Income Based Repayment As a "Subsidy" for Legal Education

Brian Tamanaha

In the absence of IBR, law schools with bad results for most students would be forced to drastically slash tuition because few rational students would enroll in these institutions at current prices. Owing to IBR, however, these law schools can entice students by telling them that they need not fear the size of the debt they will take on because their monthly payments will be capped at a manageable level and the remaining debt will be forgiven. One administrator at a middle-ranked law school used IBR in precisely this way, saying “the loan forgiveness aspects of these plans are essentially back end scholarships.”

Law schools have smartly begun to incorporate IBR into their admissions pitch, making assertions that echo Schrag’s position. In a promotional podcast extolling the “magical Juris Doctor” degree, California Western law professor Don Smythe asserts that “$100,000 plus” debt should not worry prospective students because IBR, which he calls an “important public subsidy to all prospective law students,” insures low monthly payments and debt cancellation after 20 years. Dean Steve Smith adds, “[a]nd in a sense it is a safety net because whatever the principal is you’ve borrowed you are not going to go bankrupt; you should not be paying more than, now it is less than, 10 percent, of your adjusted gross income, your discretionary income, to repay loans. So that is a kind of safety net.” As noted earlier, the California Western class of 2011 had average debt of $153,145, the highest nationwide; nine months after graduation, only 112 out of 285 graduates had landed full time long term jobs as lawyers; the bulk of the graduates working in lawyer jobs were in firms of 2-10, which typically pay less than $60,000, far below the amount necessary to manage the average debt. Law schools like this would go under without IBR.

IBR is intended to rescue grads who find themselves drowning under large educational debt. It was not set up to be utilized by schools—fighting for their survival in the face of declining applications—as an inducement to persuade concerned prospective students to leap into risky financial waters that will leave them floundering.