The provision of higher education to all who qualify for it intellectually has been a social ideal in this country for the last half century. Until relatively recently, attempts to provide educational opportunity for those who could not afford it took the form of tuition grants and scholarships or tuition waivers, with little reliance on educational loans. In the last twenty years, however, student loans have come to comprise the major method of funding students in post-secondary education. Law schools have been quite active in insuring that law students have ready access to sufficient funds necessary to finance their legal educations and that the funds are available at favorable terms. The Law School Admission Council (LSAC)[1], an association whose membership is comprised of all of the American Bar Association approved law schools in the United States and fifteen Canadian law schools with common-law programs, became involved in providing federally guaranteed loans exclusively to law students in the late 1980's, a role eventually assumed by the Access Group, a not-for-profit organization that today provides private and federal loans to graduate and professional school students, debt management materials and software, a need analysis service, and several online services for schools and students.
Costs of Legal Education
Legal education costs vary widely. According to the most recent edition of The Official American Bar Association Guide to Approved Law Schools, tuition costs alone range from less than $5,000 an academic year to more than $20,000 for the same period. Additional amounts for food, lodging, books, fees and personal expenses increase the costs for three years to more than $60,000 in almost all cases and more than $100,000 in many. The geographical location of the school and whether it enjoys state subsidization contribute to the variety of costs for individual schools. The National Association of Financial Aid Administrators (NASFAA), estimates that over 80 percent of law students require financial assistance to pay for their legal education expenses. In August 1999, NASFAA reported that the average law student at a private college or university accumulates $63,078 of debt.
Students meet their expenses usually by a combination of personal resources, grants and scholarships, federal work-study, and loans.
Sources of Financial Aid for Law
Students
Personal resources consist of savings, earnings, and contributions from family and friends. Grants and scholarships are awards from the government (state or federal), the law school, or from private or civic sources. Unlike loans from the same sources, they do not have to be repaid. Federal Work-Study funds are tied to employment of students who have demonstrated financial need, and, because of their source and their requirement for a showing of financial need, are different from earnings that a student may derive from independent employers. Loans are the principal source of funding for law students. Basically, there are four types: federally guaranteed loans; state-sponsored loans; institutionally funded loans; and privately guaranteed loans offered by private lenders.
Federal Financial Aid
History
Over the years, financial aid programs have sought to achieve
a number of objectives. The United States GI Bill, passed for the benefit of
returning World War II veterans, and the 1947 Report of the (U. S.)
President's Commission on Higher Education, the geneses of modern federal financial
aid, sought to reward ex‑service personnel for their wartime service and
to restore the post‑World War II economy at least to its pre‑War
level. In addition, the notion of equal educational opportunity was embodied in
the federal policy enunciated in the 1947 Commission Report, which
addressed not just higher education in the abstract, but student financial aid
as well. On that subject, it urged that equal education opportunity could not
be achieved until economic, racial, ethnic, and sexual obstacles were surmounted.
Adequate financial assistance to students was the agreed upon method to
overcome these inequities.
The next major federal financial aid legislation, the 1958
National Defense Education Act (NDEA) had a perceived threat from the
Soviet Union as its impetus. The launching of Sputnik was cited as evidence
that an educated populace, especially one educated in new scientific and
technological advances, justified the provision of student loans.
With the enactment in 1964 of the Equal Opportunity
Act, which established the College Work Study Program and provided for Equal
Opportunity Grants (EOG's), and the Higher Education Act of 1965, the focus
changed. Both laws addressed equal educational opportunity by means of need‑based
programs combining EOG's and Guaranteed Student Loans (GSLs). Together, they
provided grants and work opportunities for low income students and loans for
middle and upper income students. The Education Amendments of 1972, including
Basic Education Opportunity (BEOG) and Pell grants, further made concrete the
commitment to meet the financial need of students without regard to factors
other than the economic resources available to them. A few years later, the
Middle‑Income Student Assistance Act of 1978 provided yet another
source of federal financial aid based on economic need.
The most recent history of federal
financial aid, starting in about 1980, reflects continuing tension
between efforts by the federal government to reduce drastically the scope and
reach of existing programs and annual successes by opposing forces to defeat
those efforts and to maintain existing programs essentially intact. Recent
legislation has made Guaranteed Student Loans unavailable to students whose
family income could be considered upper‑middle class and adjustments in
federal tax law have made it more attractive for those with sufficient assets
to use second mortgages and equity loans for the financing of educational debt.
Those with sufficient assets, thus, are likely to make less use of Guaranteed
Student Loans and Supplemental Student Loans. Economically disadvantaged
students, who lack options, undoubtedly will continue to depend on the loan
programs as the primary source of financial aid for higher education.
Grants
With the exception of limited
federal grant funds for ethnic minority students, primarily from the Council on
Legal Education Opportunity (CLEO) and Patricia Roberts Harris Fellowships
(formerly G*POP), grants of money to law students are financed by private
donations and budgeted financial aid made possible by setting tuition amounts
at a level that allows tuition money from students who can afford it to
subsidize tuition from students who cannot.
Loans
The federal loan programs are by far
the largest source of student aid available.
The U.S. Department of Education
Student Financial Assistance Programs include the Federal Stafford Loan and the
Federal Perkins Loan programs. The
Federal Stafford Loan is a low-cost loan available through the William D. Ford
Federal Direct Loan Program (FDL) and the Federal Family Education Loan Program
(FFEL). The former is funded directly
by the U.S. Government and administered by schools, while the latter is funded by
commercial lenders like banks, credit unitons, and organizations. Both are “guaranteed” by the federal
government. The “guarantee” insures
that lenders will receive repayment of the loan from the guarantor if the
borrower does not repay it.
The Federal Stafford Loan Program
can be subsidized or unsubsidized. If
the loan is subsidized, if must be awarded based on the student’s financial
need, and the federal government pays the interest due on the loan while the
borrower is in school and during approved forbearance periods. Unsubsidized loans are not based on financial need, and interest begins to accrue as
soon as the funds are disbursed/ The borrower can pay the interest when billed
or allow it to be added to the principal amount during forbearance
periods. These unsubsidized loans can
be used to meet financial need not covered by other sources of financial aid or
personal resources. The maximum
subsidized Federal Stafford Loan per year is currently $8,500. The current combined annual maximum for
subsidized and unsubsidized Federal Stafford Loans is $18,500. The cumulative maximum is $138,500, of which
no more than $65,500 can be subsidized funds.
The Federal Perkins Loan is both federally guaranteed and federally
subsidized and is administered by the school of attendance. It is intended to provide low-interest loans
to students demonstrating high financial need.
The funds are provided by the federal government, but the school acts as
lender. The exact amount offered to a
student depends upon the availability of funds and the amount of his or her
financial need, but cannot exceed $5,000.
State-Funded
Programs
Some states offer grants or loan
programs. Eligibility for these
programs is defined by state law and varies from state to state. Some may require financial need while others
may be awarded based on criteria related to academic achievement or potential.
Institutional
Funds
Some law schools have institutional
funds that may be offered to qualified students. As with the state-funded programs mentioned above, eligibility
for these funds varies from school to school.
Criteria may be based on
academic achievement or potential, on financial need, or, in some cases, on
objectives, such as enrolling a diverse student body, that are peculiar to that
institution. Whatever the case, it is
usually up to the financial aid staff of the school of attendance to determine
who is eligible to apply for these funds.
Privately Guaranteed
Supplemental Loans
As
noted above, the most a borrower can receive annually through the federally
guaranteed (FDL or FFEL) programs is $18,500.
This amount, supplemented by personal resources, grants and
scholarships, may not meet the entire cost of attendance at private, or the
most expensive public, law schools.
Privately guaranteed loan programs are available to assist borrowers in
filling this gap. There are numerous
privately guaranteed student loan programs available that are not based on financial need and tend to
have higher interest rates and fees than federal or state loan programs. Private loan programs, unlike the federally
guaranteed programs rely heavily on a borrower’s credit history. As a result, borrowers at the same school
may pay different fees and interest amounts based upon their past credit
behavior and current credit standing.
To be eligible for private loan programs, a borrower must meet the
federal eligibility guidelines, plus have a favorable credit rating.
In addition, some loan programs (private, state, and institutional loan)
require that a borrower obtain a creditworthy cosigner in order to apply for
a loan. Applying with a creditworthy cosigner can reduce the cost of a
loan and provide the means for a borrower to meet private loan program credit
requirements that otherwise could not be met.
Bar
Examination Loans
Some privately guaranteed loan
programs offer Bar Examination loans to assist law students in meeting the cost
of a Bar review course and other educational expenses related to preparing for
the Bar Examination.
Repayment
and Forbearance
Repayment is deferred on both the
subsidized and unsubsidized Federal Stafford Loans as long as the borrower is
enrolled at least half time as a student pursuing a degree or certificate. Repayment begins six months after the
borrower graduates or ceases to be enrolled at least half time. The repayment period extends to ten years,
and there is no penalty for prepayment.
A number of repayment options
currently exist for Federal Stafford Loan borrowers. These include standard (level) repayment, graduated repayment,
extended repayment, income contingent repayment (FDL Program only), and income
sensitive repayment (FFEL Program only).
Borrowers also have the option to refinance federal education loans
though the Federal Consolidation Loan program.
Using any repayment option other than the standard (level) repayment can
reduce the amount that must be paid each month, at least temporarily, and
typically is used when the borrower anticipates that he or she will be unable
to pay the minimum loan amount required under the standard plan. It also, however, will increase the total
cost of the loan because of increased finance charges accruing on the loan
principal. Many private loan programs also
offer repayment options, and they vary by lender. While the repayment period
varies among private loan programs, it typically extends between 15 and 25
years.
Indebtedness
With increased average indebtedness
among law school graduates, and the growing disparity between private sector
and public sector legal salaries, there is general concern about the effects of
indebtedness on career choice. As
indebtedness rises, fewer students can afford to take on starting positions in
the legal field within the lower salary strata, particularly in the area of
public interest law.
A result of this growing concern is
Loan Repayment Assistance Programs (LRAPs).
LRAPs are school-sponsored programs that help repay the legal education
expenses of law graduates who take positions within public interest law, which
typically offer lower starting salaries than private practice law
positions. Many schools will forgive
the loans of graduates who serve in public interest or nonprofit positions.
Conclusion
Legal education is costly and there
is little beyond federal assistance in the form of loans. Although these programs provide funding
for U.S. citizens enrolled in U. S.
Department of Education approved programs, persons on an F1 or F2 student visa
only, or on a J1 or J2 exchange visitor visa only, can't get federal student aid regardless of where they
matriculate. Also, persons with G series visas (pertaining to international
organizations) are not eligible for federal student aid.
[1] See Rennard Strickland’s Creating Opportunity,
prepared for this conference, for more information about LSAC and its role in
legal education in the United States.