Law School Deans, Law Schools, Money, Student Loans

Law School Dean Responds To Accusations of Inflating Tuition at Taxpayer Expense

A week after accusations surfaced that a top law school was gaming the federal government, the dean responds -- not very persuasively.

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This is some quality dissembling. Dean William Treanor of Georgetown Law decided to enter the fray by responding to the New America Foundation report that I wrote about last week that claimed that Georgetown Law was using a loophole to use its public service debt repayment program to profit off the federal government. By way of recap, the school agrees to pay off the income-based payments of its students in the federal income-based repayment plan itself, then raises tuition for the next crop of students and uses that money to pay off their payments later, creating a big circle where tuition is artificially (if only marginally) inflated and taxpayers pick up the tab and the school pockets the profit.

Dean Treanor’s response attempts to deflect the criticism, but the article misses the entire point of the controversy.

What’s the important life lesson that Dean Treanor learned from Patches O’Houlihan? Oh right: Dodge, Duck, Dip, Dive.

And Dodge….

Last week’s coverage of the New America Foundation report kicked up a bit of outrage, mostly from Georgetown and its alums, accusing me of taking part in needlessly impugning the good work public sector lawyers do by casting this program as gaming the system. This couldn’t be further from the truth. In fact, the crux of the argument was not that law school programs aiding public service lawyers are bad, but that the shady system employed by Georgetown (and possibly others) risks undermining the whole regime designed to help deal with student debt.

Indeed, the phrase “this story is why we can’t have nice things” was used.

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Dean Treanor’s response in the Chronicle of Higher Education is entitled “Georgetown Law’s Loan Policy Is Good for Society as Well as Students,” marking the first sign that this is going to miss the point entirely. Helping public service lawyers is not bad. Creating a Ponzi scheme with federal dollars is bad.

Georgetown could have ended its own effort when the national program was created and left it to the government to assist our graduates. Instead we put more money into our Loan Repayment Assistance Program, so that through a combination of that and the federal program, our graduates who dedicate themselves to the service of the public for a decade and earn no more than $75,000 annually would not be burdened by repayment of law-school-tuition loans. This is a particularly efficient form of scholarship aid, helping those most in need after graduation.

Hop on board for the guilt trip! “You should reward us for continuing to help students.” No, actually that’s not the problem. In the previous article, I linked to Professor Paul Campos outlining the problem in chapter 8 of his e-book, Don’t Go To Law School (Unless) (affiliate link). Campos notes that IBR, designed to provide further help to public sector lawyers, has actually reduced the scale of elite law school commitment to LRAP programs because they have pushed the issue increasingly onto taxpayers.

Back to Dean Treanor:

The Loan Repayment Assistance Program assists more than 350 graduates, working as prosecutors, public defenders, child advocates, and other public-service jobs, at an expected cost to Georgetown Law of about $2-million this year alone. Our decision to provide loan assistance beyond what the federal program offers is not a “loophole” in the federal program; it is a supplement to public support for our graduates who serve the public.

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And this also isn’t the problem. Offering loan assistance isn’t a loophole. Passing the cost of that along to the next crop of students through a tuition hike that then gets passed on the back end, in part, to taxpayers in the form of loans fully forgiven another decade hence is a loophole. If Georgetown merely bootstrapped its LRAP commitment into making IBR payments for students and committed to not increasing tuition in order to pass off the cost, that would be fine.

And maybe that’s what Georgetown did. Though if that’s true, why wouldn’t Dean Treanor just say so without all this other fluff and misdirection? It just screams bad faith. Speaking of bad faith, let’s not forget that troublesome video of another dean coaching students on shielding income to keep Georgetown’s IBR payments down. That did not get addressed in this response.

The New America Foundation charges that law schools with loan-repayment-assistance programs are simply passing increased tuition costs on to the federal government, because funds for the programs come from tuition as well as from alumni donations. That charge is wrong for a number of reasons.

First, tuition is determined by what it costs to offer a high-quality legal education and is constrained by market competition. Of the 20 top-ranked law schools, Georgetown’s tuition is among the lowest. While the New America Foundation is suggesting we are exploiting the federal loan program to raise tuition above what we could otherwise charge, we are, in fact, charging less for tuition than our peers, most of which do not have programs that provide the support that ours does.

Simpler Treanor: Georgetown didn’t increase tuition to pass our costs on to the taxpayer because… well, look, we’re still pretty cheap so who cares?

Second, while the foundation implies that loan-forgiveness programs are a driver of significant tuition increases, Georgetown’s Loan Repayment Assistance Program hardly figures into our tuition rate at all. It is a tiny fraction of our budget, about 1 percent, considerably less than our expenditures for utilities or library books.

First of all, print is dead. Stop buying books. Second, this is a fair criticism of the original report, but it provides mitigation at best. Is the school using the federal loophole to increase tuition by 1 percent in an effort to pass off the cost of LRAP increasingly to taxpayers? That’s really all that’s relevant here, not how big the increase is.

Third, the foundation misses the obvious fact that the vast majority of students paying our tuition are either not using federal loans at all or will pay back their loans, in full and with significant interest. Those students will receive little or no federal forgiveness. Thirty-six percent don’t borrow federal money at all. Most of the rest are private-sector employees who will pay back their loans in full over several years. In short, 90 percent of Georgetown Law students do not benefit from the program. Through their loan repayments, these graduates—not the federal government—are supporting our Loan Repayment Assistance Program. Alumni are contributing to the program as well, through their philanthropy.

Right. Some of the students affected by the artificial tuition increase will join taxpayers in funding the program. That’s not really a selling point. It just means this loophole has other victims besides taxpayers.

Finally:

In fact, graduate and professional students pay a disproportionate price for federal loans. For example, last year our students paid about $2.4-million in federal-loan fees simply for the privilege of borrowing from the government at interest rates of 6.8 to 7.9 percent; the government’s profit reduced taxpayers’ burden by far more than the amount that may eventually go to forgiving some of the debt.

True. The federal government is ripping off taxpayers, too. Kind of a non-sequitur.

To reiterate, no one is arguing that LRAP programs are bad. The argument is that getting greedy and using a trick of the new federal regime to save a few bucks has jeopardized the whole IBR regime. While Congress is unlikely to get off its duff and take action, when bipartisan support is emerging to overhaul IBR because of this loophole, it risks upsetting the whole IBR regime.

Georgetown Law’s Loan Policy Is Good for Society as Well as Students [Chronicle of Higher Education]

Earlier: Law Schools Devise Trick To Game Taxpayers

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