Funding and Loan Repayment Agreements

This section will discuss funding for NLRP loan repayment agreements.  It will also describe the length of loan repayment agreements, how agreement amounts are determined, minimum agreement amounts and provide additional related information.  

NLRP funding: NLRP agreements are funded by state funds appropriated by the Michigan legislature. There is no employer contribution currently.

Participation in NLRP is contingent upon the availability of program funds at the time of contracting.  Applicants are asked not to call the NLRP Office to inquire about funding status.  Applicants will be notified as soon as information is available.

Loan repayment agreements: Nurses not employed by state psychiatric hospitals may participate in NLRP for up to 10 years and receive up to $300,000 in income-tax free funds to repay their eligible educational debt.  Nurses may not receive NLRP payments more than their total eligible debt.

Nurses employed by state psychiatric hospitals may participate in NLRP for up to four years and receive up to $300,000 in income-tax free funds to repay their eligible educational debt. Nurses may not receive NLRP payments more than their total eligible debt.

Length and amount of NLRP agreements: NLRP loan repayment agreements require two-year service obligations, which begin October 1 following each application period. Two-year loan repayment agreements will be determined by the calculation described below and applicants must have sufficient eligible debt to warrant an initial two-year, $20,000 loan repayment agreement to participate. Participants compete for each subsequent two-year loan repayment agreement during every other application period. After at least one two-year agreement, a participant’s final agreement may be for one year if there is insufficient debt remaining to support a minimum $20,000 two-year contract but may not be for less than $10,000. 

All initial agreements must be for two years. 

Nurses not employed by a state psychiatric hospital: Initial two-year agreement amounts are determined by dividing the amount of nurses’ eligible debt, up to the $300,000 maximum, by their 10 years of eligible program participation and multiplying by two. Eligible debt will be determined by loan information provided on applicants’ Nurse Application, Part B forms. 

Example: For a new participant, not employed by a state psychiatric hospital, with $140,000 eligible debt, divide $140,000 by 10 years of eligible participation and multiply by two years for a $28,000 initial two-year agreement.

($140,000/10 years = $14,000 per year) x 2 years = $28,000.

Nurses employed by a state psychiatric hospital: Initial two-year agreement amounts are determined by dividing the amount of nurses’ eligible debt, up to the $300,000 maximum, by their four years of eligible program participation and multiplying by two. Eligible debt will be determined by loan information provided on applicants’ Nurse Application, Part B forms. 

Example: For a new participant, employed by a state psychiatric hospital, with $140,000 eligible debt, divide $140,000 by four years of eligible participation and multiply by two years for a $70,000 initial two-year agreement.

($140,000/4 years = $35,000 per year) x 2 years = $70,000.

Odd dollar amounts derived in this manner will be rounded up or down to the nearest $1,000 amount for administrative simplicity.  If an applicant has at least $20,000 of eligible debt and the two-year agreement amount calculated as describe above is less than $20,000, the nurse will receive, if awarded, the minimum $20,000 two-year agreement. 

Agreement amounts for those reapplying to NLRP: Participants will compete for each subsequent two-year loan repayment agreement during every other application period. The amount of subsequent two-year agreements will be determined by dividing the lessor of the participant’s remaining Maximum Total Payments or current eligible debt by their remaining years of participation. Current Eligible Debt/Remaining Years of Participation  X Two Years = New Two-Year Agreement Amount

Example: In the first previous example, the same participant reapplies in two years and is awarded. They received $28,000 under their initial agreement, which reduces their Maximum Total Payments from $300,000 to $272,000 ($300,000 original maximum - $28,000 received during first two-year agreement).  

During those two years, the participant paid down $28,000 of eligible debt and accrued $10,000 additional interest for remaining eligible debt of $112,000 ($140,000 - $28,000 NLRP payments = $112,000 + $10,000 interest = $122,000). Since remaining eligible debt of $122,000 is less than the $272,000 remaining Maximum Total Payments, the $122,000 remaining debt must be used in the numerator of the calculation.  The $122,000 of remaining eligible debt will be divided by their eight years of remaining participation (ten years – two years) and multiplied by two years to determine their next two-year agreement amount of $30,500, which is rounded up to $31,000

($122,000/8 years = 15,250 per year) X 2 years = 30,500 ~ $31,000.

This process will continue each time an applicant is awarded a new NLRP loan repayment agreement until they have either completed ten years of participation or have less than $10,000 of remaining eligible debt. Similarly, the participant who works for a state psychiatric hospital would have their remaining eligible debt become their award amount.

Loan repayment agreement-related topics: Before applying to the program, nurses must understand the NLRP service obligation, default provisions, qualifying educational loans, loan repayment documentation, NLRP payments and their tax treatment. They will also need to carefully read the current NLRP Opportunity Announcement, the entire website and all application forms to compete successfully in the application process.

NLRP service obligation: Nurses awarded NLRP agreements enter service obligations that correspond to the start and end dates of their loan repayment agreements. NLRP service obligations are legal responsibilities that should not be taken lightly. Nurses should carefully read their NLRP agreements before signing them and understand that participants who do not complete their service obligations face default penalties. Nurses not comfortable with their employers should not apply. They should wait until the following application period to see if issues are resolved or find another employer before submitting an NLRP application.  

Default provisions: State penalties, mandated by state legislature, will be imposed on health care nurses who default on NLRP agreements. Upon breach of the NLRP agreement by not completing their service obligations, and in addition to forfeiting the right to any future NLRP payments, they will owe the department an amount equal to the sum of the funds they have been awarded.

Qualifying educational loans: Only loans incurred through professional education (i.e., nursing programs and degrees that lead to the certification and active nursing license.) 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 nursing professions in which participants will satisfy their NLRP service obligations. Undergraduate and professional education loans not related to degrees in which participants will satisfy their NLRP service obligations are not eligible debts for this program. 

Loan repayment documentation requirement: When reapplying to the NLRP (or if you have participated in another state loan repayment program), applicants must provide Loan Repayment Documentation (LRD) to show they have paid down the loans listed on their Nurse Application Part B forms by an amount at least equal to the amount they have received from NLRP. For details on LRD, go to the Participant Information and Requirements section of this website. 

NLRP payments: Nurses complete 12 months of their service obligation beginning with the October 1 start date of their NLRP agreements and then initiate their first 12-month payment. Nurses initiate their 12-month payment cycles each September 1 during their participation in the program by submitting their properly dated Work Verification Forms (WVFs) to their employers. Twelve-month payments are made directly to nurses, not to their lenders, and nurses 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.

Nurses must forward their WVF to their employers at the beginning of each September. Employers must verify their nurses have worked 40 hours per week over the past 12 months and submit the documents to NLRP office staff, Juliette Rousseau at RousseauJ@Michigan.gov. For nurses who work for an approved School of Nursing, their employer must submit the WVF confirming their full-time status for the last 12 months and submit that WVF to NLRP office staff at RousseauJ@Michigan.gov. Detailed instructions are included on each WVF. The NLRP Office must receive signed WVFs before participants can be paid. For details on NLRP payments, go to the Participant Information and Requirements section of this website. 

Tax treatment of NLRP payments/information for your tax professional: NLRP funds disbursed are exempt from gross income, employment, state and local taxes. 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 considered as wages in determining benefits under the Social Security Act. Thus, any NLRP payments received are exempt from federal taxation. Furthermore, the state of Michigan has made NLRP payments exempt from both state and local taxes.

Back to Main Page