Tuesday, June 16, 2009

Problems (and some solutions) with student debt

his week the New York Times has run a series of articles on the increasing costs of a college education. In an article Sunday entitled "How Much Student Debt is Too Much?", several student loan experts weighed in on the issues and costs of mounting student debt. One of those people was Robert Applebaum, a lawyer who advocates canceling student debts as a method for stimulating the economy. I thought his last two paragraphs were particularly good:
Until higher education becomes a safe investment again, prospective borrowers should give greater thought to the financial consequences of seeking an advanced degree. Community colleges and state schools are probably better places to “find oneself,” than expensive private institutions, particularly if the student doesn’t really know what he or she wants to do for a living. Associates degrees and trade schools are other avenues to consider.

None of this is to suggest that a liberal arts education isn’t good for the mind and spirit — but whether it’s as wise a financial investment as it once was requires serious consideration. 
I would be the last person to discourage a prospective law school student from pursuing that course. But given the uncertainty in the market and the changing face of the legal profession, any future lawyer should think long and hard about the costs associated with a legal education. This is particularly difficult for law students because the education costs are higher than almost any other discipline, and because school rank is such a large factor in finding employment.

There is a lot of frustration building with respect to student debt, especially since many colleges are raising tuition and slashing financial aid at the same time students and their parents feel the pinch from the economy. Some of the comments from the first NY Times article I mentioned were published yesterday in a collection entitled "Student Debt, Fool's Gold?"

It isn't all bad news, however. Beginning on July 1 of this year a new Income-Based Repayment program will go into effect for federal student loans. This will cap payments for borrowers based on income and family size. Previously, federal loans didn't take into account a borrower's number of dependents, which was especially hard on borrowers with larger families. There is also a new Public Service Loan Forgiveness program for borrowers of federal loans who work in the public sector or qualifying non-profits. Of course, these programs only apply to federal loans, which currently have a $18,500 per year cap. That isn't enough to cover tuition at many law schools, which often exceeds $40,000. But if you have a family, a public interest job, and six figures of student debt, every little bit helps.

Photo credit: AMSA.


  1. When I finished law school in '07 my wife and I had 180k in student loans (which is pretty darn good considering we both have undergraduate degrees from a school with 35k/year tuition). I started working for a state government and immediately signed up for the public service loan forgiveness. Also, while the "Income-based Repayment" isn't available until July of this year, there has been an "Income Contingent Repayment" plan available for the last few years. After making ten years of adjusted payments based on my income and family size (we have four kids), the remainder of my Stafford loans (which make up the bulk of my loans) will be forgiven. We estimate it will save us several tens of thousands of dollars in student debt.

    We're not rich, but we own a good-sized house, we can pay all our bills, and I never work more than 40 hours a week. I'm just writing this to suggest to law students than even if you have student loans approaching 200k, it is still very possible to do government work (although perhaps not in areas with a high cost of living like NYC). Law firm work is not your only option.

  2. I thought Obama was going to pay for our student loans.....and my mortgage...

  3. Yeah, I've quit looking for a job altogether because I know that Obama is going to give me one.

  4. Fine. More job openings for me when I decide I hate my life and leave the corporate sector.