Assets are considered in determining the amount of a LIPP subsidy for which a participant is eligible. Graduates will receive an asset protection allowance of $10,000 at graduation, with an additional $8,000 for each subsequent year employed, and $8,000 for each full year employed between college and law school. For married participants, the protected asset amount is doubled since the spouse’s assets are also considered. In addition we protect 50% of the vested retirement value reported by participants. The total allowance is then subtracted from the total amount of assets, resulting in an amount of unprotected assets. A declining percentage (from 100% for 0 years out to 0% for 10 years out) is applied to the unprotected amount. This result is then divided by the outstanding loan debt amount, resulting in a percentage. The LIPP subsidy is reduced by that percentage.
Single participant has been out of school for 3 years and worked 1 year between college and law school. Total assets are $50,000, total outstanding debt is $100,000. Calculated award without asset adjustment $5,000.
- Protected Assets: $10,000+3*$8,000+1*$8,000=$42,000
- Unprotected Assets: $50,000-$42,000=$8,000
- Adjusted Unprotected Assets: $8,000*0.70=$5,600
- Award Reduction Percentage: $5,600/$100,000=5.6%
- Adjusted LIPP Award: $5,000*(1-0.056)=$4,720
For LIPP purposes, assets are defined as cash and savings, investment equity, home equity, and retirement savings such as 401(k), 403(b), and IRA plans. Updated asset information is collected for each LIPP application cycle.
LIPP and Mortgages
LIPP participants often contact our office with concerns about qualifying for a mortgage. Their primary worry is that they will have difficulty getting approved for a mortgage because of their high monthly education loan payments. We are more than happy to send a letter on behalf of participants outlining the parameters of the LIPP program and detailing the loan repayment assistance we provide. We have sent these letters for many participants, and to our knowledge the vast majority of these participants have not encountered any issues securing mortgages.