Housing Assistance Program Forgivable Loans

Information about the Housing Assistance Program (HAP2) Forgivable Loans

Information about HAP2 Program as of effective July 1, 2014. Forgivable loans as of May 15, 2014

Eligibility

Eligibility is limited to tenured faculty members (Morningside campus only, excluding the Law School) seeking to purchase and/or renovate a primary residence within commuting distance of the University.
Faculty must be recommended by their dean to participate in the program.
All loans under the Program are subject to the approval of the Provost and University’s Chief Financial Officer.

Details

Only available for the purchase and/or renovation of a primary residence within commuting distance of the University
Term of loan is up to ten years
Principal is forgiven in equal annual installments over the loan term
Interest on forgiven principal will be forgiven annually, concurrent with the principal forgiveness
Interest rate for ten-year loans is based on the long-term annual Applicable Federal Rate (AFR) at the time the loan is made, as published by the IRS
For loans with terms of more than three and up to nine years, interest rate is based on the medium-term annual AFR
Rates are increased each year to account for interest on accrued interest amounts outstanding for longer than one year
Forgiven principal and interest are taxable as income and subject to appropriate withholding
Faculty may select to have withholding on forgiven amounts spread over several paychecks (up to six months) provided that all withholding occurs within the calendar year during which amounts are forgiven
Outstanding principal and accrued interest need to be repaid in the event of termination of full-time affiliation with the University (including by reason of retirement, voluntary or involuntary termination or death), within six months of termination
Upon receipt of an offer of a forgivable loan, faculty have two years to draw on the loan, after which the offer expires
Faculty must provide the University with documentation of a purchase or renovation within 364 days of drawing the funds, otherwise the entire principal amount and accrued interest will be due; there will be no forgiveness

Notes

Faculty are encouraged to consult with their own tax and financial advisors
This sheet summarizes the general terms of the Program; specific terms are governed by the individual loan documents

Forgivable Loan Examples

Assumptions: Long-term annual AFR: 3.36% (All dollars in thousands)

Example 1: Assume $100,000 loan for 10 years

Year: 1
Beginning Balance Outstanding: $100,000
Effective Rate (%): 3.36%
Principal Forgiven: $10,000
Interest Forgiven: 0.3 %
Total Forgiven = Imputed Income: $10,300
Estimated Withholding @ 46.52%*: $4,800

Year: 2
Beginning Balance Outstanding: $90,000
Effective Rate (%): 3.42%
Principal Forgiven: $10,000
Interest Forgiven: 0.7 %
Total Forgiven = Imputed Income: $10,700
Estimated Withholding @ 46.52%*: $5,000

Year: 3
Beginning Balance Outstanding: $80,000
Effective Rate (%): 3.47%
Principal Forgiven: $10,000
Interest Forgiven: 1.0 %
Total Forgiven = Imputed Income: $11,000
Estimated Withholding @ 46.52%*: $5,100

Year: 4
Beginning Balance Outstanding: $70,000
Effective Rate (%): 3.53%
Principal Forgiven: $10,000
Interest Forgiven: 1.4 %
Total Forgiven = Imputed Income: $11,400
Estimated Withholding @ 46.52%*: $5,300

Year: 5
Beginning Balance Outstanding: $60,000
Effective Rate (%): 3.59%
Principal Forgiven: $10,000
Interest Forgiven: 1.8 %
Total Forgiven = Imputed Income: $11,800
Estimated Withholding @ 46.52%*: $5,500

Year: 6
Beginning Balance Outstanding: $50,000
Effective Rate (%): 3.66%
Principal Forgiven: $10,000
Interest Forgiven: 2.2 %
Total Forgiven = Imputed Income: $12,200
Estimated Withholding @ 46.52%*: $5,700

Year: 7
Beginning Balance Outstanding: $40,000
Effective Rate (%): 3.72%
Principal Forgiven: $10,000
Interest Forgiven: 2.6 %
Total Forgiven = Imputed Income: $12,600
Estimated Withholding @ 46.52%*: $5,900

Year: 8
Beginning Balance Outstanding: $30,000
Effective Rate (%): 3.78%
Principal Forgiven: $10,000
Interest Forgiven: 3.0 %
Total Forgiven = Imputed Income: $13,000
Estimated Withholding @ 46.52%*: $6,100

Year: 9
Beginning Balance Outstanding: $20,000
Effective Rate (%): 3.85%
Principal Forgiven: $10,000
Interest Forgiven: 3.5 %
Total Forgiven = Imputed Income: $13,500
Estimated Withholding @ 46.52%*: $6,300

Year: 10
Beginning Balance Outstanding: $10,000
Effective Rate (%): 3.92%
Principal Forgiven: $10,000
Interest Forgiven: 3.9 %
Total Forgiven = Imputed Income: $13,900
Estimated Withholding @ 46.52%*: $6,500

*46.52% is proxy for flat rate withholding including federal, state, city, Medicare and FICA; individual withholding might be different.

Year: 1
Beginning Balance Outstanding: $300,000
Effective Rate (%): 3.36%
Principal Forgiven: $30,000
Interest Forgiven: 1.0 %
Total Forgiven = Imputed Income: $31,000
Estimated Withholding @ 46.52%*: $14,400

Year: 2
Beginning Balance Outstanding: $270,000
Effective Rate (%): 3.42%
Principal Forgiven: $30,000
Interest Forgiven: 2.0 %
Total Forgiven = Imputed Income: $32,000
Estimated Withholding @ 46.52%*: $14,900

Year: 3
Beginning Balance Outstanding: $240,000
Effective Rate (%): 3.47%
Principal Forgiven: $30,000
Interest Forgiven: 3.1 %
Total Forgiven = Imputed Income: $33,100
Estimated Withholding @ 46.52%*: $15,400

Year: 4
Beginning Balance Outstanding: $210,000
Effective Rate (%): 3.53%
Principal Forgiven: $30,000
Interest Forgiven: 4.2 %
Total Forgiven = Imputed Income: $34,200
Estimated Withholding @ 46.52%*: $15,900

Year: 5
Beginning Balance Outstanding: $180,000
Effective Rate (%): 3.59%
Principal Forgiven: $30,000
Interest Forgiven: 5.4 %
Total Forgiven = Imputed Income: $35,400
Estimated Withholding @ 46.52%*: $16,500

Year: 6
Beginning Balance Outstanding: $150,000
Effective Rate (%): 3.66%
Principal Forgiven: $30,000
Interest Forgiven: 6.6 %
Total Forgiven = Imputed Income: $36,600
Estimated Withholding @ 46.52%*: $17,000

Year: 7
Beginning Balance Outstanding: $120,000
Effective Rate (%): 3.72%
Principal Forgiven: $30,000
Interest Forgiven: 7.8 %
Total Forgiven = Imputed Income: $37,800
Estimated Withholding @ 46.52%*: $17,600

Year: 8
Beginning Balance Outstanding: $90,000
Effective Rate (%): 3.78%
Principal Forgiven: $30,000
Interest Forgiven: 9.1 %
Total Forgiven = Imputed Income: $39,100
Estimated Withholding @ 46.52%*: $18,200

Year: 9
Beginning Balance Outstanding: $60,000
Effective Rate (%): 3.85%
Principal Forgiven: $30,000
Interest Forgiven: 10.4 %
Total Forgiven = Imputed Income: $40,400
Estimated Withholding @ 46.52%*: $18,800

Year: 10
Beginning Balance Outstanding: $30,000
Effective Rate (%): 3.92%
Principal Forgiven: $30,000
Interest Forgiven: 11.7 %
Total Forgiven = Imputed Income: $41,700
Estimated Withholding @ 46.52%*: $19,400

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