LIPP Scenarios
Participants in LIPP are expected to contribute a percentage of their monthly household income toward their monthly loan payments. Most participants find that they are able to comfortably manage the participant contribution that is expected of them. Participants at the lowest incomes have the lowest expected contribution rate.
In an effort to demonstrate the potential long-term benefits of LIPP, we have provided several examples showing how graduates in varying circumstances would fare under LIPP. For each of these examples, we have made the following assumptions:
- We used the 2008-09 program guidelines and allowed for moderate increases to the income scale each year.
- We assumed that salaries are increasing with the cost of living (3% per year), except in the DOJ attorney example. If actual annual salaries increase by more than 3%, actual LIPP benefits will be lower than these estimates.
- All loan repayments are calculated at an average 7% interest rate, assuming a 10 year repayment plan (120 payments).
- We used a borrowing average of $105,494, the average borrowing of the HLS class of 2007, which equates to 119 monthly payments of $1,224.87 and a final payment of $1,225.70. The total amount repaid on this debt after 10 years will be $146,985. Note that graduates with higher debt that this assumed average would receive more LIPP assistance, with all other assumptions being unchanged.
- We assumed that all borrowing met LIPP eligibility guidelines.
- Assistant District Attorney, single
- Assistant District Attorney, married
- Legal Services Attorney, single
- Attorney at Small Private Firm, single
- Attorney, U.S. Department of Justice, single
Assistant District Attorney, single
- Starting income of $45,000.
- With annual raises of 3%, after 10 years she will be earning an income of almost $59,000.
Based on an income of $45,000, this graduate will contribute $50 each month toward her loans, and LIPP will cover the remaining $1,174.87 of her monthly payment. If she remains in LIPP for 10 years, she will be awarded about $140,107 to cover her loan payments, and will be expected to pay about $6,878 out of pocket. This means that HLS will repay 95% of her loans.
If she moves on to a higher paying job after four years and leaves LIPP, she would still receive about $56,284 during her years of participation. Because LIPP has no "minimum term" requirement, she will not have to repay any of the LIPP assistance for which she has qualified. Even though she is responsible for the entirety of her future loan payments after leaving LIPP, when she completes repayment of her loans after ten years, HLS still will have paid off about 38% of her loan debt.
Assistant District Attorney, married
- Starting income of $45,000; spouse earns $60,000, for a combined household income of $105,000.
- With annual raises of 3%, after 10 years he will be earning an income of almost $59,000, and his spouse will be earning an income of over $78,000, for a combined household income of $137,000.
This graduate will contribute $250 each month toward his loans, which is based on half the initial household income of $105,000. LIPP will cover the remaining $974.87 of his monthly payment. If he remains in LIPP for 10 years, he will be awarded about $112,593 to cover his loan payments, and will be expected to pay a total of $34,392 out of pocket. This means that HLS will repay 77% of his loans. If this couple has children during the period in LIPP, the graduate can qualify for LIPP assistance during a parental leave, or while working part-time, and will also receive allowances against his share of the household income for child care and maintenance expenses.
If he moves on to a higher paying job after four years and leaves LIPP, he would still receive about $46,243 during his years of participation. Because LIPP has no "minimum term" requirement, he will not have to repay any of the LIPP assistance for which she has qualified. Even though he is responsible for the entirety of his future loan payments after leaving LIPP, when he completes repayment of her loans after ten years, HLS still will have paid off about 31% of his loan debt.
Legal Services Attorney, single
- Starting income of $40,000.
- With annual raises of 3%, after 10 years he will be earning an income of almost $52,200.
Based on an income of $40,000, this graduate will not contribute anything towards his monthly loan obligations, and LIPP will cover the entire $1224.87 of his monthly payment. If he remains in LIPP for 10 years, he will be awarded $146,985 to cover his loan payments, and will be expected to pay nothing out of pocket. This means that HLS will repay 100% of his loans.
If he moves on to a higher paying job after four years and leaves LIPP, he would still receive about $58,794 during his years of participation. Because LIPP has no "minimum term" requirement, he will not have to repay any of the LIPP assistance for which he has qualified. Even though he is responsible for the entirety of his future loan payments after leaving LIPP, when he completes repayment of his loans after ten years, HLS still will have paid off about 40% of his loan debt.
Attorney at Small Private Firm, single
- Starting income of $60,000.
- With annual raises of 3%, after 10 years she will be earning an income of almost $78,300.
Based on an income of $60,000, this graduate will contribute $500 each month toward her loans, and LIPP will cover the remaining $724.87 of her monthly payment. If she remains in LIPP for 10 years, she will be awarded about $78,202 to cover her loan payments, and will be expected to pay about $68,783 out of pocket. This means that HLS will repay 53% of her loans.
If she moves on to a higher paying job after four years and leaves LIPP, she would still receive about $33,692 during her years of participation. Because LIPP has no "minimum term" requirement, she will not have to repay any of the LIPP assistance for which she has qualified. Even though she is responsible for the entirety of her future loan payments after leaving LIPP, when she completes repayment of her loans after ten years, HLS still will have paid off about 23% of her loan debt.
Attorney, U.S. Department of Justice, single
- Starting income of $56,173, based on the 2008 Federal GS salary scale.
- Raises for DOJ attorneys are typically more frequent and larger in size, so after 6 months, she could receive a raise to $67,329, and one year after that, another raise to $80,065; her next pay raise, 1 year later, would place her at an income at which she would no longer qualify for LIPP assistance based on her level of loan debt.
At an income of $56,173, this graduate will contribute $372.43 each month toward her loans, rising to $1,168.83 at an income of $80,065. LIPP will cover the remaining $852.44 and $56.04 (respectively) of her monthly payment. If she remains in LIPP for 2.5 years, she will be awarded about $11,553.96 to cover her loan payments, and will be expected to pay about $25,192.14 out of pocket. This means that HLS will repay 31% of her loan payment while she is in LIPP.
Once she no longer qualifies for LIPP, she will not have to repay any of the LIPP assistance for which she has already qualified. She will, however, have to practice good money management skills in the first few years after moving beyond LIPP eligibility in order to meet her expenses and monthly loan payments. Still, the long-term outlook for HLS graduates in federal government positions is good; they typically receive income increases at above the annual cost of living rate, and the portion of their post-LIPP income they must devote to loan repayment gradually declines. There are also federal loan repayment assistance programs for which federal employees can qualify after LIPP, and HLS currently offers a competitive fellowship program, the Heyman Fellowship, for graduates beginning careers in federal government. When this attorney completes repayment of her loans after ten years, HLS will have paid off about 8% of her loan debt.
If you want to learn more about LIPP, begin here.