Legal education can be the foundation for an outstanding career; however a law degree represents a major investment. The price of legal education and the reality of the legal employment market presents today’s law graduates with significant financial challenges extending many years post-graduation. Law graduates can successfully manage student debt and realize the promise of their educational investment, but they cannot do it without support from their law schools.
Law schools can help by increasing the availability of reliable student loan information and offering specific guidance geared toward the special needs of law students and graduates.
Why Students and Grads Need More Help
Nearly all of today’s law students finance their legal education with borrowed money, committing considerable future income to repaying student loans. Fortunately, federal student loan programs include flexible repayment options and forgiveness provisions. Unfortunately, these options are excessively complicated, difficult to understand, and cumbersome to access.
Most people, whether or not they are employed by a law school, are not well versed in the student loan issues facing law graduates. Graduates are frustrated by trying to navigate the existing system of student loan repayment. Typical student loan borrowers encounter tricky decisions with significant effects on long-term costs, complex income tax considerations, and burdensome annual reporting requirements.
Increased Costs, Higher Student Debt, Fewer Jobs, and Lower Salaries
Increased educational costs, lower salaries, and fewer legal jobs have reduced the “return on investment” of a law degree. A typical graduate of a public law school borrows $68,827 for law school and a graduate of a private law school borrows $106,249. Two-thirds of undergraduates graduate with debt, owing an average of $24,500 in loans for their undergraduate education.
Law school tuition increased 317 percent from 1989 to 2009, and continues to rise. In 2009, the most recent year for which data is available, in-state tuition at public law schools averaged $18,472. Private law school tuition averaged $35,743 per year. Indirect costs such as books, room, board, and health insurance (which range between $12,500 and $25,000 for the academic year depending on the law school attended), the annual stated “cost of attendance” at the most expensive law schools approaches $75,000.
The employment rate for the law Class of 2010 was the lowest since 1996. James Leipold, executive director of NALP (the Association of Legal Career Professionals), said, "We have been watching this market deteriorate for several years now, but even I was surprised to see that the percentage of graduates employed in a full-time job requiring bar passage had dropped to 64%.” Employment data show an unprecedented decline in the percentage of employed graduates who got their first job at a law firm. With the exception of large law firm salaries around $145,000 to $160,000, attorney starting salaries tend to cluster around the $40,000 to $65,000 range. A shift away from large law firm employment is reflected in lower average salaries; starting private practice salaries fell 20%. Government and public interest job median salaries remain stagnant--$52,000 for government jobs, and $42,900 for public interest jobs. More law graduates are working in one or more part-time or temporary jobs. Not including judicial clerkships, one in five jobs held by the Class of 2010 was temporary.
Trouble Paying Back Student Loans
The Institute for Higher Education Policy studied data on 8.7 million student loan borrowers and 27.5 million student loans, focusing on the 1.8 million borrowers who entered repayment in 2005. About 14% of the borrowers studied were graduate or professional students. The Institute for Higher Education Policy found that borrowers:
· Do not fully understand loan terms
· Are rarely familiar with all the repayment options
· Are often not aware of options that could have helped them manage their loans
Many more student loan borrowers are having difficulty repaying their student loans than is generally recognized. Student loan default rates only tell us so much. Deferment and forbearance allow borrowers to temporarily suspend repayment in times of financial stress and avoid delinquency and default. A borrower isn’t considered “delinquent” on his student loan until after his payment is 60 days late. A borrower faces “default” after another 270 days.
Although graduate and professional borrowers were less likely than other borrowers to have been delinquent or defaulted on their student loans, 42% of graduate and professional borrowers couldn’t manage to make timely payments without either postponing their payments, becoming delinquent, or defaulting on their student loans.
Of graduate and professional borrowers entering repayment in 2005:
· 19% faced delinquency or default
· 22% had to temporarily suspend their student loan payments using deferment or forbearance options
· Only 58% made timely payments without using deferment or forbearance options
Those who graduated with a degree fared better than those leaving school without attaining a degree: 68% of graduate and professional students who earned their degree were able to repay without delay but only 47% of those who left before attaining a degree did so.
Financial Aid Offices Have Their Hands Full Already
A borrower’s ability to deal with student loan repayment depends on getting good information. Unfortunately, students are getting less one-on-one assistance from their financial aid offices even as their financial aid professionals are working harder than ever.
In a recent National Association of Student Financial Aid Administrators’ survey, 90 percent of financial aid administrators report that they have fewer resources available to provide critical student services including student loan repayment counseling. Two in three financial aid administrators said their office was facing a “moderate” or “severe” resource shortage. Of those reporting shortages, nearly 90 percent said the shortage impacted their obligation to assist and counsel students. Approximately 80 percent of those facing shortages indicated that the shortages are not short term. A majority of survey respondents cited complex regulations and a greater compliance workload as a major cause of the resource shortage. Over the last decade, there has been a 40 percent increase (in word count) of the federal regulations governing the student aid programs, the National Association of Student Financial Aid Administrators’ reports.
Moving in the Right Direction
Awareness of the challenges facing student loan borrowers is growing within legal education. More and more law schools are committed to finding the resources needed to help their graduates understand and take advantage of the flexible student loan repayment options that are available.
Last year, the Law School Admission Council (LSAC) began offering seminars and one-on-one counseling opportunities about financial aid at each of their regional Law School Recruitment Forums.
An increasing number of law schools are working to deliver critically important support for their students and grads. The University of California, Hastings College of the Law instigated one-on-one student loan counseling. Washburn University School of Law has increased efforts to ensure that practical ways of reducing costs are communicated through a series of campus presentations. Michigan State University College of Law posted a Statement on Loan Indebtedness and undertook a faculty-led discussion on the topic of debt during the first week of classes.
Other initiatives include offering special assistance to students entering law school with high student loan debt, encouraging work-study opportunities, and subscribing to online financial literacy training modules.
Law school tuition and average borrowing data:
Undergraduate borrowing data:
Employment and salary data:
NALP (the Association of Legal Career Professionals).