Subsidized government loans for graduate students became a casualty of the 2011 debt ceiling crisis, but law school proponents are pushing to resurrect them with the help of sympathetic lawmakers.
Bringing back subsidized Stafford loans would knock about $4,000 off the initial federal loan bills that typical law student graduates with and save them even more over the life of those loans, according to Chris Chapman, president of AccessLex Institute.
The institute, a non-profit advocate for legal education that used to provide student loans under the name Access Group, is enlisting law schools and law student allies to lobby for the restoration of subsidized student loans in Washington. With subsidized loans, students don’t accrue interest while in school or during a six-month post-graduate grace period.
Debt relief is a major issue in legal education, where law graduates have an average $140,616 in combined undergraduate and law school loans, according to a study by the New America Education Policy Program. (That figure was $42,000 for MBA students and $161,772 for students in medicine and health sciences.)
Last month, Rep. Judy Chu (Dem.—CA) introduced the POST GRAD Act, which would amend the Higher Education Act of 1965 to reinstate subsidized federal Stafford loans for graduate students, including those in law school, medical school, and other professional programs.
But the bill faces an uphill battle on Capitol Hill. All 32 of the bill’s cosponsors are Democrats, and Republicans hold a majority in both the House of Representatives and the Senate. The Congressional Budget Office has yet to estimate how much the POST GRAD Act would cost.
“The challenge for this bill is that just as it saved money by repealing, it will cost money to be reinstated,” Chapman said, noting that the government rarely increases its higher education spending. “In the broader scheme of federal policy, graduate and professional education starts at the back of the line.”
Indeed, undergraduate students enjoy far more clout in Washington than their graduate counterparts, said Michael Simkovic, a professor at the University of Southern California Gould School of Law, largely because there are so many more undergraduates. (Graduates students compose about 15 percent of all college students, according to the National Center for Education Statistics.) The government did not eliminate subsidized loans for undergraduate students in 2011, and undergraduates continue to receive lower loan interest rates from the government than do graduate students.
Graduate students tend to be less organized and vocal on policy matters, Chapman said. “From a political standpoint, no lawmaker has ever been afraid of graduate and professional students marching on Capitol Hill, or law students, or lawyers, marching on Capitol Hill,” he said. “The undergraduates tend to command a lot more power as a political constituency.”
AccessLex plans to work with other graduate school organizations to solidify support for reinstating the subsidized loans. The organization is lobbying lawmakers and has launched a #MakeTheCase social media campaign. It’s also encouraging supporters to phone and write to Congressional members.
Subsidized loans for graduate students makes fiscal sense, Simkovic said. Lawyers, doctors, dentists, and other professionals typically see a high rate of return on their educational investment—they earn higher salaries and have lower loan default rates than undergraduates. Those higher salaries translate into higher taxes over time. Thus, the government recoups far more in the long term than the upfront investment of subsidizing graduate student loans, he said.
“The federal government can afford to fund education and recover the costs later with taxes,” Simkovic said. “[Restoring subsidized graduate loans] would be a step in the right direction.”
Private loan providers are sure to oppose any effort to restore subsidized graduate loans, Simkovic added, as they see such moves as cutting into their market share and depressing interest rates.
Moreover, lawmakers tend to make higher education policy decisions based on immediate budgetary needs rather than comprehensive, thought-out policy, Chapman said.
“There has been very little policy discussion over higher education financing, particularly over graduate and professional financing, over the last 15 or 20 years,” he said. “It has all been policy by budget. This is a good example of policy by budget rather than policy by what’s good for students and education.”
Prior to 2011, graduate students were eligible to take out $8,500 in subsidized Stafford loans in addition to a larger amount of unsubsidized loans. Lawmakers opted to eliminate the loan subsidy—which was estimated to save the government $18 billion over 10 years—and reallocate the bulk of the savings to Pell grants for undergraduates. Subsidized loans for undergraduates were left untouched. “There was no policy debate,” Chapman said. “It was just a pot of money that existed.”
A $4,000 savings might seem like a drop in the bucket to law students taking on six-figures in debt, but it could influence some early decision-making, Simkovic said.
“Maybe some people who are considering graduate school have a liquidity problem where they can’t borrow enough to be comfortable during graduate school,” he said. “A little bit of help at that early, vulnerable stage of their life might go a long way. You might get a high return on that, in terms of getting more people to pursue education.”
The POST GRAD Act’s immediate prospects appear dim, but Simkovic and Chapman agree that the bill could lay the groundwork for a more serious push to restore subsidized graduate loans down the line. The bill gives advocates something to organize around, would inform voters of the issue, and prompt lawmakers to clarify where they stand.
In addition, Congress is due to reauthorize the Higher Education Act, which could lead to more bipartisan efforts on student loan matters, Chapman said.
“The heightened awareness of the debt burden on graduate and professional students has helped elevate this issue and has given it more attention than it has had in the past,” he said.
Contact Karen Sloan at email@example.com. On Twitter: @KarenSloanNLJ