July 5, 2017

Private: Finding a Lifeline in Loan Forgiveness


Kaiya Lyons

by Kaiya Lyons

At the 2017 ACS National Convention, Professor William Yeomans concluded the breakout panel on whether to serve in an unfriendly administration by emphasizing to the room of current, former and aspiring government lawyers that public service “really is a lawyer’s highest calling.” But for too many law students, the choice to pursue that higher calling comes at a high price, as student loan debt continues to rise well beyond most public interest wages. Later in the day, ACS Board member David Frederick had a simple solution—“make law school less expensive.”

During the “Progressive Federalism” plenary, Frederick declared that massive student loan debt is the “number one impediment to law students going out and doing public service jobs.” To support his assertion, Frederick pointed to the time-honored tradition of public interest-minded grads spending two to three years in BigLaw to pay down their student loans before entering public service. Frederick explained that, instead of starting in public service, “law students are often forced into corporate law firms” for years to pay off their loans, a practice he characterized as a type of “indentured servitude.” While this image sparked laughter and jokes from the other panelists, Frederick maintained the veracity of his comparison and went on to stress that legal education must be more affordable in order for young lawyers to pursue public interest.

Forgiveness in Exchange for Services Rendered

However, much to our collective disappointment, law school tuition hikes show no signs of decreasing, nor does a decrease in tuition rates seem likely. Therefore, law students and recent grads have two options: (1) take the tried-and-true path of their predecessors and enter the corporate sector for a few years with the hope that they will be able to move into the public sector later, or (2) take advantage of the government’s Public Service Loan Forgiveness program and be able to work in public interest law immediately after graduation and have their debt erased after ten years.

Many recent grads have chosen the latter option, which allows them to gain experience in their chosen field right away and avoid being forced by their prohibitively high debt to defer their public service, in some cases indefinitely. Indeed, that is exactly why the program was implemented. To ease the burden of student loan debt for public sector employees and incentivize more people to enter these vital careers, President Bush, with glowing bipartisan support, signed the Public Service Loan Forgiveness program (“PSLF”) into law in 2007. For lawyers, this program means that if you work in “public service” (which is broadly defined as non-profit or city, state, or federal government employment) for 10 years while making on-time payments toward your direct federal student loans under an income-driven repayment program, the government will forgive your remaining loan balance.

PSLF has become very popular across fields, with over half a million borrowers reportedly enrolled in the program. As its supporters have argued, it is a lifeline for public interest attorneys and the communities they serve. Georgetown Law professor Philip Schrag has praised the program, explaining that “by incentivizing people to stay for 10 years,” PSLF “enables the government agencies and nonprofit organizations to hire people who will stay beyond the two years it takes to train them to do a good job.”

Likewise, according to Amanda Furst, Director of Public Interest Programs at the University of Minnesota Law School, students see the PSLF program as "a necessary component for pursuing and maintaining a career in the public interest” due to the “salary differences in the public versus private sector." Furst, who also serves as the Public Service Section Chair at the National Association for Law Placement (NALP), has had first-hand experience working with students and alumni who entered public service due to the promise of loan forgiveness and says the program has been "instrumental in opening pathways for law students to spend their careers in public service."

But the pathway to forgiveness for future public interest law students may be in jeopardy if Congress accepts the advice of the White House. In President Trump’s 2018 budget proposal, this critical program is under threat of elimination. In its current form, the White House budget includes a provision scrapping the program in favor of a streamlined income-based repayment and forgiveness plan that would force most law school graduates to continue paying off their student loans well into their 50s.

Public Interest Lawyers on the Chopping Block

Currently, graduate students have the option to cap their monthly student loan payments at 10 percent of their discretionary income, the remaining balance of which would be forgiven after 25 years. For students going into public interest work, the PSLF program shortens that timeframe by 15 years. However, the Trump administration plan aims to replace all current repayment options with a one-size-fits-all income-based repayment plan that would cap monthly payments at 12.5 percent of a borrower’s discretionary income and increase graduate students’ forgiveness timeline by 5 years. Combined with the elimination of the Public Service Loan Forgiveness program, this proposal paints a grim picture of the future of the public interest legal community.

This budget proposal was not entirely unexpected. In fact, the May 17 announcement came on the heels of a March legal filing by the Department of Education stating that employment certification letters from the agency were not final actions on borrowers’ qualifications for loan forgiveness through the PSLF program. This statement was a disquieting glimpse of both the current administration’s opinion of public service and its lack of empathy for students burdened by inescapable debt.

In response to the president’s budget proposal, the Department of Education’s legal filing, and the new political climate, students have changed the way they approach their post-graduate career decisions since the election. According to Furst, current and incoming students are "closely watching PSLF changes as they make career decisions," in addition to "exploring loan repayment assistance programs and income based repayment options."

Still, not all members of the legal community are in favor of the PSLF program. Some critics, including Above the Law correspondent Shannon Achimalbe, point to a “very small but growing minority” of lawyers “who were never interested in public service but planned to use PSLF as a student loan bailout” as evidence that the program is a backdoor subsidy for people who have the means to pay their own way. Moreover, Jason Diesle argued in a 2014 Brookings Institution report that because the government already forgives graduate student loans after 25 years of income-based repayments, the PSLF program is “redundant at best and excessively generous at worst.”

These criticisms are flawed in three essential ways. First, “backdoor subsidy” arguments fail to account for the fact that most public interest lawyers will not earn an income to match their six-figure debt during the first ten years of their career. Second, they neglect to assign any intrinsic value to the very purpose of the program—incentivizing young professionals to dedicate their skills and energy to public service positions. These essential jobs include providing competent counsel to defendants, defending the rights of marginalized communities against discrimination in our country’s courts and legislatures and protecting our environment—tasks that benefit society and help the government to serve the public interest. Even though income-based repayment schemes alone may make it possible for graduates to pay off their loans while earning a modest public interest income, without the PSLF there is no incentive for borrowers to actively choose these jobs over more lucrative career moves.

Third, by according too much significance to a “small minority” of PSLF enrollees who may immediately enter the corporate sector after receiving forgiveness, critics overlook the much greater risk of a depletion in the public sector workforce overall. For instance, NPR staff reporter Bobby Allyn has warned that the likelihood that a sizeable portion of PSLF enrollees will defect to BigLaw after ten years is not only a “legitimate worry,” but also may have “negative consequences for citizens who benefit most from the work of the public servants.” However, this argument ignores the much larger population of future public interest-minded law students who will not be able to enter the public sector without the help of PSLF. Furthermore, it minimizes the contribution of those borrowers whose decades of public service are per se valuable to their individual clients, the issue areas and communities in which they worked, and (necessarily) the federal government.

Luckily, most students worried about the demise of the PSLF can breathe a momentary sigh of relief. As pundits have explained, the President’s budget proposal is just that—a proposal. In order for any changes to the current loan repayment and forgiveness scheme to take effect, Congress will have to act affirmatively to include them in the 2018 education budget—a task that exclusively belongs to the legislative branch. And legal reporters generally agree that Congressional approval of the White House budget is unlikely.

Working Together To Save Public Service

Fortunately, the Department of Education has clarified that, in the unlikely event that Congress enacts the Trump administration changes, they would only apply to borrowers taking out loans after July 1, 2018. Although this would save current borrowers who may have depended on the promise of loan forgiveness when entering law school and their legal careers, it would have a disastrous impact on the future of the public interest community. Therefore, we must work vigilantly to protect alternative ways to support law students and recent graduates and make it possible for them to enter public service as soon as possible, and without sacrificing their financial livelihood.

David Frederick’s call for lower law school tuition highlighted an emerging theme at the 2017 convention: a movement of progressive federalism that can serve to fill in the gaps left by an unfriendly or unwilling federal government. But how can state and local government entities and non-profits (1) entice such lawyers to join their ranks and (2) find the money to hire them? Some legal luminaries, such as Yale Law’s Heather Gerken and former Arizona Attorney General Terry Goddard, suggest the answer may be to rely on private trust funds, such as Skadden or Soros fellowships, which allow public interest law students to begin their careers in public service.

In response to Frederick’s remarks, Professor Gerken explained that the reason many lawyers and law students do not want to go into public service on the state or local level is that those offices are often “incredibly under-resourced.” A potential solution to this problem, she explained, is establishing and contributing to private funds which allow recent graduates to begin providing direct services to vulnerable communities at government entities or non-profits straight out of law school. Such private funds include Jill Habig’s recently minted Public Rights Project, which mirrors the law firm associate deferral programs of the late aughts and aims to partner with law schools, law firms and non-profits to provide young lawyers with a stipend to work with progressive state attorneys general, district attorneys and city attorneys.

As states across the country have proven, however, there are other ways to provide financial support for young public interest lawyers besides a small amount of highly competitive, privately funded fellowships. Over 100 law schools across the country have taken steps to help low-income public servants pay off their loans through Loan Repayment Assistant Programs (LRAPs). These LRAPs, which may be administered by schools, state bar foundations, or federal and state governments, award financial aid to law school graduates working in low-paying public sector jobs. These programs offer recent graduates the chance to work at the organization of their choice.

Conclusion

Given this unique moment in our history, these alternative paths to debt relief are especially important. Now, more than ever, we need eager, determined and passionate young lawyers to begin contributing to the great work being done to defend our civil rights and constitutionally protected freedoms as soon as possible. Recruiting the next generation of public interest lawyers will require a concerted effort by the legal community to combat astronomical rates of law student loan debt by protecting the PSLF program, lobbying for lower law school tuition, sponsoring fellowships for recent graduates and dedicating resources to creating new jobs for young lawyers in the public sector.

There is no reason to believe that any single solution will fix the current scheme of rising debt and lack of public interest employment for recent grads. Instead, advocates must use their resources to combat the status quo holistically and recognize that the Public Service Loan Forgiveness program is one vital component, among many, in the effort to maintaining and expanding the strength and size of public interest legal community. We need the combined support of law schools, private benefactors, public interest employers and legislatures to make it possible for the future graduates to embark on a career in public service without sacrificing financial stability.

For more information on how to certify your public service and stay on track for forgiveness, see the CFPB’s recent guides to understanding the PSLF.