Tax Code Factor in HLS Loan Program

With the announcement Friday that the Harvard Law School had extended its Low Income Protection Plan (LIPP) program, administrators hoped they would calm student concerns about the debt they'd face after graduation.

The program had been criticized in recent years by students and alumni who said it didn't cover enough graduates--and didn't relieve enough debt.

Responding at least in part to these anxieties, the Law School announced it will increase the number of graduates who will be eligible.

But some say the program should do even more--and while a press release trumpeted the LIPP changes as "an extensive expansion," the $1.5 million budget for the loan program hasn't much changed.

According to Lisa Dealy, who directs the LIPP program, Law School administrators decided, in response to recent changes in federal tax law, to give substitute a certain number of forgiveness grants that graduates had been receiving with loans. The result, she said, is that the LIPP has more money than it gives away. And so Friday's announcement that the program would expand doesn't necessarily mean the program will give more money to graduates.

A Different LIPP

The average Harvard Law School (HLS) student currently graduates with over $70,000 in debt to the University. College debt compounds the pressure to choose careers based on salary, rather than personal interest or public priorities, students say.

"Without LIPP it would be impossible for many students to do public interest jobs, unless they come from a silver-spoon family," said Joseph Scully, a member of HLS' class of 1999.

LIPP aims to address this problem by forgiving some of the debt of many students pursuing public interest careers.

And under the new plan, alumni will be eligible for debt forgiveness if they earn under $72,000 a year in law-related public interest positions and meet certain other conditions. Under previous rules, alumni had to make less than $51,000 to qualify.

The new plan will also expand benefits for many alumni with children by increasing dependency allowances and expanding benefits for some alumni who work part-time while raising children.

Students have been calling for greater generosity from the LIPP program for over two years, according to Ayn Ducao, co-chair of the Student Public Interest Network (SPIN) and a member of HLS' Class of 2001.

Ducao said over 60 student groups "from across the spectrum, from the Republicans to Democrats to the squash team to the South Asian Law Students Association to the Black Law Students Association" voiced support for LIPP reform this fall. SPIN also collected 600 signatures in support of greater debt relief.

Ducao also said a report from McKinsey & Co. consultants showed that students cared as much about reforming loan forgiveness as they did about issues like class size and grading.

Harvard Law School may also be responding to competitive pressure.

"More and more incoming students are very well-versed in the various loan forgiveness programs, and that is becoming a very important criterion in their decision [about which Law School to accept]," Dealy said. "These are people who may or may not end up in public interest jobs, but they want to know that it's an option if they go that route."

Room for More?

Ducao said she was "very pleased" about the changes, and said they will improve students' outlook about what to do after graduation.

"The improvements to the program will help people in making career choices," she said.

But Ducao and some other students said the reforms need to continue.

"Given many student take on a lot of debt, financial constraints are still a concern," she said. "LIPP is a very strong program. Certainly, we want improvements tot he program to make if better."

Dean of HLS Robert C. Clark did not make at least two significant changes called for by student groups and alumni.

The "imputed parental contribution"--which affects alumni who would prefer to take on debt rather than require their parents to pay for them to go to law school--will remain.

And the so-called "marriage penalty" will remain, as the school will continue to calculate graduates' eligibility for the program based on the combined incomes of a couple.

"There is a disincentive to get married," Scully said. "It makes certain choices difficult. Certain people do not feel uncomfortable moving in together, but others have certain moral or religious beliefs that make it much more difficult [without marriage]. So it's kind of unfair in that respect."

Despite Harvard's reforms, some students said HLS' loan forgiveness program still falls short of Yale's. Yale generally puts fewer restrictions on graduates loan forgiveness, with a higher salary cut-off for complete loan forgiveness and no restrictions on what type of work qualifies for its debt relief program.

And Ben Classman, a member of HLS' Class of 2000, said the current debate fails to ask questions about more radical alternatives to a program like LIPP.

"Failure to think beyond discrete issues tends to preserve the structure of the status quo," Classman said after praising some of the changes. " It's the difference between reformation and transformation."

A Tax Break

Dealy said the announced changes are not expected to significantly increase the program's budget.

The federal Taxpayer Relief Act of 1998 made the tax benefits of receiving loans greater than that of receiving grants, in many cases, Dealy said.

As a result, HLS has in recent years given fewer grants and required students to take on more loans, in order to take advantage of the changes in the tax code.

These changes put HLS's LIPP program significantly under budget.

The LIPP reform program, Dealy said, is more about "changing the rules of the program," not a result of significantly increased financial generosity on the part of HLS.