assistance will be determined annually by the Dean. The Law School has discretion to select the eligible graduates each year to receive loan repayment assistance. The Law School need not award the entire amount available in any given year. There is no guarantee that graduates selected one year will be selected in future years. The Law School may, if warranted by the level of Program funding in a given year, establish a cap on the amount of benefits that will be awarded to any graduate during that year. III. LOAN REPAYMENT AND FORGIVENESS A. Repayment of Advances. LRAP loans are typically disbursed in six-month increments to assist graduates in making future monthly law school loan payments. For example, graduates typically receive a disbursement in January to cover payments during the first half of the calendar year. If a graduate leaves qualifying employment before the end of such a six-month period, the graduate must repay immediately any portion of the disbursement that was intended to cover law school loan payments during the remainder of that six-month period. Likewise, if changes in a graduate s financial information reduce eligibility, the graduate must repay immediately from the remainder of the disbursement the excess the Program Administrator calculates. The Program reserves the right to recall for immediate repayment any outstanding loans if the graduate has not used the provided funds to make payments on eligible loans. B. Loan Forgiveness Schedule. If a graduate has completed at least one calendar year in the Program but has served less than three years in qualifying employment, the Law School will partially forgive any loans made to the graduate as loan repayment assistance ( LRAP loans ). 4

5 If a graduate has completed at least one calendar year in the Program and has served in qualifying employment for at least three years, the Law School will completely forgive any of the graduate s outstanding LRAP loans. The following table sets forth the loan forgiveness schedule: Years in Qualifying Employment Percentage of Program Loans Forgiven Less than one 0 % At least one but less than two 33.3% At least two but less than three 66.6% Three or more 100% To qualify for loan forgiveness, graduates must submit annual verification, no later than January 31 st, that they worked in qualifying employment during the prior year. The employment verification form may be found on the LRAP web site. Graduates must continue to submit such verification even after they stop receiving loan repayment assistance, so long as they intend to claim the prior year as qualifying employment for purposes of loan forgiveness. Judicial clerkships will be included in calculating the length of time spent in qualifying employment for purposes of loan forgiveness under this provision up to a maximum of two years. A graduate may accumulate time towards loan forgiveness in non-consecutive periods. C. Taxation. Section 108(f) of the Internal Revenue Code of 1986, as amended, specifies the circumstances in which graduates can exclude any loan amounts forgiven by the Law School from gross income. Graduates should consult a tax advisor regarding the tax consequences of any loans forgiven under this Program. D. Repayment of LRAP Loans Other Than Advances. When a graduate leaves qualifying employment, the Program Administrator will promptly calculate the amount of LRAP loans the participant will be required to repay, if any, and will so inform the graduate. Graduates must repay any LRAP loans that are not forgiven. Under the promissory note signed by the graduate at the time of disbursement, no interest will be charged and no repayment will be required earlier than 30 days after leaving qualifying employment. Any subsequent interest on LRAP loans shall accrue at an annual rate equal to the prime rate beginning from the date of repayment, as quoted in The Wall Street Journal on that date. Graduates may prepay LRAP loans with no penalty. If a graduate subsequently re-enters qualifying employment, the graduate may apply for additional LRAP loans on the normal schedule. The graduate may also accumulate additional credit towards loan forgiveness, such that the graduate may ultimately accumulate enough total time in qualifying employment to become entitled to a refund of amounts repaid to the Law School after departing the Program. Only qualifying employment held during the first twelve years after graduation will be considered in the loan forgiveness calculation. 5

6 IV. PROCEDURES AND ADMINISTRATION A. Dates. The Program operates on a calendar year. The distribution of funding under the Program is determined separately each year. Eligible graduates, whether or not they have previously received assistance under the Program, must apply each year by November 1st to be considered for loan repayment assistance in the following calendar year. The Law School will attempt to announce funding decisions under the Program by December 1st. If a graduate selected for loan repayment assistance has started qualifying employment and debt repayment on or before January 1st, the Law School will make a disbursement for the first six months of the year during January and for the second six months during July. If a graduate selected for loan repayment assistance has not started qualifying employment or debt repayment on January 1st, the first disbursement will occur once the graduate starts employment and debt repayment and the second disbursement will occur during July. B. Application Materials. Graduates can obtain an application from the Law School s website. The application materials require: 1. Proof of employment, acceptance of an offer of employment in qualifying employment, or application for qualifying employment, as well as a description of the job, the address of the employer, salary (verified by the employer), and the name of a contact person at the employer. 2. A resume including dates of any relevant employment. 3. A copy of a current pay stub to verify pre-tax withholding for excludable income. If the applicant is not currently employed, this information will be required as soon as it is available. 4. Information regarding sources of estimated income other than the graduate s salary, including the salary of any spouse and loan repayment assistance from other programs received by the graduate and his or her spouse (if any), for the calendar year in which the graduate seeks assistance. 5. A list of assets. 6. A list of educational loans taken by both the graduate and his or her spouse (if any) and information regarding these loans, including documentation of the amount of the outstanding debt, monthly payments due during the calendar year for which the graduate seeks assistance, the amortization period, and the date on which payments began or will begin. 7. Any additional or clarifying information or documents as requested by the Law School, including the names and birthdates of any dependent children. C. Promissory Note. The Law School will require all graduates selected to receive loan repayment assistance to sign a promissory note before the Law School will disburse any loans. 6

7 D. Notification of Changes in Graduate Information. Graduates who are selected to receive loan repayment assistance are expected to provide notice to the Law School of any changes in their personal circumstances within two weeks of the change. These changes include but are not limited to: (1) voluntary or involuntary termination from the qualifying employment described in the application; (2) a change in annual income; (3) a change in loan payment terms or amounts; (4) a change of marital status; (5) receipt of loan repayment assistance for law school loans from another program; (6) any increase in the graduate s Assets, including an inheritance or gift, that exceeds $5,000; (7) a leave of absence, whether paid or unpaid, from qualifying employment for greater than one month; and (8) a change in any personal contact information, including address, cell phone number, or residential address. Depending on the nature of the change, it may trigger loan repayment by the graduate as described in this policy or cancellation of a disbursement during the year the graduate was selected for loan repayment assistance. A graduate who fails to inform the Law School within two weeks of any of the abovelisted changes in circumstances will be subject to immediate repayment of any amounts that the Law School loaned to the graduate during that year. E. Program Administration. The Dean will appoint the Committee, the Program Administrator, and the Program Coordinator to review and oversee the Program. The Committee, the Program Administrator, and the Program Coordinator will periodically review and evaluate the Program and will recommend any changes to the Dean. The Program Administrator receives applications for participation in the Program and reviews them for completion. The Program Administrator also administers loan payment and repayment and other procedural aspects of the Program. The Committee will make decisions regarding eligibility and will select those graduates who will receive loan repayment assistance each year. The Dean will determine the amount of funding available for the Program each year. 7