TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, April 1, 2017

WSJ:  100 Colleges Offer Loan Repayment Assistance To Graduates, As Do 100 Law Schools

Student LoansWall Street Journal, Some Colleges Step Up to Ease Students’ Debt Burden: About 100 Mostly Liberal Arts Colleges Offer Help With Loan Repayments to Graduates:

When Natalie Dunn was a senior in high school, she was torn between two colleges — but only one offered anything close to a money-back guarantee. So she picked Adrian College over the less-expensive Central Michigan University. The private liberal-arts school promised it would cover some or all of her student-loan payments, depending on how much she earned after graduation, up to $37,000 a year in salary. ... 

About 100 schools — mostly liberal-arts colleges — are now offering a variant of this guarantee through an Indiana company called LRAP [Loan Repayment Assistance Program] Association, The company sells programs similar to insurance policies to schools for an average of about $1,300 per student, said LRAP President Peter Samuelson.

The school buys a policy from LRAP for some or all of the students in a class. The terms of the policies are different but in general, if the student has graduated and is still earning below a certain amount in salary, LRAP cuts the student a check to help cover their student loans. Usually there is a sliding scale, so if a student is earning less LRAP would pay more.

The idea, which has been around since at least the 1980s, first gained traction at law schools where the debt-to-first-year-earnings ratio can be especially high. Similar guarantees are now spreading among coding boot camps and other for-profit technology schools where job-placement rates are high.  [Over 100 law schools offer Loan Repayment Assistance Programs.  Stanford Law School, a client of LRAP, "is widely regarded as the best of its kind."] ...

In 2015, Sen. Lamar Alexander (R., Tenn.), chairman of the Health, Education, Labor and Pensions committee, called for “market-based accountability policies that require all colleges and universities to share in the risk of lending to student borrowers” in a congressional report.

Lawmakers have since filed many bills addressing the subject but the debate in Washington has stalled. It is expected to be picked up later this year when Congress considers reauthorizing the Higher education Act.

Schools are leery of the additional cost—and oversight.

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