MichiganState Loan Repayment Program Funding:

A basic understanding of how the Michigan SLRP is funded will help you also understand the different types of SLRP contracts, application periods and program policies.  The SLRP is funded through four basic sources:

1.       Federal Funds awarded by the Health Resource and Services Administration (HRSA);

2.       State Funds appropriated by the Michigan Legislature;

3.       Local Match Funds contributed by eligible health care providers' non-profit employers; and,

4.       CMH/DOC State Match Funds.

Employers at the types of facilities described above as practice sites for mental health workers may use funds received as part of their Community Mental Health (CMH) appropriations as their Local Match contributions to SLRP contracts for employees who are eligible mental health care providers. 

Department of Corrections (DOC) facilities that do not receive CMH funds may use funds received as part of their DOC allocations as their Local Match contributions to SLRP contracts for employees who are eligible mental health care providers. 

Since 1991, Michigan SLR Program has received a Federal Grant Award from the Health Resources and Services Administration (HRSA) through the National Health Services Corps.  During each of those years, the program has also received an appropriation from the Michigan Legislature.  The Federal Grant Award is typically larger than the State appropriation.  SLRP uses its entire State appropriation, along with an equal amount of its Federal Grant Award, to fund Competitive Contracts.  As a result, each Competitive Contract is funded with 50% Federal and 50% State dollars, requiring no local employer match. 

Because the amount of the Federal Grant Award typically exceeds the State appropriation, Federal funds remain available after all Competitive Contracts are awarded.  Michigan SLRP uses any Federal funds in excess of State funds to offer Local Match and CMH/DOC State Match Contracts to health care providers whose employers are willing to contribute 50% of the amount of their employees' SLRP contracts.  These Local Match Funds come from employers' budgets, including the Community Mental Health (CMH) and Department of Correction (DOC) appropriations from the State Legislature.    

Each year, the equal amount of Federal and State funding determines the amount available for Competitive Contracts, while the  difference between Federal and State funding determines the amount available for Local Match and CMH/DOC State Match Contracts.  SLRP managers strive to commit all funds appropriated for SLRP.

SLRP Contracts: 

All Federal SLRP funds must be equally matched with State or some other non-Federal funds.  Three types of SLRP Contracts meeting this requirement are available.  You may apply for only one type of contract during any application period.

Competitive Contracts:

Competitive Contracts are funded with 50% Federal and 50% State funds, and do not require a local employer match.  Because they require no employer local match, a large number of applicants typically compete for these contracts with the great majority awarded to Michigan's priority applicants.  Priority applicants are identified below in SLRP PROVIDER SELECTION CRITERIA.

Historically, about 25 to 30 priority applicants are awarded competitive contracts each year.  As described above in SLRP FUNDING, the number of Competitive Contracts awarded each year depends on the amounts of Federal Funds awarded and State funds appropriated.  If any of the 50% Federal/50% State pool of funds remains after all priority applicants have been awarded Competitive Contracts, eligible, non-mental health care, non-priority applicants, who have applied for Competitive Contracts will be selected for remaining Competitive Contracts based on the lowest, randomly-assigned lottery number.

Because priority applicants have preference in the selection process for Competitive Contracts, a much smaller number of non-priority applicants are awarded Competitive Contracts each year.  This points out the need for applicants seeking Competitive Contracts to consider employment at one of the SLRP Priority Practice Sites identified below in SLRP PROVIDER SELECTION CRITERIA.

Once a provider has completed the first year of their initial two-year Competitive Contract, they may apply to re-contract with SLRP for a third year.  Providers in good standing who are eligible to re-contract will only be denied an additional year of SLRP participation if State and/or Federal funds are not available.

Local Match Contracts: 

The second type of contract is the Local Match Contract.  Local Match Contracts are available to providers whose employer is willing to contribute 50% of the amount of their Local Match Contract.  Local match provided by an employer cannot be part of the salary or bonuses that a health care provider would normally receive as part of their compensation.  Local Match Contracts are typically sought by non-priority applicants.     

Employers who provide 50% of the initial two-year SLRP contract are encouraged, but not required, to provide 50% of the maximum contract amount for which a provider is eligible.  Primary-level providers, such as physicians and dentists, receive a maximum of $25,000 per year, while mid-level providers, such as nurse practitioners and physician assistants, receive $15,000 per year for the typical two-year contract. 

Once a provider has completed the first year of their initial two-year Local Match Contract, they may apply to re-contract with SLRP for a third year.  In such a case, the SLRP re-contract period will be funded with 50% Federal and 50% State  funds, eliminating the need for an employer local match contribution.  This means that employers who enter into a Local Match Contract will be able to retain a provider for three years with only a two-year local match investment.  Providers in good standing who are eligible to re-contract will only be denied an additional year of SLRP participation if State and/or Federal funds are not available.

CMH/DOC State Match Contracts:

The third type of contract is the CMH/DOC StateMatch Contract.  This type of contract targets the priority mental health care practice sites identified above that choose to use their State Community Mental Health (CMH) funds to provide the required matching dollars.  Department of Corrections facilities that do not receive CMH funds may use funds received as part of their DOC allocation from the State Legislature to contribute 50% of the amount of DOC Local Match Contracts for employees who are eligible mental health care providers.

Once a mental health care provider has completed the first year of their initial two-year CMH/DOC Local Match Contract, they may apply to re-contract with SLRP for a third year.  The employer must, however, contribute 50% of the amount of the contract for the third year.  Mental health care providers in good standing who are eligible to re-contract will only be denied an additional year of SLRP participation if Federal funds are not available.

SLRP Contract Provisions:

Following are some basic terms and provisions of the SLRP Contract.  Should your SLRP Application prove successful, you should carefully read your contract before signing it. 

Qualifying Educational Loans:

Only those loans incurred through professional training education (i.e., medical/dental school, graduate school, PA/NP/CNM programs, etc.) are eligible.  Qualifying educational loans are Government and commercial loans for actual costs paid for tuition related to the graduate education of the SLRP participant leading to a degree in the health profession in which the participant will satisfy their SLRP service obligation.

Undergraduate loans and professional training loans not related to graduate education leading to a degree in the health profession in which the participant will satisfy their SLRP service obligation are not eligible debts for this program. 

SLRP Payments:

SLRP providers are paid semiannually, beginning six months after the start date of their SLRP contracts.  Payments are made directly to health care providers, not to their lenders.  Providers must have their employers submit Employment Verification Forms to the SLRP Office each six months, before each of their semiannual SLRP payments will be approved.  Providers are contractually required to use all funds received through the SLRP to repay their loans for verified professional education. 

Tax Treatment of SLRP Payments/Information for Your Tax Professional:

SLRP funds disbursed on or after January 1, 2004 are exempt from gross income, employment, state, and local taxes.  All SLRP funds received prior to January 1, 2004 were subject for federal, state and local taxes, according to the tax laws existing at that time. 

On October 22, 2004 President Bush signed Public Law 108-357, which makes all NHSC Loan Repayment Program (LRP) and State Loan Repayment Program (SLRP) funds received on or after January 1, 2004 exempt from Gross income and employment taxes.   The law also excludes these funds from being taken into account as wages in determining benefits under the Social Security Act.  Thus, any NHSC LRP, or SLRP checks that you receive in the year 2004 and beyond are now exempt from federal taxation.  Furthermore, the State of Michigan has decided to also make these SLRP funds exempt from both State and Local taxes.

Contract Start Dates, Length and Re-contracting with SLRP:

Successful applicants from the April Application Period receive contracts starting on the following October 1^st.  Successful applicants from the November Application Period, when offered, receive contracts starting on the following April 1^st.

SLRP Provider contracts are written for an initial period of two years.  They are written as agreements between the MDCH and the health care provider for Competitive Contracts and between the MDCH, the health care provider and their employer for Local Match and CMH/DOC State Match Contracts. 

Once a provider has completed the first year of their initial two-year SLRP Contract, they may apply to re-contract with SLRP for a third year.  Providers in good standing who are eligible to re-contract will only be denied an additional year of SLRP participation if State and/or Federal funds are not available.  SLRP providers re-contracting with SLRP need to provide payment documentation from their lenders that clearly shows they have reduced their qualifying educational debt by at least the amount of payments received through the SLRP.  SLRP providers who fail to provide this documentation or other administrative requirements will not be allowed to re-contract with the program. 

Service Obligation:

Each health care provider entering into an initial contract or re-contracting with SLRP agrees to complete a service obligation that runs the length of their contract.  This is a legal responsibility and should not be taken lightly.  Health care providers should carefully read the contract before signing it.  Providers who do not complete their service obligations or fail to meet any of the contractual service requirements, face significant default provisions included in their contracts.

For a copy of the current SLRP contract, see: _________    

Providers not comfortable with their employers should not apply for SLRP.  They should wait six months to see if issues are resolved or find another employer before considering submitting a SLRP application.   

Default Provisions:

Severe federal penalties, mandated by the Federal State Loan Repayment Program Office, are imposed on health care providers for default of the SLRP contractual agreement.  Failure of the provider to meet any of the contractual service requirements will result in a provider penalty consisting of:

1)       The payback of any SLRP funds received through the program,

2)       A default penalty of $7,500 per month multiplied by the number of months of the entire contract (if less than one year has been served) or $7,500 multiplied by the number of months remaining in the contract (if the provider has served more than one year), and

3)       An additional $10,000 penalty if the defaulted contract is three or more years in length.