Thursday, December 14, 2017
Cassandra Burke Robertson (Case Western), A Looming Asteroid for Law Schools:
My last post focused on proposed aggregate debt caps for federal loans. But as a recent article from Inside Higher Ed points out, a more immediate problem for educational institutions and their students may be the Prosper Act's proposed annual lending limits. The bill would limit federal loans for non-medical graduate and professional students to $28,500 per academic year.
Again, debt caps are not unprecedented — federal loans were capped until the GradPlus program was created in 2006. But so much has changed since 2006 that re-instituting federal lending caps would create chaos in law school finance. ...
If it passes (which it has a decent chance of doing--it is the House's version of the Higher Education Act reauthorization bill) there would be an immediate crisis in funding law school — after all, the federal loans would barely cover the cost of living (and at schools in high-cost areas, wouldn't even be enough to cover the cost of living). There would be little to nothing left over to cover tuition. Certainly, some students could rely on family contributions, and some may be able to lessen living expenses by living at home while attending law schools. But not all families are in a position to help, and the legal profession would suffer greatly if only the very privileged could join. Private loans may step in to fill some of the gap — though again, I suspect that the availability of such loans would be significantly more restricted than the current open-door policy of GradPlus. And in any case, private loans have decreased so much (declining by more than half) in the years after the introduction of GradPlus that I doubt private lenders could ramp up fast enough to avoid massive disruption in the short term. Finally, any such private loans would probably have more onerous terms — it is unlikely that they would qualify for income-driven repayment, and they would likely require a cosigner.
In short, if the Prosper Act passes in its current form, students will face immediate difficulties in financing their graduate education — and the scale of the problem will create a financial crisis for schools as well.