New Loan Repayment Assistance Program (LRAP) at Empire Justice Center

December 1, 2006

Next year, attorneys at Empire Justice Center will take part in a new loan repayment assistance program (LRAP) recently approved by our Board of Directors.  The program will provide attorneys and those with job-related graduate school debt at Empire Justice with a forgivable loan each year to partially offset the monthly expense of repaying that  debt.

In 2007, recipients of LRAP will be responsible for the tax consequences of the assistance they receive.  However, in recent conversations the Monroe County Bar Foundation has shown an interest in exploring sponsoring the Empire Justice LRAP beginning in 2008.  If the Monroe County Bar Foundation does sponsor the program, LRAP recipients could exempt the forgiveness of the loans from counting as taxable income under 26 U.S.C §108(f).
 
This pilot program is the result of efforts by an ad hoc committee of attorneys at Empire Justice in cooperation with the management team to develop a sustainable loan assistance program for current and new staff with law school debt.  The ad hoc group began the process with individual assessments to determine the loan debt of current staff.  Staff members that wanted to participate in the process understood they would have to disclose their current law school debt and monthly payment amounts to participants in the group.  The group contacted 17 different LRAP programs at public interest offices across the country to assess the features of each of the various programs.

From these programs, the group decided on four model programs and applied the LRAP formulas of those programs to the loan debt of participants in the ad hoc group.  After we applied our debt numbers to these formulas, we assessed the pros and cons of each of the four formula's and decided on which LRAP program formula would work best for our goals and described these results in a memo to the management team. Based on the models, the organization’s goals and the budget, Empire Justice decided that we could afford a program design that capped net monthly loan payments at 6% of gross monthly salary.  With 8 attorneys eligible the cost will be about $10,000 per year. The Board has indicated that it will review the program design for continued affordability as the new staff with eligible loans are hired.

The staff committee’s memo described the financial burdens faced by legal services attorneys with significant law school debt as follows: 

The economy has significantly changed since legal services programs began in the 1960’s.  Most notably, the costs of education and a law school degree have increased significantly.  Anecdotal evidence from lawyers who graduated in the 1960’s, ‘70’s and into the ‘80’s indicates that they graduated with relatively little undergraduate and graduate school debt.  Today, it is not uncommon for lawyers to finish their educations with upward to $120,000 in educational debt.  Increased debt loads are coupled with an economy that places greater demands on our budgets for basics such as housing, taxes, utilities, health care and child care.  Studies indicate that we are required to spend a higher percentage of our income today on the non-frivolous consumer goods listed above, than we did in the 1970’s. 

While legal services salaries have increased over the years, non-profit programs have suffered similar budgetary strains and have not always been able to keep salary levels commensurate with yearly cost of living increases.  Educational debt has become a significant monthly expense to lawyers; a monthly payment often comprises the largest single debt payment for recent graduates, sometimes totaling more than housing payments.  While lawyers who graduated twenty years ago had to make hard choices about how to spend their money and sacrificed personal comfort to work in legal services, today’s graduates often can’t even make those choices because they cannot pay their student loans and work in public interest law.

Recent graduates who are able to find a way to make it, often do so by consolidating their loans over longer time periods.  Today, unlike even ten years ago, graduates are extending repayments terms to 20 or even 30 years.  (Ten years ago, the typical time period was 10 to 15 years.)  These extended repayment terms, while they make a monthly payment affordable, mean that not only are legal services lawyers paying more in interest for their loans, but that their loans will be a strain on their incomes for a much longer period of time.  Many people end up relying on the support of partners and family members as the only way to be able to afford their jobs.         

The negative impact of the increased costs of education has on legal services programs has never been calculated but it exists.  The pool of graduates who are financially able to accept legal services jobs is dwindling and has the potential of eliminating those who do not come from privileged backgrounds or have other financial resources.  In addition, there is serious jeopardy to the retention of lawyers in legal services.  While in the past, newer legal services lawyers could scrimp and save for 10 years while they paid off their loans, the extension of loan terms to upwards of 30 years means that many will be incurring more significant but necessary debt – such as mortgage payments, child care and financing the education of their children – while they are still making payments on their own loans!