Michigan State Loan Repayment Program Funding:
Michigan SLRP (MSLRP) agreements are funded by a federal/state/local partnership:
1. Federal Funds awarded by the Health Resources and Services Administration (HRSA);
2. State Funds appropriated by the Michigan Legislature; and
3. Local Funds from employer contributions toward MSLRP agreements awarded to their healthcare providers. Per federal program guidelines, employer contributions must consist entirely of non-federal funds.
The percentage of each of these three funding sources used to fund MSLRP agreements may vary depending upon the availability of state and federal dollars and on the expected volume of MSLRP applicants. You will find the MSLRP agreement percentages for each of these funding sources for the current application period in the ‘MSLRP Opportunity Update' at the beginning of this website. This includes the required employer contribution for loan repayment agreements resulting from the current application period.
Partnering with Local Foundations to Recruit and Retain Primary Care Providers:
Most employers make their required MSLRP contributions from their operating funds. Employers may, however, want to consider partnering with local community and corporate foundations to offer loan repayment to help recruit and retain primary care providers. Foundations supporting employer contributions leverage their contributions through the use of state and federal funding. Employers can contact their local community foundation about joining forces to recruit or retain needed primary care providers for their communities by:
- http://www.forgoodforever.org/Default.htm to enter the Michigan Community Foundations website,
- Clicking on the button labeled ‘Find Your Local Community Foundation', then
- Clicking their county on the map provided.
Providers may want to encourage their employers to contact foundations regarding partnering to offer loan repayment, but should refrain from contacting foundations directly.
Employers and foundations who have questions about partnering to provide tax-free loan repayment may call Linda Tarjeft, Michigan Area Health Education Center (MI-AHEC), at (313) 577-5161. The MI-AHEC can provide additional information on assistance available through your Regional MI-AHEC Office and local corporate foundations and can schedule a conference call among employers, foundations, and the Michigan State Loan Repayment Program.
Length and Amounts:
Initial MSLRP agreements are for two years. Participants may, however, receive loan repayment for a total of up to four years. Participants awarded initial two-year agreements may reapply for an additional one or two years of loan repayment.
Because employers are required to make contributions toward MSLRP agreements, providers and employers must discuss the amount of the agreement before applying. For mid-level providers, such as physician assistants and nurse practitioners, contract amounts may range from the traditional $15,000 up to a maximum of $35,000 per year. For primary providers, such as physicians and dentists, annual contract amounts may range from the traditional $25,000 up to a maximum of $35,000 per year.
Qualifying Educational Loans:
Only loans incurred through professional education (i.e., medical/dental school, graduate school, PA/NP/CNM programs, etc.) and relevant undergraduate training are eligible. Qualifying educational loans are government and commercial loans for costs related to the undergraduate and graduate education leading to degrees in health professions in which participants will satisfy their MSLRP service obligations.
Undergraduate and professional education loans not related to degrees in which participants will satisfy their MSLRP service obligations are not eligible debts for this program.
MSLRP providers are paid semiannually, beginning with the first payment cycle that occurs at least six months after the start date of their MSLRP agreements. Payment cycles occur every April and October during the term of providers' agreements. Six-month payments are made directly to healthcare providers, not to their lenders, and providers are required to pay down their eligible loans by an amount at least equal to the payments they receive within a reasonable amount of time.
Providers must forward their Work Verification Forms to their employers during the month preceding each of their six-month payment cycles. Employers must verify their providers have worked 40 hours per week over the past six months, attach their employer contribution checks, and submit the documents to the Michigan Department of Community Health. Detailed instructions are included on each Work Verification Form. The Department must receive signed Work Verification Forms and employer contributions before participants can be paid.
Tax Treatment of SLRP Payments/Information for Your Tax Professional:
MSLRP funds disbursed on or after January 1, 2004 are exempt from gross income, employment, state, and local taxes. All MSLRP funds received prior to January 1, 2004 were subject to 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 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 MSLRP payments received during or after 2004 are exempt from federal taxation. Furthermore, the state of Michigan has made MSLRP payments exempt from both state and local taxes.
Healthcare providers awarded MSLRP agreements enter into service obligations that correspond to the begin and end dates of their loan repayment agreements. MSLRP service obligations are legal responsibilities that should not be taken lightly. Healthcare providers should carefully read their MSLRP agreements before signing them and understand that participants who do not complete their service obligations, or fail to meet any of their service requirements, face significant default penalties. With this in mind, providers not comfortable with their employers should not apply for MSLRP. They should wait at least six months to see if issues are resolved or find another employer before considering submitting an MSLRP application.
Severe federal penalties, mandated by the Health Resource and Services Administration (HRSA), will be imposed on healthcare providers who default on MSLRP agreements. Upon breach of the MSLRP agreement for any reason, and in addition to forfeiting the right to any future MSLRP payments, they will owe the Department an amount equal to the sum of the following:
- The total of the amounts paid by the Department to the participant for loan repayment for any period of obligated service not served; and,
- An amount equal to the number of months of obligated service not completed, multiplied by $7,500; except that,
- The amount the Department is entitled to recover shall not be less than $31,000.