Students at the nation’s top-ranked non-profit business program will now have a better chance to enter the non-profit sector without the burden of debt.
The Yale School of Management will revamp its loan forgiveness program for graduates who go into non-profit work, a move that ends years of what many say is administrative neglect. A 14-year-old bastion of SOM’s not-for-profit management program, the school’s current loan forgiveness program is considered by many students to be complicated and inadequate. Under the new program, students will be able to receive grants tax-free, and the eligibility criteria for receiving funding will be adjusted for inflation yearly.
“We want to make sure that SOM students could now really use this, and that the funding formula is really realistic,” said Allison Gray SOM ’01, who worked closely with the administration last year on reforming the program. She was one of a small but determined band of SOM students who approached the financial aid office last winter to pressure for change.
Despite being the first scheme of its kind at any business school when it was introduced in 1987, SOM’s loan forgiveness program has since fallen into disrepair. Administrators were slow to respond to a federal law passed by Congress a few years ago that allows program participants to receive SOM loan forgiveness grants tax-free. The criteria determining eligibility for the program, such as starting income and debt, was not regularly adjusted for inflation and rising cost-of-living standards. Consequently, the maximum income threshold for the program was low even for non-profit work.
SOM’s program has been surpassed by similar plans at rival institutions, Gray said.
“If you took a fictional person, and you gave them a fictional amount of loan debt, and a certain amount of [not-for-profit] salary, and charted how this person would do coming out of Stanford, the University of Pennsylvania or Harvard, SOM’s program just looked so weak,” Gray said. “The funding formula was making people max out of their loan forgiveness at a pretty low level.”
But once approached by concerned students, the administration responded, SOM Dean of Student Affairs Patricia Pierce said.
“It was time to look at it, and we looked at it and made some adjustments,” Pierce said. “I think it represents a renewed commitment to non-profits.”
The new loan forgiveness program will be more like Yale Law School’s, which leads the country in law students who take not-for-profit jobs. The Law School’s Career Options Assistance Program funds 100 percent of the loan payments of those who earn less than $39,000 and benefits roughly 30 new graduates each year, Yale Law School Associate Director for Financial Aid Patricia Barnes said. The Law School’s program significantly influenced the SOM revisions, Gray said.
“[The Law School’s program] is simple and cut-and-dry and graduating students interested in a career in nonprofit can have a portion or all their student loans forgiven because of their contribution to society,” Gray said.
Under SOM’s revamped plan, a single person with no dependents with a non-profit income under $39,000 per year will be eligible to have all their loan payments forgiven — each year, SOM will present a grant covering that year’s loan payment. Students earning more than $39,000 per year can still have part of their loans forgiven, depending on the amount of their debt and their yearly income. A complex set of other factors will also effect the amount the School of Management will cover, including whether the graduate has a spouse, dependents and valuable assets.
“Basically, the only thing that will disqualify you now from the program is what type of job you have — if it’s non-profit or for-profit,” said Larry Chang SOM ’02, who with Gray and Seth Appel SOM ’01, played a major role in researching the loan forgiveness programs of other business schools. “If I’m making only a modest income, then essentially all of my debt payments will be taken care of by the school.”
In addition, the criteria for the program’s eligibility will be updated annually for inflation.
Chang and Tom Guiltinan SOM ’02 will meet with administrators to review the final scheme developed by the financial aid office sometime next month, and the new plan should be announced shortly thereafter.
With the recent extra focus on its for-profit initiatives, one question is whether SOM will actively publicize its new scheme to incoming students.
“In the past few years, while other big boys have been revising their loan forgiveness programs and advertising them and saying, ‘Hey, we care about non-profits,’ SOM hasn’t been,” Gray said.