To maximize LIPP eligibility we recommend all LIPP participants place their loans on a ten year repayment plan while they are receiving assistance. It is the responsibility of each participant to verify the repayment terms of their loans and make their required payments on a monthly basis. If participants find their loans are being repaid over a period of time greater than ten years we will cover expedited payments, so long as the expedited plan is not shorter than five years, does not end less than ten years from HLS graduation, and results in a total of 120 payments by the participant. These payments can only be covered if there is documentation of a higher required payment amount. LIPP assistance is provided to cover required loan payments; therefore, if loans are on a repayment term of greater than 10 years or if there is no payment due in a given month LIPP eligibility will be affected.
Additionally, LIPP assistance is solely and specifically intended to be used to repay eligible education loans. When applying or reapplying for LIPP, participants must document that their loans are in good standing which means the loan is in a current status with no past-due payments. LIPP assistance will not be offered for past-due loans or loans without a payment due such as loans that are in their grace period, forbearance or eligible for deferment; graduates will not receive assistance on a loan for which they have waived the grace period.
LIPP six-month amounts are calculated on a monthly basis to most accurately reflect any anticipated changes in income, monthly loan payment amounts, employment status and family size reported on the application for each LIPP cycle. The expectation is all participants will repay their loans on-time and on a monthly basis. Failure to do so may result in a reduction of the LIPP benefit or ineligibility for future assistance. There is no LIPP coverage for periods of unemployment.
LIPP does not process retroactive assistance. For instance, if you have a January payment due and you wait until February to apply or submit your supporting documents you will not be eligible for January assistance.
LIPP Adjustments
LIPP assistance is provided twice annually, with each cycle covering a participant’s expected eligibility for the upcoming six months. Participants must report changes in income, job, or other financial circumstances to the LIPP staff promptly by filling out an Adjustment Form in the SFS Self-Service Portal; LIPP amounts will be adjusted accordingly.
Example:
A LIPP participant received an initial LIPP amount for the January – June period based on the following information:
- Marital Status: Single with no dependents
- Gross Yearly Salary: $80,000
- Required Eligible Loan Payments: $1,945/month
Based on a gross salary of $80,000 the Participant Contribution (PC) is $233.33/month so the initial amount is calculated as follows:
- 6 months of loan payments ($11,670) – 6 months of PC ($1,400) = $10,270
- The participant then submits an adjustment application to report a salary increase to $90,000 ($566.67/month PC) effective March 1st; therefore, the original LIPP amount will be adjusted to account for two months of the lower salary and four months at the higher salary. The new LIPP eligibility is calculated as follows:
- 6 months of loan payments ($11,670) – 2 months lower PC ($466.66) – 4 months higher PC ($2,266.68) = $8,936.66
Since the new amount is less than the original, this participant would owe a balance of $1,333 (the difference between the two amounts). Participants can choose to pay the balance immediately, or if they will remain in a LIPP eligible position the balance can be taken out of the next cycle’s LIPP amount.
LIPP Disbursement
LIPP funds are disbursed directly to participants who must then manage their monthly loan payments. The type of disbursement and the taxability of it is dependent on the type of employment held by the participant. Please note, LIPP is based on need and does not require a commitment on the part of the participant to remain eligible for a certain amount of time, except in regard to clerkships.
LIPP One Year Loans and LIPP Clerkship Loans are distributed to participants as loans for tax purposes. For details please refer to the Taxability of LIPP section.
- LIPP One Year Loans: Participants who receive this type of disbursement are employed by public sector employers that have 501(c)(3) status. The funds are distributed as loans which are forgiven annually and repayment is only expected in cases where an overpayment of LIPP has occurred. (Because we process LIPP funds on a forward schedule, based on an estimate of what you will be earning, there are sometimes overpayments due to income increases or changes in employment during the LIPP period.)
- LIPP Clerkship Loans: Participants who receive Clerkship Loans are employed in either one or two-year clerkships. For those participants who take a LIPP-qualifying job after the clerkship, the LIPP assistance provided during the clerkship will be forgiven at the end of the first full year in the post-clerkship position. For those participants who choose to do a two-year clerkship, the second year of the clerkship LIPP assistance will be forgiven at the end of their second full year of post-clerkship participation in LIPP. LIPP Clerkship Loans are intended for participants who plan to pursue a LIPP eligible position after their clerkship. Those who do not secure an eligible position post-clerkship are required to repay the Clerkship Loan.
- LIPP Grant: Participants who receive LIPP Grants are self-employed, work at private sector agencies, work at public sector employers that do not have 501(c)(3) status or are employed by Harvard University. LIPP Grants include an additional 25% allowance that participants use to cover the tax liability of their LIPP disbursement. This type of LIPP assistance is not provided as a loan and repayment is only expected in cases where an overpayment has occurred.