The average Georgetown Law graduate has almost $150,000 in debt by commencement. | REUTERS Law schools devise debt-free path

The pitch could be straight from a late-night infomercial: Get a law degree with no money down and don’t spend a penny of your own paying the loan back.

But that’s the promise that law schools at Georgetown University, New York University, the University of California-Berkeley and other top universities are making to some graduates. If they spend 10 years outside the private sector, the law school will make their loan payments for a decade. Then, starting four years from now, a federal program kicks in to forgive the remaining balance, often more than $100,000.


The schools are exploiting a loophole that could lead to billions of dollars in written-off federal student debt and both education activists and lawmakers want to crack down on the practice. The New America Foundation has warned of an “undeserved bonanza for wealthy lawyers and expensive law schools.”

“It lends itself to giving a big windfall to people who don’t really need it, as opposed to people who would otherwise be in default,” said Rep. Tom Petri (R-Wis.), who has introduced a bill with Rep. Jared Polis (D-Colo.) to overhaul the nation’s student loan repayment process.

But many don’t expect Congress to address the issue until loan forgiveness begins in 2017, or until lawmakers rewrite the Higher Education Act — whichever comes first.

Top law schools have long helped graduates who choose public service over corporate law repay their loans after graduation. For graduates who went to work in a legal position at a government or nonprofit, schools would help cover loan payments for up to10 years. The idea was to help graduates pay off six-figure debt on a five-figure salary.

But the programs couldn’t usually cover students’ entire monthly loan payment, which nationally averages more than $1,000. And once the 10 years were up, graduates were on their own to pay the remaining balance.

Then Congress made two changes to student loans that magnified the power of school assistance programs, said Jason Delisle, director of the Federal Education Budget Project at the New America Foundation. Starting in 2006, graduate students could for the first time borrow enough from the federal government to cover the entire cost of their education.

Then, in 2007, Congress created a sweeping public service loan forgiveness program. Borrowers who work for a nonprofit or the government for 10 years and make payments based on their income have their student loan balance canceled when the decade is up.

“You’ve got an open-ended amount that can be borrowed, and an open-ended amount that can be forgiven,” said Delisle, who estimated the average Georgetown Law graduate in the program will walk away from $158,000 in federal debt.

Law schools — which are, after all, filled with lawyers — looked at the new laws and saw an opportunity. Income-based monthly payments are lower than standard payments, so the schools could cover graduates’ payments entirely for the first 10 years. The money for law school repayment assistance programs usually comes out of tuition mostly paid with federal student loans; at Berkeley, for example, it’s part of the fee that all professional-degree students pay.

The government’s loan forgiveness program would do the rest. Without drawing down endowments or draining financial aid accounts, law schools could promise an (eventually) free education for public service students.

And plenty now do: Besides Georgetown, NYU and Berkeley, programs at Washington University in St. Louis, Duke, George Washington University, Columbia University and others tell students they can combine loan forgiveness with school loan assistance programs. “Public interest borrowers,” Georgetown promises, “might not pay a single penny on their loans — ever!”

Students are taking them up on the offer. At Georgetown, 350 borrowers are enrolled in the loan-repayment assistance program promising full forgiveness eventually. At Berkeley, there are 263, although some are students who graduated before the loan forgiveness legislation took effect and won’t have their entire loan canceled.

The average Georgetown Law graduate has almost $150,000 in debt by commencement. At Berkeley, the average debt at graduation is about $115,000. The income-based payments graduates make for 10 years sometimes barely cover the interest, said Dennis Tominaga, assistant dean of financial aid at the Berkeley law school.

“The amount of debt they’ve acquired, that could be astounding to some people,” Tominaga said. “That’s probably the equivalent of a small mortgage in some places.”

There’s no way of projecting now how many students will fulfill the 10-year public service commitment to get forgiveness. But right now, Tominaga said, it seems that many will: Four years before the first wave of forgiveness hits in 2017, borrowers are being meticulous about collecting and submitting the reams of documentation they will need.

So far, the program has attracted little attention outside law schools. Advocates for income-based student loan repayment, which can be a lifeline for borrowers who are underemployed or in low-paying jobs, have been hesitant to point it out. Even if Congress makes changes if forgiveness proves costly, they’re unlikely to apply to borrowers who took out loans while the program was in effect.

Tominaga and other law school administrators say they don’t see their programs as taking advantage of a loophole. Their goal is to help their graduates pursue public service without the burden of debt, they say.

The Georgetown loan repayment program is driven by the school’s Jesuit mission, said Charles Pruett, an assistant dean. “Dollars could be spent on the front end with scholarships to attract a class, or they could be spent while the students are here to make them happy,” he said. “It’s a demonstration and a commitment.”

Georgetown Law students collectively pay almost $2.5 million per year in loan origination fees alone, Pruett said. And many graduate loans before this year had interest rates of 7.9 percent. Even if the Education Department writes off six-figure debts for a small proportion of the school’s graduates, he said he thinks his students in the aggregate are paying in significantly more than they’re taking out.

The Education Department did not respond to a request for comment.

“We have some folks out there that are beating a drum that this is sort of a wasteful program,” Pruett said. “The question is, in society, do we need to make sure the indigent have representation? I think one of the ways you can do that is making it possible for people to go from quality schools to offer those services.”

That’s not how the program should be evaluated, said Delisle, who recommends limiting loan forgiveness to $30,000. Financial aid has had to fight for every dollar in an era of tight budgets. The Pell Grant, the bedrock financial aid program for low-income students, faces a deep shortfall after 2015 and has been trimmed back several times in the past two years. That grant provides $5,645 per student per year.

“The federal government is going to spend way more money forgiving the debt of Georgetown law grads than they are sending low-income kids to Georgetown undergrad,” Delisle said.

The real test for the program will come in 2017, when the Education Department starts writing off the first borrowers’ debts. Tominaga said he hopes lawmakers take a deep look at the data then to examine costs and benefits.

Already, he said, students and graduates are worried the program won’t last long.