Forgiving student debt

The major obstacle attorney Andrew Thomas faced in pursuing his dream of working in the public sector was finding the money to cover his student loan debt.

His desire to do public interest work led him to Indiana University Maurer School of Law where he completed law and Master in Public Affairs degrees in 2011. Now he is a staff attorney at Indiana Legal Services Inc. in Fort Wayne, primarily representing clients in divorces complicated by domestic violence.

Thomas, 33, likes his job and intends to stay in the public sector, but he doubts he would be able to work as a legal aid attorney and still pay all his bills without federal loan repayment programs.

He is enrolled in the federal Income-Based Repayment program which reduced his monthly loan payments from more than $1,000 to about $350. Also, he is hoping to qualify for the Public Service Loan Forgiveness program which will erase the balance of this student debt if he continues to do public interest work for at least 10 years.

Though programs are significantly easing his debt burden, Thomas is still worried about his student loans.

Congress has been tossing around ideas to change the loan forgiveness program. Members have proposed either capping the amount of the student loan that can be erased at $57,500 or doing away with the program altogether. Thomas is concerned one of the ideas will take hold and leave him with an unexpected debt when he celebrates his 10-year anniversary in legal aid.

“I fear I’ll do everything they say then they will pull the rug out from under me,” Thomas said.

The PSLF program is open to any public sector employee, including social workers, health care workers and teachers as well as attorneys, but the push against the program prompted the American Bar Association to launch a social media campaign this summer. Lawyers like Thomas, who work for nonprofits or government entities and are committed to continuing the work because of the potential of having their loans discharged, are being encouraged to tell their senators and representatives how imposing limitations or eliminating the program would impact them.

Personal stories are vital to the preservation effort because, as the ABA acknowledged, there are no hard numbers of how many stand to benefit from loan forgiveness and what the cost of the program actually is. Part of the reason for the lack of data is that no loans have actually been forgiven because the program is not 10 years old. PSLF was started in 2007 so the earliest any participants will be eligible for the benefits is 2017.

Although no proposals regarding loan forgiveness are currently pending on Capitol Hill, House Republicans did indicate their willingness to repeal the program this past spring. In March, the Republicans tendered a budget that realized savings through reversing the expansion of the Income-Based Repayment program and ending the PSLF program.

Floreancig

At Indianapolis Legal Aid Society Inc., general counsel John Floreancig was incredulous at the prospect of cutting the forgiveness program for public interest attorneys. He described the PSLF program and repayment assistance as an investment in the community, allowing lawyers to stay in civil legal aid and help low-income people.

“Does Congress not understand what good work is done by these people?” Floreancig said. “When you get a legal problem off a person’s back, I find life’s other problems come back into order.”

Arguing the final impact

The Obama Administration estimated in its recent budget the Income-Based Repayment and the PSLF programs will cost the federal government $11 billion annually.

Jason Delisle, director of the Federal Education Budget Project at the public-policy institute New America, argues that the forgiveness program is more than a budget issue. He said the program is distorting higher education and the labor market. It is contributing to the hike in law school tuition as well as helping depress salaries in both the public and private sectors.

Law firms and public interest entities no longer have to justify what they are paying their employees, in part, because the federal government is removing the burden of student loan debt, he said.

Laramore

Jon Laramore, executive director of Indiana Legal Services Inc., understands the argument that loan assistance programs are keeping paychecks small but said that is not the reality. His agency has to attract highly qualified attorneys, regardless of their debt burden, so the primary driver of salaries is market competition, not who qualifies for government loan repayment assistance.

Both Laramore and Floreancig said the programs help recruit attorneys, but the participation rate in these programs among Indiana’s civil legal aid attorneys is not overwhelming. Sixteen of the 55 ILS staff attorneys receive repayment assistance; five of 12 attorneys at the Neighborhood Christian Legal Clinic participate in the PSLF program.

At Indianapolis Legal Aid Society, only one attorney, John Sage, is in the federal repayment program.

Sage said the assistance had enabled him to repay his student loans while still having enough left for housing, transportation and food. Without the help, he would probably have to leave his job in public sector, something he does not want to do because he likes the pace of the work and the ability to handle many cases.

“I want to help people,” Sage said. “Here I can do that.”

As for law school tuition, the ABA has countered there is no evidence to link the rising costs to the forgiveness programs. In fact, since the inception of the PSLF program, tuition has increased at a slower rate than before the program was implemented. This trend suggests to the ABA that the forgiveness program is not having the impact that others argue it has.

Still not enough

The ABA contends the repayment and forgiveness programs stabilize the public sector because they not only enable nonprofits and government agencies to fill chronically vacant positions, they also provide the means for attorneys to take and keep such jobs.

Even Delisle is not calling for the programs to be completely dismantled. He advocates for keeping both programs but making changes, such as making the income-based repayment amounts at least 15 percent of an individual’s annual income and extending the time one must do public interest work to qualify for loan forgiveness to 25 years.

“Ten years is too short,” Delisle said.

In Fort Wayne, Thomas pointed out that despite repayment assistance and forgiveness programs, legal aid still does not have enough attorneys to meet the need in the community. A difficult part of his job is telling the people who come into the office for help that the agency does not have the money and attorneys to represent them.

Thomas said he has been humbled to see the gap between those who do have access to justice and those who are left flailing alone in the legal system. His frustration is balanced by the cases where he feels he really helped a client. The reward of a handshake or hug gives him the incentive to continue.

“I hope I find a way to stay at Indiana Legal Services,” Thomas said.•