A small group of colleges are now offering to pay student loan bills through a program referred to as the loan repayment assistance program. Many law schools have been practicing this for over a decade to new law graduates pursuing a career in public service. Recently, some private colleges are now applying the same offer for any undergraduate major.
What’s the catch? The program charges schools an annual fee for each student registered in the program. In order to receive payments from the program, the graduate must fall below a predefined income based on the salaries of recent graduates and regional factors. From there, the payments are based on a sliding scale in proportion to the graduate’s income. Not only does the student have to meet these requirements to be eligible for the assistance, there are additional requirements in order to continue receiving payments. The student must graduate and work at least 30 hours per week. Once the income threshold is broken, the student will no longer receive assistance even if their income dips below the threshold again in the future. Finally, the assistance is considered taxable income, causing a student to have a high tax payment.
Of course this action taken by schools is not completely selfless. It’s a big draw for smaller schools that need to boost their enrollment. How do you know if this deal will benefit you? It’s hard to say. When deciding between multiple schools, be sure to inquire about programs like these and find out what you have to do to be considered as well as other options such as in-state tuition and merit scholarships. Try to avoid making a decision relying solely on the repayment assistance program. While it would be nice to know that your payments are covered upon graduation, it is not a guarantee. What if you are above the threshold by one dollar? What if the school quits participating in the program by the time you graduate? It is important to take measures to minimize your student loan debt so that, if your income rises above the threshold, you do not have as large of a burden to face.