Georgetown Law's Loan Policy Is Good for Society as Well as Students

Photograph courtesy of Georgetown U. Law Center

Georgetown U. Law Center
August 21, 2013

At a time when colleges are under pressure to help reduce their graduates' education debt, Georgetown Law is doing just that—as it has for over 25 years—by helping graduates who work in the public interest pay their law-school loans. Recently the New America Foundation attacked us for doing so, both on its Web site and in a commentary in The Chronicle that claims, falsely, that we are "offering free rides on the taxpayers' dime."

In 1986, Georgetown created its Loan Repayment Assistance Program, to help graduates pursue whatever careers they wanted, including low-paying public-service careers, without having to wonder every month how they would pay their bills. The program reimburses graduates for some of their student-loan payments to the federal government if they work for government agencies or most tax-exempt nonprofit organizations.

In 2007, Congress created the Public Service Loan Forgiveness Program, a kind of loan-repayment-assistance program for the entire nation. Under this law, any graduate of a college or of a graduate or professional school can put 10 to 15 percent of her annual discretionary income toward student-loan repayment. After that graduate performs 10 years of full-time public service, the federal government will forgive the balance. The program is not focused on lawyers, but is a reward for all public servants: teachers, nurses, social workers, municipal employees, doctors in the public-health service, and many others.

Georgetown could have ended its own effort when the national program was created and left it to the government to assist our graduates. Instead we put more money into our Loan Repayment Assistance Program, so that through a combination of that and the federal program, our graduates who dedicate themselves to the service of the public for a decade and earn no more than $75,000 annually would not be burdened by repayment of law-school-tuition loans. This is a particularly efficient form of scholarship aid, helping those most in need after graduation.

The Loan Repayment Assistance Program assists more than 350 graduates, working as prosecutors, public defenders, child advocates, and other public-service jobs, at an expected cost to Georgetown Law of about $2-million this year alone. Our decision to provide loan assistance beyond what the federal program offers is not a "loophole" in the federal program; it is a supplement to public support for our graduates who serve the public.

The New America Foundation charges that law schools with loan-repayment-assistance programs are simply passing increased tuition costs on to the federal government, because funds for the programs come from tuition as well as from alumni donations. That charge is wrong for a number of reasons.

First, tuition is determined by what it costs to offer a high-quality legal education and is constrained by market competition. Of the 20 top-ranked law schools, Georgetown's tuition is among the lowest. While the New America Foundation is suggesting we are exploiting the federal loan program to raise tuition above what we could otherwise charge, we are, in fact, charging less for tuition than our peers, most of which do not have programs that provide the support that ours does.

Second, while the foundation implies that loan-forgiveness programs are a driver of significant tuition increases, Georgetown's Loan Repayment Assistance Program hardly figures into our tuition rate at all. It is a tiny fraction of our budget, about 1 percent, considerably less than our expenditures for utilities or library books.

Third, the foundation misses the obvious fact that the vast majority of students paying our tuition are either not using federal loans at all or will pay back their loans, in full and with significant interest. Those students will receive little or no federal forgiveness. Thirty-six percent don't borrow federal money at all. Most of the rest are private-sector employees who will pay back their loans in full over several years. In short, 90 percent of Georgetown Law students do not benefit from the program. Through their loan repayments, these graduates—not the federal government—are supporting our Loan Repayment Assistance Program. Alumni are contributing to the program as well, through their philanthropy.

In fact, graduate and professional students pay a disproportionate price for federal loans. For example, last year our students paid about $2.4-million in federal-loan fees simply for the privilege of borrowing from the government at interest rates of 6.8 to 7.9 percent; the government's profit reduced taxpayers' burden by far more than the amount that may eventually go to forgiving some of the debt.

And our students are a good risk. Georgetown Law has a three-year default rate of less than 1 percent.

Our students are aware from before their first day on campus that however they choose to fulfill their professional aspirations—whether through a financially lucrative private career or a life of public service—they will contribute to the Jesuit-inspired mission of the institution. Georgetown Law is proud to continue that mission through the support of its public-service students and alumni—for the benefit of society, not at its expense.

William M. Treanor is dean of the Law Center at Georgetown University.