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Federal loan repayment program set for expansion

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The Obama administration’s move to expand its student loan repayment assistance program – an initiative which may help some lawyers struggling with debt – has put another spotlight on the debate over the rising cost of law school tuition.

President Barack Obama signed an executive order June 9 that would expand the Pay As You Earn program to 5 million more borrowers. This program caps federal student loan payments at 10 percent of the borrower’s income and forgives any amount left unpaid after 20 years.

Currently, PAYE is available only to those who graduated in 2010 and later. The president is proposing the initiative be offered to those who borrowed before October 2007 or ceased borrowing by October 2011.

However, as some point out, the executive order does little to address the problem of ballooning college costs.

While Christopher Chapman, executive director of Access Group Inc., praised the expansion of PAYE, he said many factors contribute to the problem of student loan debt. Part of the solution will have to come from schools making changes to their cost structure.

“No business can consistently increase the price of a product beyond the income of the customer without a negative impact,” Chapman said, adding schools have been taking “simple steps” to curb costs and provide more value to students.

Access Group Inc., a nonprofit comprised of 192 American Bar Association-approved law schools, educates and advises student borrowers who are seeking a professional degree.

Austen Parrish, dean of the Indiana University Maurer School of Law, noted tuition is a complicated issue. Often, he said, the sticker price is not the true cost law students pay because many receive financial assistance from the school.

He estimated that at IU Maurer, more than 90 percent of the students have been awarded reduced tuition rates with the average amount of reduction being between $22,000 and $25,000 annually.

In addition, providing a “rich intellectual environment” is not a cheap endeavor, Parrish continued. To be among the top ranked, law schools must offer students practical experience through clinics and externships with quality faculty and practitioners.

“It’s unclear that you can provide a high-quality law school education at a bargain basement price,” Parrish said. “I think the brightest students want to go to a place that provides a full range” of experiences.

The PAYE expansion will not happen immediately. The president has charged the Department of Education with developing the regulations and having the program available to more borrowers by the end of 2015.

Marvin Smith, director of student financial services at Indiana University-Purdue University Indianapolis, said questions surrounding how the expansion will be implemented make it difficult to determine how beneficial the program will be to students on the IUPUI campus, including those enrolled at the Indiana University Robert H. McKinney School of Law.

One very worrisome issue for law school graduates is the president’s apparent contradictory moves. On the one hand, he wants to increase PAYE while, on the other hand, his FY 2015 budget request would lower loan forgiveness amounts of borrowers who are in professional and graduate schools.

The White House is proposing to lower the amount of a graduate student’s debt that can be wiped away under the Public Service Loan Forgiveness program, according to an article written by José Espada, director of medical student financial aid at the IU School of Medicine. Under Obama’s budget, loan forgiveness would be capped at $57,500.

Chapman sees the expansion of PAYE as a positive move since it will make more student borrowers eligible for repayment assistance. PAYE and other similar loan repayment programs are good tools for law students and others with high debt and low salaries, he said.

However, Smith and Chapman said borrowers could actually end up owing more if they participate in the PAYE program. While the monthly payment will be lowered, the interest rate will not decrease so the balance on the loan could grow. Chapman also noted that the amount erased is counted as taxable income in the year it is forgiven, requiring borrowers to declare more in income for that year.•
 

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  1. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  2. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  3. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

  4. Why in the world would someone need a person to correct a transcript when a realtime court reporter could provide them with a transcript (rough draft) immediately?

  5. This article proved very enlightening. Right ahead of sitting the LSAT for the first time, I felt a sense of relief that a score of 141 was admitted to an Indiana Law School and did well under unique circumstances. While my GPA is currently 3.91 I fear standardized testing and hope that I too will get a good enough grade for acceptance here at home. Thanks so much for this informative post.

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