Law School Association Highlights Uncertainty About Access to Repayment Improvements
Heads up, Class of 2012! The following letter was sent by Susan Prager, Executive Director of the American Association of Law Schools, to law school deans. Ms. Prager identifies the uncertainty surrounding the implementation of President Obama's announced improvements to student loan repayment calculations. A negotiated rulemaking committee is currently considering these and other regulatory questions affecting student loan borrowers. Some members of the Class of 2012 may need to take action now (with the help of their financial aid offices), in order to preserve their ability to benefit. The problem is, nobody knows how these rules will end up, so it might be a waste of time. Like anything student loan related, it's complicated. Read on if you're interested. Other information about the new initiatives is on my blog here: Will the President's Student Loan Initiatives Help You? and here: The Impact of Legislative and Regulatory Updates on Student Loan Borrowers.
January 17, 2012
TO: Law School Deans
FROM: Susan Prager, Executive Director
RE: Possible new student loan repayment benefit: Impact on 2012 graduates
I am writing to bring your attention to changes that the President recently announced that may substantially impact some of your law students' monthly loan repayment obligations. The President's plan may entitle those graduates who have relatively low starting salaries and continue to have relatively low incomes to have a large fraction of their student loan debt forgiven after twenty years of making modest monthly repayments (or ten years in the case of those who work in public service). If the federal regulations currently being drafted are promulgated in a form as expansive as the President's October 25, 2011, announcement implies, then law graduates who have only moderate incomes will benefit, even if they work exclusively in the private sector or are not employed.
However, it is possible that the regulations yet to be written will condition graduates' eligibility for this benefit on their having executed a student loan instrument during the 2012 calendar year. If so, potentially eligible students-those who did not have undergraduate loans before 2008-who are currently in their final semester of law school this spring (2012) may be able to benefit from the new regulations only if law school or university financial aid offices work during the spring semester with these students to (a) cancel at least one of their academic year 2011-12 student loans, and (b) replace the canceled loan with fall 2011 and spring 2012 loans. It is our understanding that an inquiry was made to the Department of Education for clarification about whether law students will need to obtain new loans, but the Department has declined to answer the question because it is still working on the regulations.
It appears that the rulemaking is in its early stages; thus, we will probably not know until April 2012, at the earliest, whether those cancellations and replacements will be necessary or even whether the benefit that the President announced will be available to all borrowers who did not have undergraduate loans before 2008. For these reasons, AALS is making no recommendation as to how law schools might advise their potentially eligible graduating students. AALS also recognizes that some schools will not be able to marshal their financial aid apparatus in time to have students execute the necessary documents before they graduate. However, we understand that some law schools are undertaking this administrative work now. I include a link to memoranda from Georgetown's Dean William Treanor and Professor Philip Schrag as information to help you decide, together with your financial aid officials, how to counsel students in the face of such uncertainty. To see the memoranda please click here. The linked memoranda include all the information we have to date.
With thanks to Georgetown
for its generosity in sharing
this information –