Private LRAP Programs May Offer Student Loan Peace of Mind
We’ve written here before about LRAPs (loan repayment assistance programs) through government agencies and some law schools, but there’s a private LRAP firm that’s signing up colleges to participate in their programs. This is an interesting form of student loan “insurance” that may give some borrowers peace of mind – if your institution of choice is enrolled.
To refresh you – an LRAP is a program that makes loan payments on your behalf (either full or partial payments). Work-related LRAPs offer them as a perk of signing on – usually with a government agency. Some law schools offer LRAPs for those that work in lower paying public service positions such as public defender offices.
The LRAP program we’re talking about today is offered by a private company – the LRAP Association – and has been offered since 2008. The founder of the LRAP Association, Peter Samuelson, was himself a recipient of Yale’s LRAP program, which was one of the earliest of its kind founded in 1989. Other advisors attached to the LRAP Association are two of the founders of Yale’s LRAP and a former executive from Sallie Mae.
How the program works is that if a college has signed up with this LRAP and a prospective student is undecided about choosing the school because they will have to borrow to attend, the college can entice them with the LRAP. The college pays a fee to LRAP Association for each student they enroll in the program (much like insurance) and the benefit kicks in after graduation if the student ends up with a low earning job.
The caveats are that the student must graduate from the institution, must get a job, and must work at least ¾ time. If their income is below a certain level, LRAP Association helps pay the student loans. The program covers private, federal and PLUS loans and stays in place for the life of the loans, so long as the graduate continues to meet the low income threshold.
According to LRAP Association’s website, 68% of students that are on the fence about enrolling as freshman opt to attend when offered an LRAP. They also tout a 10% retention increase from freshman to sophomore years attributable to the LRAP program initiation.
There are several questions we have about this program that seems to be a well-kept secret. We reached out to LRAP Association for answers and Josh David, LRAP Association’s Director of Student Service, provided the information requested. Here is the Q&A:
Tuition.io: Does a college offer LRAP to all incoming students or only those that are fence sitting?
LRAP Association: LRAP Association works with many colleges and universities across the country, who provide LRAP to help students and families in a variety of ways. Some will offer it to all their incoming students, to provide peace of mind for their entire incoming student body, while others will offer LRAP more selectively, generally focusing on helping students with a passion for public service, to ensure they don’t have to choose between a paycheck and meaningful employment after graduation. That said, many institutions are beginning to offer LRAP to all their students, or a larger segment of their student body, to provide peace of mind for students in whatever path they choose, and reiterate their commitment to their students’ success after graduation.
Tuition.io: If not offered to all, if a prospective student requests it, can they be signed up?
LRAP Association: For the colleges and universities that do not offer LRAP to all their incoming students, the decision of offering LRAP is at the sole discretion of the institution. Some will offer it by need-based criteria, similar to a financial aid award, while others will specify academic programs (e.g. education) with graduates who may generally encounter modest incomes in their field of work. That said, it is becoming increasingly common for students to ask their first-choice colleges if they offer LRAP, and we have experienced situations where a student has asked for it, and received LRAP.
Tuition.io: Is the income threshold for your repayment services to kick in set by school? By major? Or is it set across the board? What is the income level for LRAP to kick in? Does it phase out as income increases or does it simply cut off at a certain level?
LRAP Association: The income thresholds are different for each college and university, and are determined by the institution. In general, the upper and lower income thresholds are comparable across institutions, and only change slightly when accounting for regional demographics (e.g. cost of living). In general, if an LRAP graduate is making less than $20,000 per year, LRAP will reimburse them for the entire amount of their loan payments each quarter. As their income increases, the assistance becomes proportional. LRAP assistance continues until their income surpasses the upper income threshold, or their loans are paid off entirely.
Tuition.io: Do you have a complete list of colleges using your program that I could link to or list in the blog?
LRAP Association: Below is a list of the institutions currently offering LRAP to all their incoming students, and we have also just had 2 new colleges and universities decide to offer LRAP to all their incoming students, beginning in Fall 2014, and are in discussions with several more to do the same in new locations across the country. Stay tuned for those updates!
Huntington University (Huntington, IN)
Spring Arbor University (Spring Arbor, MI)
Adrian University (Adrian, MI)
Corban University (Salem, OR)
Central Christian College of Kansas (McPherson, KS)
This is certainly an interesting program and if you absolutely have to borrow to finance your college education, an LRAP could give you some piece of mind. However, opting for a much more expensive college simply because it has an LRAP is likely not advisable. But all things being financially and academically equal, an LRAP could be a worthwhile deciding factor.
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