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

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$En Estados Unidos: la regresiÃ³n Del igualitarismo a la fractura social$

A recent Office of Personnel Management Report found that “[t]he student loanrepayment authority is a valuable tool that enables agencies to entice potentialcandidates into Federal service and keep talented employees in the Federalworkforce.” 87 The Report stated that the federal agencies identified lack of fundingfor the loan repayment program as the most common barrier to using the student loanrepayment incentive effectively. 88 The agencies recommended several changes in theFederal student loan repayment program, such as eliminating the tax liability toemployees, reducing the statutory three-year service requirement in exchange forstudent loan repayment, and increasing the annual payment limitation and thelifetime maximum payment limitation on student loan repayment. 89 One Federalofficial noted that although the General Accounting Office offered student loanrepayments to 187 employees, nearly 10% rejected the offer due in part, to theadditional tax burden that results from accepting the loan repayment. 90Making the student loan repayment benefit tax-free will greatly increase itsincentive potential. Furthermore, the ABA should support legislative efforts to reviewthe annual and aggregate caps so that they keep pace with rising educational costs.45Congress should amend the Internal Revenue Code to allow a full deduction forinterest paid on student loans obtained for the purpose of attending an institutionof post-secondary education.Borrowers who paid interest on a student loan may be able to deduct up to $2,500of the interest paid. This deduction is taken as an adjustment to income, so aborrower can claim it even if she does not itemize deductions. The amount of aborrower’s deduction depends upon his income level. If an individual’s modifiedadjusted gross income exceeds $65,000 (or $130,000 for a borrower filing a jointreturn), she may not take a student loan interest deduction.Congress should amend the Internal Revenue Code to allow a full deduction forinterest paid on student loans obtained for attending an institution of post-secondaryeducation, such as law school. With the cost of law school tuition rising, law studentsare borrowing more funds to finance their legal educations. With many law studentsborrowing $80,000 or more in loans, graduates are faced with monthly loan obligationsin excess of $1,000 (this figure may not include loans assumed to finance undergraduateand/or other graduate education). Especially in the years immediately followinggraduation, law students may pay in excess of $10,000 of interest on law school loans.By restoring the full deductibility of student interest loan payments, Congresscould help borrowers reduce the actual cost of repaying money borrowed for lawschool. This restoration will provide a strong incentive for law graduates to acceptlower-paying public service jobs by reducing their taxable income.No legislation to restore the full deduction is pending. However, on March 18,2003, Representative Miller (D-CA) introduced H.R. 1304, which proposes to changethe current student loan tax deduction benefit to a tax credit, which will deliver alarger rebate on the interest paid on student loans to borrowers than is affordedunder current law.Federal87OPM Report to Congress on the Federal Student Loan Repayment Program, supra note 45, 7.88Id. at 6.89Id. at 6.90Quote attributed to David Walker, Comptroller General, in “Few Agencies Repay Student Loan to Keep, HireStaff,” Federal Times, November 11, 2002.
Federal46The Legal Services Corporation should make loan repayment assistance andforgiveness a priority, by such means as promoting these programs to itsgrantees and/or exploring the creation of a loan repayment assistance programfor its grantees.The Legal Services Corporation (LSC) is a private, non-profit corporationestablished by Congress to seek to ensure equal access to justice under the lawfor all Americans by providing civil legal assistance to those who otherwisewould be unable to afford it. LSC was created in 1974 with bipartisan congressionalsponsorship and the support of the Nixon administration, and is fundedthrough congressional appropriation.An 11-member Board of Directors appointed by the President and confirmed bythe Senate heads LSC. By law, the Board is bipartisan: no more than six membersmay be of the same political party. LSC does not provide legal services directly.Rather, it provides grants to independent local programs selected through asystem of competition. In 2003, LSC funded 161 local programs. Together theyserve every county and congressional district in the nation, as well as the U.S.territories. Special service areas also address the distinctive needs of NativeAmericans and migrant farm workers.Recognizing that high student debt burdens make it impossible for talentedlawyers, especially those who come from less privileged backgrounds, to accept orremain in legal services staff positions, some LSC-grantees have created their ownLRAPs. Community Legal Services in Phoenix, AZ, is one such program. According toCommunity Legal Services’ Executive Director, Lillian Johnson, “Community LegalServices established its own loan repayment assistance program in 1997 in responseto the more than 35% turnover rate among its newly hired staff attorneys. As a resultof the loan repayment assistance program, staff morale among attorneys improvedand CLS’ ability to attract a more diverse attorney applicant pool was enhanced.”LSC should take a leadership role to encourage and support its grantees’efforts to establish LRAPs for its staff attorneys and to work with other entities,such as law schools, statewide Access to Justice Commissions and other LRAPadvocates, to establish statewide LRAPs. While LSC-grantee-sponsored programshave met with success, they are limited in scope and due to a lack of adequatefunding, unable to provide assistance to all lawyers on staff in need ofassistance. Also, under current law, LRAP benefits given by LSC-grantees to theiremployees is taxable income to the recipients.Therefore, LSC should explore creating a LRAP for its grantees and/or exploreother options, such as examining the cost of developing a LRAP program inpartnership with LSC recipients, law schools and national and state partners. LSCcan and should play a leadership role in supporting its grantees’ efforts to recruit andretain a talented workforce to benefit their communities by serving the legal needsof the poor.
Page 3 and 4: Copyright © 2003 American Bar Asso
Page 6: Table of ContentsTable Of ContentsP
Page 10 and 11: Executive Summary9THE PROBLEM: EDUC
Page 12 and 13: 4 ( ) () () (GDP
Page 14 and 15: • In addition to creating law sch
Page 16: y the rest of the members of the ba
Page 20 and 21: position - should also help make cl
Page 22 and 23: one with the lowest total payments
Page 24 and 25: Ms. Median Takes the Job with the P
Page 26 and 27: TABLE 5Starting Salaries of New Law
Page 28 and 29: As the size of educational debts ri
Page 30 and 31: monthly debt obligations. Public se
Page 32 and 33: law graduate debts. Since August 20
Page 34 and 35: Federal 33OVERVIEW OF FEDERAL LOAN
Page 36 and 37: assistance to lawyers, including th
Page 38 and 39: Education Loan Program. When Senato
Page 40 and 41: disliked the twenty-five year repay
Page 42 and 43: A number of bills expanding or init
Page 44 and 45: Congress should amend Section 125 o
Page 48 and 49: Law Schools47OVERVIEW OF LAW SCHOOL
Page 50 and 51: strong recruiting tool. Pre-law stu
Page 52 and 53: encourage them to keep borrowing to
Page 54 and 55: programs, sample LRAP legislation w
Page 56 and 57: Conclusion55The Commission was char
Page 58 and 59: ABA Policy• Developed policy pert
Page 60 and 61: APPENDIX 3AMERICAN BAR ASSOCIATION

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

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