Law schools don’t prepare graduates for the financial realities they’ll face when their student loans come due, an American Bar Association task force has concluded after a year spent examining legal education costs. Next week, the House of Delegates will take up a proposal to fix that.
The resolution calls upon law schools to offer students better financial counseling and to disclose more information about financial aid and their own revenues. It also urges schools and loan providers to give borrowers easy-to-understand terms, and asks schools to experiment with ways to lower tuition.
“Students need to fully understand what they’re getting into, with no surprises at the end,” said Dennis Archer (left), chairman emeritus of Detroit law firm Dickinson Wright and chairman of the ABA’s Task Force on the Financing of Legal Education. “If you’re being counseled every year you’re in law school, then you’re better able to consider how much you need in loans, and you’re doing so with your eyes wide open.”
The resolution wouldn’t bind the law schools, but underscores heightened concerns over climbing debt loads. Average debt for graduates of private law schools grew from $102,000 in 2006 to $127,000 in 2013, adjusting for inflation, according to the task force’s report. Graduates of public law schools took on an average $66,000 in debt in 2006, compared to $88,000 in 2013.
“I think it’s a step in the right direction,” said Heather Jarvis (left), a student loan consultant and task force member. “Some law schools are doing much more in this area than others. Generally speaking, financial aid officers tend to be quite busy seeking aid for their students and have been less focused on counseling them with regard to repayment.”
Other parties complained the resolution doesn’t address the real reasons for increasing tuition and loan debt. Kyle McEntee, executive director of the nonprofit Law School Transparency organization, for example, blames the easy availability of federal student loans and a lack of accountability for schools that fail to place graduates in jobs.
“I think it’s terrible,” McEntee said the proposed resolution. “It’s more like blame shifting, with the task force saying it’s on students to know more about what they’re borrowing rather than saying that system is fundamentally broken. Information only takes you so far.”
Stephen Harper, a retired Kirkland & Ellis partner and adjunct professor at Northwestern University School of Law, reached a similar conclusion in a recent column in NLJ affiliate The American Lawyer. The task force’s recommendations are “superficial fixes,” Harper wrote.
Law graduates in 2012 had the second-highest median debt load among all professional schools, at $117,000, according to the U.S. government’s National Postsecondary Student Aid Study. Only medical students graduated with more debt. Graduates of Thomas Jefferson School of Law in San Diego took on the most debt, according to U.S. News & World Report, with the class of 2014 borrowing an average $172,445. Graduates of Howard University School of Law had the lowest average debt, at $24,102.
“A Major Issue for Us”
Thomas Guernsey, dean at Thomas Jefferson, said the school provides loan counseling during orientation and again during the third year. “It’s a major issue for us,” he said. “We caution our students against overborrowing all the time, but we find most students borrow as much as they can. I think providing more information is a good idea, but I don’t think counseling alone will have a big impact on the amounts students borrow.”
Robert Barton, a 2009 graduate of the University of Minnesota Law School, said he can make the interest payments on the $30,000 he took out in private loans thanks to his associate job at Holland & Knight. But some classmates who saw law firm offers rescinded during the recession, or who could not secure jobs, have struggled to repay what they owe.
“When you’re thinking about this stuff in law school, you don’t necessarily consider the financial repercussions down the road, like your ability to buy a house,” said Barton, who still owes the $30,000 principal. “You sign the papers and that’s that. I came to law school straight from undergrad, and I had no idea what it really meant.”
One 2011 Harvard Law School graduate, who spoke on condition of anonymity because she didn’t want her finances disclosed publicly, has repaid all but $9,000 after borrowing $130,000. An associate at a midsize firm in the Northeast, she dedicated her entire paycheck to loan repayment for the first 1 1/2 years in her job, while she and her husband lived on his earnings.
“To be honest, I didn’t think hard about it at all,” she said of her loans. “It didn’t register with me how much I was really taking out. It would have been very helpful to have more of a conversation about interest on loans—that you aren’t just taking out the face value of the loans.”
She received no individual financial counseling from Harvard, she said, but recalled attending a voluntary session on loan repayment. She welcomed any effort to improve loan repayment counseling.
Ken Lafler, assistant dean for student financial services at Harvard, said the law school boosted its financial programing in 2007 and continues to look for ways to educate students about personal finance. All graduating students must attend an hourlong small-group session on loan repayment, and one-on-one counseling is available, Lafler said. The school holds voluntary sessions on borrowing, budgeting and investing, and discusses loans during its admitted-students weekend.
Convincing law students to pay attention presents a challenge, however. Many are preoccupied with classes, grades and career development, worrying about their loans only after they’ve taken the bar exam. “If you’re talking about a student with a free hour during the day, is attending a financial-planning session really what they’re choosing to do?” Lafler said. “Our students are extremely busy, and we want to be sensitive to that, which is why we’re loath to make sessions mandatory.”
The U.S. Department of Education—the issuer of federal student loans—requires each borrower to complete an informational session both when they take out loans and when they are about to graduate, but they are often cursory, Jarvis said.
The government has introduced numerous repayment plans—students can select a traditional 10-year plan with fixed monthly payments; graduated plans in which payments increase over time; and income-based plans that cap payments and offer loan forgiveness after a specific number of years.
“It has gotten far more complicated than it used to be, and it was never streamlined or easy,” Jarvis said. “It begins with taking on the goal of providing clear and accurate information to students from the beginning. The schools have a unique opportunity to provide that information and to encourage every student to take advantage of it while they can.”
Contact Karen Sloan at firstname.lastname@example.org. For more of The National Law Journal’s law school coverage, visit: http://www.facebook.com/NLJLawSchools.