Let Your College Pay Your Student Loans For You

by Kevin on January 24, 2014

One of the driving forces in many family’s choices on higher education is the significant cost involved. Tuition payments, room and board, and the almighty student loan with hefty payments can, will, and do sway higher education decisions.

Yes, son, you could become a PhD in botanical gardening, but the $150,000 price tag combined with the $15,000 per year annual salary maximum means you aren’t getting a good deal. You will never be able to afford the student loan payments so, sorry, go find something else to be passionate about.

I just discovered something that really made me scratch my head. Certainly it can’t be true.

Your college will pay your student loan payments for you?

Student Loan Bills Paid By College

Here are some of the details on getting college to pay your student loan bills:

What is LRAP?

LRAP stands for Loan Repayment Assistance Program. The colleges that use this program provide a safety net for their students. If you graduate and can’t land a job, or can’t land a job that pays well, the LRAP steps in to make either partial or whole loan payments on your behalf.

It’s a surprisingly good deal.

How Does It Work for Students?

Here’s how it works for students.

First, you must go to a school that uses the Loan Repayment Assistance Program. (They pay a fee for it; more on that in a minute.) If your school doesn’t participate in LRAP then it won’t do you any good. This severely limits your school choices, but there are some surprising schools in the mix.

Next, you must graduate. No diploma, no support.

After that it depends on your income. If you earn a really low income — say, $20,000 — then the LRAP pays 100% of your student loans. If you earn a high income, the program doesn’t pay anything — and never will.

The area in between is a sliding scale. As your income rises from $20,000 to something higher, the amount of support you get goes down. You go from 100% of your payments being paid to a percentage of those bills.

If you start in the low income area, then rise above to where the bills are 100% your responsibility, but a few years later your income falls back into the area where LRAP would pay your bills… that’s too bad. Once your income escapes the repayment assistance area, you can’t go back.

Why Do Schools Use LRAP?

So why exactly do schools use LRAP?

Enrollment.

It’s all about higher enrollment and the revenue that comes from that. The tuition, room and board, and meal plans we talked about as a huge problem for students is a huge opportunity for schools.

Through guaranteeing some form of income protection for graduates the schools can market to students that might otherwise pass by without applying. If the student does enroll the school gets an immediate, guaranteed win: the student loan the student gets. The revenue comes to the school immediately and is the student’s responsibility in the future.

The school simply pays a fee — think of it as an insurance premium — to LRAP. LRAP manages the “claims” and the school sacrifices a slight income hit (the premium) in return for getting the remaining revenue stream.

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