Lifting the Burden: Law Student Debt as a Barrier to Public Service

disliked the twenty-five year repayment term because the term was simply too long insome absolute sense, a strong majority responded that they were averse simplybecause they could not bring themselves to sign up for a twenty-five year term. 70Additionally, the study showed that many law school financial aid advisors discouragestudents from using the program, in part because they believe that twenty-five yearsis too long of an amortization period for graduates. 71 Financial aid advisors alsothought that few graduates would remain in the income-contingent repayment optionlong enough to obtain forgiveness and, even though the program is revocable, fearedthat graduates would pay too much compared to the standard repayment option. 72Shortening the forgiveness period to 15 years or less for those graduates whospend a specified period in public service would help the income-contingentrepayment option meet its goal: ensuring that debt not foreclose community serviceorientedcareer choices for young graduates. The Commission is not suggesting howmany years of public service should be required. However, in order to focus thebenefits on those who choose public service as a career, and to keep the cost of theproposal manageable, a minimum period of at least five years may be necessary.For graduates who are married or may plan to marry, an additional obstacle exists.For married borrowers, the income-contingent repayment formula combines theincome of both spouses for purposes of determining the monthly repaymentobligation. By attributing the income of both spouses to the borrower, the programeffectively imposes a “marriage penalty” for married two-income, one-debt couples.Although the Commission does not recommend one specific solution to this problem,it is easily remedied. For example, the income-contingent repayment option formulacould include only the borrower’s own income, or it could include one-half of thecombined income of the borrower and the spouse.The Secretary of the Department of Education has the authority to effectuatethrough regulatory amendment the improvements to the income-contingentrepayment option that the Commission recommends. Although such action is anoption, the Secretary of the Department of Education has not undertaken theseinitiatives. Currently, these issues are subsumed within the reauthorization of theHigher Education Act. Suggested statutory language to implement this policyproposal is attached as Appendix 4.Congress and/or the U.S. Department of Education should increase to at least $30,000the amount a law student may borrow annually in unsubsidized loans under theStafford Loan Program. This amount should be reviewed periodically thereafter and,at a minimum, adjusted for inflation and rising costs of higher education.A key factor contributing to the large debt burdens facing students today is the$18,500 cap ($8,500 subsidized, $10,000 unsubsidized) on the amount that graduateand professional students may borrow annually under the Stafford Loan Program.This amount is simply not sufficient to meet the borrowing needs of many students.For example, the average private law school tuition in 2002 was $24,144, while theaverage annual public law school tuition was $9,376 for residents and $18,131 fornon-residents. 73 These amounts do not include living expenses or incidentals suchas books and supplies. Therefore, most law students must also borrow from privatelenders at much higher interest rates, increasing their total debt burden.Through 1992, Congress regularly increased the amount of Stafford loan fundsthat graduate and professional students could borrow annually at low interest rates.39Federal70Id. at 792.71Id. at 793-803.72Id. at 801.732002 Annual Questionnaire, ABA Section of Legal Education and Admissions to the Bar.