Paul L. Caron

Tuesday, July 26, 2016

Vermont Law School Seeks $15 Million Federal Loan To Restructure Its Debts Via Sale-Leaseback With Related LLC

Vermont Logo (2016)Following up on my previous posts (links below) on the financial difficulties at Vermont Law School: VT Digger, Vermont Law School Seeking Federal Loan to Ease Debt Costs:

Vermont Law School is hoping to borrow $15 million from the federal government to help restructure its debts and take advantage of lower interest rates.

VLS officials said the school has put the worst of its financial woes behind it, and the proposal would fund a land-lease transaction involving its 15-acre South Royalton campus.

“It means significant operating savings for VLS,” said Lorraine Atwood, vice president of finance at the school, which she said currently spends about $1.2 million annually to service about $13.5 million in debt.

The school, which has an annual budget of $28 million, is hosting a public information meeting at 5 p.m. Thursday at Oakes Hall about the plan, which would create a land-lease agreement with a separate entity, VLS Campus Holdings LLC.

The law school would continue to own its land and 22 buildings, which have a combined net book value of $22 million, according to Atwood.

The school is seeking the loan from the USDA’s Rural Development Community Facilities Direct Loan Program, which develops “essential community facilities” in rural areas. ... In order to qualify for a loan, the school must demonstrate that it “provides an essential service to the local community for the orderly development of the community in a primarily rural area, and does not include private, commercial or business undertakings,” according to guidelines on the program website.

Vermont's enrollment has declined 33% since 2011 (from 566 to 375).

Prior TaxProf Blog coverage:

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Fair enough. But look at it this way: VLS has about 450 or so JD students (we'll put aside all of the random MFALPs and other non-JD students). Tuition is just under $50k/year and another living expenses $25k (side note: a remarkably high amount for rural Vermont. This is the COL allowance for most of Boston's law schools, and Boston is the 3rd most expensive city in the US). The vast majority of the students get tuition discounts, to VLS's credit, with a median discount of $20k. 25th percentile is $8k and 75th percentile $30k, but for the sake of simplicity I'll just take $20k off everyone's bill. So that takes the annual cost from $75k per year to $55k per year. That's $165k in federal loans, plus low five figures in interest accumulated while in law school. And tuition increases every year, of course. Call it $180k all in, exclusive of undergrad debt or bar loans. That means each year's crop of law students ultimately owes about $27 million in federal student loans.

So what's the median starting salary? Just $50k. And the 75th percentile is just $61k. This means that virtually everyone will HAVE to go on an income-based repayment plan, because that's a $2,000 per month standard repayment and their takehome paycheck is not going to be too much over $3,000 per month. Thanks to the remarkable repayment calculators at, we can find that, if they go on REPAYE with $180k of student loans and a starting salary of $50k that will eventually rise to the BLS median of $116k (I'm being very generous here - take it from a New Englander; salaries are terrible in Vermont), we find that... a graduate will only pay back $103k, never touch the principal at all, and accumulate $140,000 in unpaid interest. Total loan forgiveness after 20 years: $320,000. Multiply that by 150 graduates, and you wind up with a cool $48 million dollars. That's a decent ballpark estimate of how much money each class of JD students at Vermont Law School will ultimately cost the taxpayer.

Info taken from Law School Transparency and VLS's 2015 ABA Form 509 disclosures

Posted by: Unemployed Northeastern | Jul 28, 2016 8:12:25 AM

@Unemployed Northeasterner

What is possible is not relevant; anything is possible. The contention was that the taxpayers were going to lose the money ... just factually incorrect. Like any loan, it is possible. But it isn't a fait accompli. Just pointing that out. Don't fight the hypothetical?

Posted by: ruralcounsel | Jul 28, 2016 5:02:12 AM


If VLS goes under, which isn't out of the question given 1) what Moodys has to say about its financial health and 2) the demand for new lawyers and MFALPs (look it up) in a geographically and demographically tiny state that has only added 297 people since 2010. It also has the smallest GSP (Gross State Product) in the country. And it is surrounded by NY and MA, which between them have at least two dozen law schools. So it is entirely possibly that VLS shuts down and the taxpayers eat the loan, just as they will eat all of the monies extended via federal student loans that won't get anywhere near fully repaid because of income-based repayment plans and loan forgiveness.

Posted by: Unemployed Northeastern | Jul 27, 2016 7:11:36 AM

@Get Real .... I believe it said Federal loan, not gift or grant. So, no, the taxpayers aren't stepping in to the tune of $15mil. Basically like a small business loan (since it is a private law school).

Posted by: ruralcounsel | Jul 27, 2016 5:04:52 AM

How is this even remotely the business of the federal government?

Posted by: BlogDog | Jul 26, 2016 11:09:26 AM

MFALP! Sad that none of the faculty or alumni are willing to front some of their million dollar wage premiums to VLS so it can keep giving more people million dollar wage premiums. How selfish. Now the law school, one of several whose bonds are at or near junk status, has to go begging the feds for (even more) money.

Posted by: Unemployed Northeastern | Jul 26, 2016 8:28:16 AM

Let me get this straight. Vermont Law School can't be profitable despite charging more than $46,000 a year in tuition - the majority of which is federal loan money - so they now want the taxpayers to step in again to the tune of $15 million? How about this novel approach: Let this failed business die. When will someone - the ABA, the DOE, the DOJ - wake up and realize that these law schools are perpetuating a criminal scam, enrolling unqualified students to maintain their access to the federal loan pipeline? Legal academia and the legal profession as a whole would be well-served to allow 20 to 30 of these law schools to close.

Posted by: Get Real | Jul 26, 2016 7:08:05 AM