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Wednesday, November 11, 2009

Law - "ABA Proposes Law Student Loan Relief"

That is the heading of this story today by Karen Sloan of The National Law Journal. It begins:

The American Bar Association is lobbying the Obama administration and Congress to extend relief to recent law school graduates who went into debt to finance their legal educations but haven't been able to find a job because of the recession.

The ABA wants the government to let unemployed graduates convert private loans into federal ones. The change could allow them to defer repaying those loans for as long as three years.

More:
Debt is a huge issue for many law school graduates, particularly given the difficult legal job market. The average public law school graduate borrows $59,324 for law school, according to the ABA. That figure is $91,506 for graduates of private law schools. Many law students take out a combination of federal and private loans.

Different rules apply to federal and private students loans. Federal loans can be deferred for as long as three years if the borrower is unemployed. Private loans generally don't come with that deferral flexibility, said Peter Halle, a senior counsel at Morgan, Lewis & Bockius and a member of the economic crisis committee. He is spearheading the ABA's efforts on the student debt issue.

"There's a fair number of people of people who have private loans, and they don't have the flexibility they need today," Halle said. "Without doing anything radical, we're looking to see if we can increase the amount of money a law student can borrow from the federal government and make that retroactive."

Essentially, the ABA proposes allowing law graduates to borrow from the federal government to immediately pay off any private debt, since most private loans carry no prepayment penalty. Borrowers then could enjoy the deferral benefits of federal loans, such as not having to start repaying loans when they're out of a job.

"The point of the program is to provide a temporary bridge by swapping out the private loan for a public one," Halle said.

Picking up on the story, Elie Mystal of Above the Law has this commentary that concludes: "This makes way too much sense. Let’s hope nobody screws it up."

Posted by Marcia Oddi on November 11, 2009 02:33 PM
Posted to General Law Related