TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 19, 2018

Proposed Student Loan Cap Could Cause 20-30 Law Schools To Close Within Five Years

National Law Journal, Proposed Student Loan Cap Could Devastate Law Schools:

A bill wending its way through Congress would cap graduate federal student loans and drive many law students into the private loan market, potentially forcing between 20 and 30 law schools to close within five years.

That’s the dire prediction offered to a group of legal educators by Chris Chapman, president of AccessLex Institute, a former private student loan provider and nonprofit organization that now advocates for greater access to law school. Chapman’s warning cast a pall over the Summit on the Future of Legal Education and Entry to the Profession, where law deans, professors and other interested parties assembled last week at Florida International University College of Law for two days to contemplate how to address legal education’s myriad woes. ...

Republicans in the U.S. House of Representatives in December advanced out of the committee a Higher Education Act reauthorization bill that would make several major changes to graduate federal loans. The bill would:

  • Eliminate public service loan forgiveness, which allows law graduates in public interest jobs to keep their monthly payment manageable and see their federal loans forgiven after 10 years.
  • Do away with income-based repayment, which lets federal loan borrows cap their monthly payments at around 10 percent of their income, and see their loans forgiven after 20 or 25 years.
  • Cap federal graduate loans at $28,000 annually, instead of allowing students to borrow the full amount of tuition, living expenses, books and fees as determined by their individual programs.

Each of those changes would make a law degree more difficult for students to pay for, and undoubtedly some prospective students would opt not to enroll due to costs while others would be shut out altogether because they can’t secure enough loans.

Above the Law, Congress Plans To Take Away Your Student Loan Money — What Happens To Legal Education Then?

http://taxprof.typepad.com/taxprof_blog/2018/04/proposed-student-loan-cap-could-cause-20-30-law-schools-to-close-within-five-years.html

Legal Education | Permalink

Comments

Like the Republicans, I support limiting graduate school to children from wealthy families. It's about time that the poor remember their place.

Posted by: Ted Seto | Apr 19, 2018 8:17:52 PM

One feels especially bad for the students who will be in law school DURING this change and will either have to drop out - indebted and with fewer repayment options - or secure private student loans and face four-figure payments a few scant months after graduation.

It is interesting that AccessLex, which quite literally began its existence as an exclusively law school student lender, appears unwilling to reenter that business, even though they securitized billions of private student loans in the pre-GradPLUS era and were comfortable with double-digit predicted default rates on those loans. It does not speak well of what they must believe actual law school loan repayment looks like now.

Posted by: Unemployed Northeastern | Apr 19, 2018 9:10:04 PM

Qua bastions of social justice, what a wonderful opportunity for law schools to deliver, and proactively take the reigns on access. They might consider proactively reflecting upon why they charge so much, and reduce costs dramatically...Legal educaction should not cost what it does, and no, U.S. News Rankings are not a justification for bloated faculty payrolls.

Indeed, the law school caste system already maintains an underclass of underpaid actual lawyers, often referred to as "clinical faculty," who cost less and add more value to the experiential education students. Let Yale be Yale, and for the rest of legal education (i.e., every institution other than a handful of plausable Yale wannabes), let lawyers teach law students at a reasonable price, and let the Ph.D -> elite clerkship -> 1 year at white shoe law firm -> law school tenure track types reside in humanites departments of their highest degree at central U, where they belong.

Posted by: anon | Apr 19, 2018 10:53:33 PM

Any abrupt regulatory change that curtails a major revenue stream is likely to cause massive disruption in an industry. Any such change should either be phased in, or colleges should be allowed to restructure their operations in bankruptcy (as basically every other industry can).

Posted by: Matthew Bruckner | Apr 20, 2018 5:49:04 AM

@Ted,

Did you harbor such concerns before 2006 when reams of law schools cost as much as $60,000/year between tuition & living expenses and the federal student lending cap was just a shade over $20,000/year? Oh, right - that was back when 98% of grads were employed at graduation with a $160k median starting salary. [rolls eyes]

Posted by: Unemployed Northeastern | Apr 20, 2018 9:18:22 PM

Or maybe $50,000 law schools will charge more affordable tuition. I'm finishing my last semester at University of Arkansas at Little Rock William H. Bowen School of Law. Tuition at both Arkansas law schools is under $16,000 a year for full-timers like me and under $12,000 for part-timers. I moved from Texas to Arkansas to get a quality legal education at a cheaper cost than any of my home-state schools and most law schools nationwide.

Posted by: Mark Powell Yablon | Apr 21, 2018 8:14:14 AM

Back in the 1970s and 80s I was able to put myself through state college and private law school by working part time, summers and a gap year. That is not possible today. Easy money has allowed schools to bid up prices. Good intentions have actually made it harder for working class and middle class kids to secure higher education without horrible debt loads, but smug virtue-signaling by those responsible continues unabated.

Posted by: Mike Petrik | Apr 22, 2018 5:55:45 AM

Professor Seto might want to read this: http://www.nber.org/chapters/c13711.pdf

Posted by: Mike Petrik | Apr 22, 2018 7:24:55 AM

Rule of economics: what ever is subsidized more will be produced and at higher prices.

Posted by: Don | Apr 23, 2018 4:27:22 AM

What do you call 20-30 law schools closing within five years? Painfully slow progress.

Posted by: Micha Elyi | Apr 23, 2018 9:14:43 PM

The number and size of law schools should depend on society's need for lawyers, not on how much money the feds are willing to throw at them.

Posted by: Old Ruster | Apr 24, 2018 7:41:43 AM