Law School LRAPs and the College Cost Reduction and Access Act SALT Teaching Conference, 2010

1. Law School LRAPs and the College Cost Reduction and Access ActSALT Teaching Conference, 2010 Philip G. Schrag Delaney Family Professor of Public Interest Law, Georgetown University

2. Average Tuition, Private and Public Law Schools, 1985-2009

3. Cost of Attendance 2004-2009

4. Median Starting Salaries, Law Graduates, Class of 2010(NALP, 9/9/10)

5. Typical Legal Aid Lawyer With $100,000 Debt [average for 2010] @ 6.8%, 10 Year “Standard” Repayment • $41,750 salary • ~$34,000 after federal and state taxes • $13,812 loan repayment • $20,188 for everything else

6. Law School LRAP Programs: Percentage of $18.3 million spent by groups of law schools

7. Major variations among the 76 LRAPs as of 2008 • Average amount provided: from $600 to $26,978 per recipient (national average $7021) • 13 schools don’t cover prosecutors • 15 don’t cover other government service • 25 permit work at for-profit public interest firms • 20 provide taxable grants rather than making loans and forgiving them (non-taxable)

8. College Cost Reduction and Access Act (CCRAA) (2007)

9. CCRAA LRAP Benefits • Income based repayment for all federally guaranteed and federally extended student loans – payment capped at about 10% of gross income [15% of (AGI – 150% of poverty level)] • Starting for new borrowers in 2014: payment capped at 6 2/3% of gross income. • Forgiveness of remaining balances after 25 years, or after 120 months of public service (which need not be continuous) • Public service defined as ALL government or 501(c)(3) employment (30 or more hours/week) • Forgiveness is tax-exempt • This is an entitlement program – not subject to appropriations

10. Example: $100,000 debt @ 6.8%(Standard repayment would be $1151/month for 10 years)

11. Recommendation for Law Schools • Let CCRAA do most of the heavy lifting • Public interest graduates will have to pay only 10% of their incomes • So: LRAPs should pay most or all of that 10%, at least up to some income level • If LRAPs pay the 10%, public interest graduates go to law school for free!

12. But schools that create programs to supplement CCRAA have many decisions to make, including • What to do about graduates with only short-term public interest expectations? • Require or assume IBR to repay loans? • Coverage of clerkships, union jobs and UN jobs • Coverage of jobs that aren’t law related • Undergraduate debt • Periods of unemployment, illness, and parental leave • Thresholds, phase-outs, and their relationship to cost

13. The Law School Cost Calculator http://www.law.georgetown.edu/finaid/articles/index.html

14. Notes for law professors and deans • By now, all law school financial aid offices should be advising incoming law students about CCRAA (whether or not the school also has an LRAP). • For a law school that has an LRAP, coordinating with CCRAA can enable the school to provide more benefits with no cost increase (i.e., by reducing the annual benefit per student to 10% of the average salary of the eligible beneficiaries). • A law school that does not yet have an LRAP may now be able to afford one, because it need not reimburse the major part of a graduate’s loans. The program will be valuable even if it repays half – or even a quarter – of the graduate’s required IBR repayment (~10% of income) for up to ten years.

15. For More Information Philip G. Schrag and Charles Pruett, Coordinating Law School Loan Repayment Assistance Programs with New Federal Loan Repayment and Forgiveness Legislation, 60 J. of Legal Educ. __ (forthcoming, May, 2011) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1721031 SSRN Paper 1721031 Philip G. Schrag, “Federal Student Loan Repayment Assistance for Public Interest Lawyers and Other Employees of Governments and Nonprofit Organizations” 36 Hofstra Law Review 27 (2007)