Paying for Law School and Loan Forgiveness

Graduate School Law School
1

<p>Hi all,</p>

<p>This may have been answered already in previous posts, but I was wondering what kind of financial aid packages people received from top law schools. I plan to declare myself independent after I get out of college (or are you automatically considered independent when you apply for grad school? I don't know how this works). Do law schools take into account that parents may not be willing to contribute towards law school costs?</p>

<p>Also, I read that if you enter certain kinds of public service law after graduation, you may be eligible for loan forgiveness. I'm interested in going into some kind of public interest law, so I was wondering if anyone knew more about this.</p>

<p>Thanks!</p>

2

<p>
[quote]
I plan to declare myself independent after I get out of college (or are you automatically considered independent when you apply for grad school? I don't know how this works).

[/quote]
</p>

<p>While you are independent in terms of the FAFSA, this is not necessarily true when it comes to financial aid and law school. Polices vary by school. Your bes bet would be to check their policies.</p>

<p>for example: in Harvard Law FAQs</p>

<p>Do I have to submit parent information to be eligible for financial aid? Is there a financial Independence policy?
YES! If you wish to be considered for HLS need-based grant/loan assistance you must submit parental information. Even though the Federal government considers you financially independent from your parents for the purposes of determining eligibility for Federal loan funds, HLS policy requires that eligibility for its institutional need-based grant/loan assistance be based on your full family's financial strength. The only exception to this policy is if you meet HLS's Seven-Year Independence standard.</p>

3

<p>Sally is right.</p>

<p>The FAFSA declares all grad students to be independent. Some schools, in calculating need, ask for your parent's information. I recall hearing something about a guy in his 30s who had to get his parent's info. </p>

<p>Aid for law school is rare, either need-based or merit-based. It is assumed that the education should pay for itself (whether or not this actually happens is another issue). </p>

<p>Top schools have much more generous loan forgiveness than lesser-ranked schools. (I think that some of this has to do with endowment and some of it is simply because, at lower-ranked schools, a generous loan forgiveness programme would end up giving money to the majority of its graduates.)</p>

<p>A quick overview:
-Harvard, Yale, Stanford: Loan forgiveness for any job that is law-related (the standard is that JD is usually required for that type of work).
-NYU: law related public service
-Georgetown: law related non-profit
-UCLA: public service; loan forgiveness not guaranteed
-BC: loan forgiveness for those admitted into a special programme before they enter 1L year
-Northwestern: public, non-profit; capped at $12,000
-Michigan: law related non-profit</p>

<p>Many schools do not guarantee loan forgiveness - for example, only 10 students per year may get their loans forgiven. </p>

<p>Many/most schools will calculate income of a spouse and adjust formulas accordingly. Many have maximum salary caps, beyond which (regardless of the size of your debt and payment), none of your loans will be forgiven. This also ties into a spouse's earnings. </p>

<p>Harvard (and perhaps Yale and Stanford, although I had trouble finding the data) is the exception to most of this. You can see that, even as you venture into the lower part of the Top 14, loan forgiveness is limited. When you venture into the top 25, loan forgiveness is not even given to all of those who do public service.</p>

4

<p>Yes, a few law schools will repay your loans if you take a low-paying public interest job. If you're doing something like legal services where the pay is lowest, Harvard and Yale (to name two) will generally pay your entire loan payment while you're at that job. A few other schools have generous programs too...those are just the two I know best.</p>

5

<p>Aires,</p>

<p>No more drinks for you on SA before you post :) Thanks for the compliment, but if I still bow at Sally's feet.</p>

<p>P.S. Hanna, I loved your analogy in comparing universities to LACs'.</p>

6

<p>Huh? What? </p>

<p>You & I cross-posted! Excellent post as well. :) </p>

<p>Sally may be the Oprah of this board, but we can promote you to Katie Couric. Me, I try to avoid being Jerry Springer. :D</p>

7

<p>Most law schools will require you to provide your parents' financial information as well as your own unless you are between 26 to 30 years old (depending on the school). Some law schools never presume you to be independent, and require your parents' financial information no matter your age or situation. I know of plenty of law students who are married with kids of their own who have had to provide their parents' financial information. </p>

<p>Examples:</p>

<p>At HLS, the financial aid office has a 7-year independence policy. Before being deemed independent, you have to prove to the financial aid office at HLS that you have not lived in your parents' household for 6 months during any of the prior 7 calendar years, that you have not received $10,000 or more from your parents at any time during the prior 7 calendar years and that your parents have not claimed you on their tax returns for 5 prior tax years. </p>

<p>At Yale Law, students who are 29 years old are deemed financial independent. Students who are 27 or 28 years old are deemed to receive only 1/2 of the calculated parental contribution.</p>

<p>At Stanford Law, a student is considered to be independent only if his or her parents have not claimed the student as an exemption on their tax returns for the 5 prior tax years and if the student has not received $5,000 or more from their parents at any time during the prior 5 years. Even once a student is deemed independent, the deemed parental contribution for financial aid purposes is reduced gradually over the six years after the student is first considered to be indepenent, and only after the sixth year of independence is the deemed parental contribution $0. </p>

<p>Most law schools describe this information on their web sites, if you are interested in finding out about more or different law schools. The bottom line is that most law students who need financial aid get a package of student loans. The problem is that you can outstrip the max federal loans available (I believe the max Stafford loan amount is $138,500, including undergrad loans) and have to fend for yourself in the private loan market.</p>

8

<p>Adding to Sally's post:</p>

<p>Michigan has a sliding scale of contribution over the course of five years.</p>

<p>For various reasons, my parents haven't claimed me as a dependent since I was 20. That did help. My school did not require their information (thankfully).</p>

<p>Now, the PLUS loans are changing everything, but last year, grad students could borrow a maximum of $18,500/year of federal loans (Stafford). </p>

<p>Schools will often have a company with whom they work for private loans. Generally, you'll take out your federal loans and then take out everything else from that company.</p>

9

<p>
[quote]
Harvard, Yale, Stanford: Loan forgiveness for any job that is law-related (the standard is that JD is usually required for that type of work).

[/quote]
I assume that this doesn't go for their corporate litigators, right? (Sorry for my naivete.)</p>

<p>Also, if my family would not qualify for financial aid, I assume then that I would not be allowed to take out loans and have Harvard (etc.) pay them off for me simply because I entered government service, right?</p>

10

<p>I'm almost certain that you would still be able to take out loans and have them forgiven, regardless of your parent's financial status.</p>

<p>Search Harvard's LIPP for more information. Go to the law school website; search for financial aid; then search for LIPP.</p>

<p>Harvard's repayment goes to anyone who is doing something law-related, regardless of income. I'm pretty sure that they don't mind you doing things at smaller firms and getting repayment. Once you see the sliding scale for repayment, you'll understand why very few corporate litigators would be able to take advantage of it - mostly, they would earn too much to qualify, based on the scale.</p>

11

<p>Harvard's Low Income Protection plan</p>

<p>Low Income Protection Plan</p>

<p>Many Harvard Law School graduates devote their careers to public service work as government attorneys, human rights activists, champions of civil rights and advocates for traditionally underserved populations. Given a significant educational debt burden, such careers might not be feasible without loan repayment assistance. The Low Income Protection Plan (LIPP) was the first law school program to address this problem and remains one of the most comprehensive programs of its kind. Through LIPP, Harvard Law School is committed to preserving freedom of job choice within the legal profession for its graduates.</p>

<p>The plan helps relieve the burden of education loan repayment for J.D. graduates in full-time government, non-profit or academic jobs. In addition, full-time law-related jobs in the private sector are also covered under LIPP (see Eligible Jobs for definition of law-related). LIPP participants pay a limited portion of annual income toward annual loan repayment obligations (see Income Levels). LIPP covers the remainder of LIPP-eligible loan payments.</p>

<p>Graduates may enter LIPP at any time after graduation if their job, debt and income qualify, however, please note that LIPP assistance is not retroactive. We encourage all students to become familiar with the LIPP guidelines as they begin to explore their legal careers. The LIPP staff is available to counsel students and graduates about the program and other aspects of debt management.</p>

<p>Eligible jobs:</p>

<p>LIPP is available for Harvard Law School J.D. Program graduates who work in any full-time job for a government, nonprofit [501(c)(3)] or academic organization in the USA, or in an overseas equivalent.
Jobs in the private sector can also qualify for LIPP, but must be full-time and law related. "Law-related" is defined as follows:</p>

<p>•the distinctive intellectual skills acquired in a legal education are generally recognized as useful in the job; and </p>

<p>•of those who hold this position, it is not unusual for them to be members of the legal profession.</p>

<p>Income Levels for LIPP</p>

<p>This scale is effective as of July 1, 2006.</p>

<p>Participants allocate, according to the following "Expected Contribution" chart, a limited percentage of their earnings toward their total annual education loan repayment. LIPP covers any difference between the graduate's total eligible law school debt payments due in that year and their expected contribution toward eligible loan payments.</p>

<p>It is the policy of the LIPP program to consider income from all sources when calculating the Participant Contribution. This includes salaries from all employment, housing allowances, living allowances, subsistence allowances, bonuses, settlements, alimony, child support and rental income. In regards to bonuses and settlements, the gross amount is added to the annual salary of the participant and used to calculate the LIPP salary for the six months following its disbursement.</p>

<p>For those participants who are paid via an hourly wage and who do not receive paid vacations, such as temporary workers, we use a 48 week year to determine an annual salary. We do this to account for the two weeks of holidays businesses are generally closed and to allow for a reasonable two weeks of vacation per year.</p>

<p>When calculating a participant's LIPP salary, we also include several allowances. These allowances include dependent care costs and out of pocket health care expenses. Additionally, we apply a Longevity Allowance to recognize longer term participants. The Longevity Allowance begins in the fifth year of program participation, at which point participants will receive a $5,000 allowance to their salary. In the sixth year participants receive a $6,000 allowance, and so forth.</p>

<p>Gross Income Portion of Annual Income Graduate Pays Towards Loans Before LIPP Assistance Begins</p>

<p>$39,000 or less none
$39,001-$44,500 18% over $39,000
$44,501-$50,000 $1,000 + 36% over $44,500
$50,001 and above $3,000 + 40% over $50,000</p>

<p><a href="http://www.law.harvard.edu/students/finaid/lipp/index.php%5B/url%5D"&gt;http://www.law.harvard.edu/students/finaid/lipp/index.php&lt;/a&gt;&lt;/p>

12

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<br>

<p>To put the LIPP policy in a nutshell: wrong. You still get your loans paid off, even if your parents are rich.</p>

13

<p>I think that many law schools have loan forgiveness programs for students who pursue public interest careers. </p>

<p>For example, Penn Law's program allows any graduate who takes a "law-related" job (utilizes the legal training and skills of the graduate) in a public interest organization to have all or a portion of their student loans forgiven. A public interest job, for purposes of this program, means (I'm paraphrazing here) (i) employment by a nonprofit or other organization whose primary purpose is to advocate on behalf of persons whose interests are not adequately represented by the private sector or the government, (ii) government employment, (iii) clinical law teaching jobs if serving the same population described in (i) or (iv) self-employment or employment by private employers if 50% of the firm's work is basically pro bono. There is also an income eligibility component. </p>

<p>Salary Contribution</p>

<p>Up to $35k $0
$35,001 to $40,000 $20% of amount over $35k
$40,001 to $45,000 $1,000 + 40% of amount over $40,000
$45,001 and over $3,000 + 60% of amount over $45,000</p>

14

<p>You know, I've often wondered about some of the quirks about the Harvard LIPP program, particularly the fact that it will still pay you if you take a private-sector job, as long as it's low-paying. </p>

<p>For example, I know a guy who may be going to Harvard Law soon and who will almost certainly end up working for his father after he graduates, and he will most likely eventually inherit his father's company. It seems to me that, according to the LIPP rules, all they would have to do to manipulate the system is just pay him a salary just a dollar under the lowest LIPP bracket such that LIPP makes all of his loan payments. Then, the year after the loan is finally paid off by LIPP, his father can simply give him all of the money he would have been paid as a regular lawyer as one big lump sum, or, more likely, simply hand him a big chunk of equity in the company. Actually, he may not even have to do that. Like I said, he's probably going to inherit the company anyway, so any salary he forgoes to retain LIPP eligibility can simply be reinvested back into the company as retained earnings, thus increasing the value of his inheritance. </p>

<p>Granted, I'm not a lawyer so I don't know if there is some clause within the LIPP rules that bar such a thing from happening. But my admittedly cursory examination of the rules makes it seem that there is nothing to prevent such a situation from happening. I think that such a thing may be inevitable if you include private sector jobs, as private-sector jobs often times include family businesses where nepotism abounds and where it's easy to move money around to make individual family members seem richer or poorer than they really are.</p>

15

<p>I thought that LIPP applies only to graduates who work in full time government, nonprofit (501(c)(3)) or academic organizations? Wouldn't that typically preclude working for the family business?</p>

16

<p>Okay, adding some sense into this....</p>

<p>
[quote]
I think that many law schools have loan forgiveness programs for students who pursue public interest careers.

[/quote]

Yes and no. Penn and Harvard are the exceptions. Yes, top schools do loan forgiveness; however, at lower-ranked schools, everyone does public interest because they don't get the good private sector jobs. Those schools also don't have the endowments. If you look beyond the top 25, you'll see that loan forgiveness is minimal - given in limited sums to a limited number of students (so even those who do low-paying public interest work don't get it). I'll hammer this issue home because the difference in quality of loan forgiveness as you slide down the prestige scale is simply massive. It is completely wrong, IMO, to give a kid the impression that he'll get loan forgiveness if he goes to a second-tier school. Simply unlikely.</p>

<p>As for Harvard, it seems to imply that its purpose is for gov't, academic, etc; however, it is allowed for any low-paying job. I think that it's like the Second Amendment - whether or not the purpose is satisfied, you still get the benefit. ;)</p>

<p>Where's Jonri when you need him?</p>

17

<p>The Navy has specific programs to reduce the financial burden on law school grads. I am sure the other services do as well.</p>

<p><a href="http://www.navy.com/careers/officer/legal/%5B/url%5D"&gt;http://www.navy.com/careers/officer/legal/&lt;/a&gt;&lt;/p>

18

<p>Check out NYUs public interest law tuition scholarship
Vanderbilt School of Law offers loan forgiveness</p>

19

<p>one thing i learned while investigating LRAPs is that most law schools will consider your assets (and your spouse's, if you're married) when deciding how much of your loans they'll help you pay off. So buying a house or a car, or contributing to a retirement plan, can actually result in lower LRAP payments from the law school to your creditors.</p>

<p>Other things to look at:
* some LRAPs consider cost of living in the city you work...so they'll pay more if you end up in New York or San Francisco than if you work in Tulsa
* some LRAPs cover your clerkship year (I know NYU does and Michigan doesn't)
* some LRAPs take into consideration whether you have kids, and will give you more money if you have childcare expenses (Michigan does this, NYU doesn't).</p>

20

<p>
[quote]
I thought that LIPP applies only to graduates who work in full time government, nonprofit (501(c)(3)) or academic organizations? Wouldn't that typically preclude working for the family business?

[/quote]
</p>

<p>Consider the following quote:</p>

<p>
[quote]
Eligible jobs:</p>

<p>LIPP is available for Harvard Law School J.D. Program graduates who work in any full-time job for a government, nonprofit [501(c)(3)] or academic organization in the USA, or in an overseas equivalent.
Jobs in the private sector can also qualify for LIPP, but must be full-time and law related. "Law-related" is defined as follows:</p>

<p>•the distinctive intellectual skills acquired in a legal education are generally recognized as useful in the job; and </p>

<p>•of those who hold this position, it is not unusual for them to be members of the legal profession

[/quote]
</p>

<p><a href="http://www.law.harvard.edu/students.../lipp/index.php%5B/url%5D"&gt;http://www.law.harvard.edu/students.../lipp/index.php&lt;/a&gt;&lt;/p>

<p>Hence, it seems to me that that definitely includes working for the family business, as long as it has something to do with law. In the case of the guy I know, his father is in real estate, and so obviously has to hire lawyers all the time to deal with contract issues. Hence, his son could become a lawyer and then work for his father. In fact, if he gets into Harvard Law (of which I think he has a good chance), and he decides to go, then one could consider the usage of LIPP as part of a brilliant, if devious, way to game the system. He can rack up a whole bunch of loans, even taking out a bunch of loans that he doesn't even really need. Then when he graduates, he can work for his father, and his father can pay him just under the lowest LIPP bracket such that he never has to pay any of his loans, as LIPP would pay it all. Then, the moment after all the loans are paid off, his father gives him a huge lump sum of cash that represents all of the money he would have been paid as a regular lawyer. In other words, he ends up making the same amount of money overall, but just on a deferred basis, just to be able to take advantage of LIPP. The bottom line is that, even though he and his family is rich, he ends up getting a Harvard law degree for free. </p>

<p>The truth is, when you're talking about family-run businesses, accounting games inevitably are played in order to make individual family members seem to be poorer than they really are just to be able to take advantage of lower taxes or other means-tested benefits. For example, I heard of one guy whose family is super-rich from a family business, but nevertheless got a full ride to college because his immediate family temporarily handed all of its assets to somebody else in the family (i.e. a 2nd cousin or something), thus making his immediate family "poor" enough to qualify for full aid. It's pretty disconcerting to see this guy wearing Prada and Boss and tooling around campus in a new car, while knowing that he's getting full financial aid. Of course the trick is that his clothes and car don't actually "belong" to him, but actually belong to somebody else in the family, and he's just "borrowing" it.</p>