Biglaw Firm Ponies Up Cold, Hard Cash To Help Associates Repay Law School Loans
This firm isn't just providing options and info; it's giving associates direct financial support for servicing loans.
Around the time that Cravath announced its great associate pay raise, it also provided its associates with information about various organizations that help associates refinance their student loans. Similarly, firms like Latham & Watkins and Sullivan & Cromwell have made arrangements with finance companies to provide refinancing of law school debt on favorable terms. But these moves didn’t get quite as much attention as the move to $180K because, unlike the pay raise, they didn’t involve law firms taking money out of their own coffers and putting it right into associates’ pockets.
At least one Biglaw firm, however, is providing direct help to its associates when it comes to eliminating educational debt. Here’s a report from the New York Times:
Orrick, Herrington & Sutcliffe, a large firm founded in San Francisco that specializes in technology, energy and infrastructure law, plans to announce on Friday that it will contribute a monthly amount to its new associates to offset accumulated education debt….
Orrick, which has more than 1,000 lawyers, is offering $100 a month for starting lawyers for 18 months. After that, the junior lawyers will be eligible to receive a bonus from the firm. The program, which starts Sept. 1, is being offered to associates who are on the track to becoming partners as well as to those who choose the less intensive career associate track.
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One clarification. An Above the Law reader (not at Orrick) interpreted this as Orrick replacing its bonuses for first-years with this loan repayment benefit. While understandable given the NYT’s wording, that’s not correct. When I reached out to her about this, Orrick chief talent officer Siobhan Handley explained that Orrick has not changed its bonus program and that the loan repayment benefit supplements rather than replaces bonuses:
This doesn’t change our bonus program at all and yes, it is on top of our existing bonuses. We pay first year-associates bonuses in January or February after their first year with Orrick (depending on the timing of decisions). As you’ll recall from our annual memo, our bonus year starts December 1. So, there are a couple of months period when associates are not yet eligible for a bonus (from whenever they start in September through the end of November). We provide the loan repayment benefit until they actually get their bonus payment as opposed to when they become bonus eligible. You’ll also recall, our program offers associates the opportunity to earn above market bonuses, based on merit and performance.
We believe that the above-market bonus potential, after the first year of work and every year thereafter, is far more valuable to associates than a stub period, pro-rated bonus for the first several weeks. We’ve gotten very positive feedback on this new benefit (and our overall bonus program, which we have no plans to change).
One can quibble with Orrick over whether a pro-rated, stub-year bonus is better than getting $1,800 toward loan repayment (for eligible associates; some associates might be fortunate enough to arrive at Orrick without debt). But the key takeaway here is that this doesn’t change Orrick’s existing bonus program and nobody at the firm is worse off (because associates weren’t getting stub-year bonuses anyway). And note also that the value of paying down principal is greater than just the cash contributed when you take into account the reduction in interest costs over the life of the loan.
Why is Orrick making this move? Here’s what it told the Elizabeth Olson of the Times:
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The firm views the debt relief as another benefit, along with flexible work arrangements and parental leave, to attract young lawyers.
Orrick has long been a leader when it comes to Biglaw perks and fringe benefits. See, for example, its industry-leading parental leave policy, which provides 22 weeks of paid primary caregiver leave to Orrick attorneys in the United States.
“With fewer students choosing law schools, fewer law school grads choosing big firms, and women leaving the profession faster than men, we wanted to distinguish ourselves in the market,” Ms. Handley said.
“This will help our associates reduce the level of financial stress so they can focus on their training, development and client service,” she added.
Now, as my colleague Staci Zaretsky noted in Morning Docket, $1,800 isn’t a huge amount — especially when, as noted in the Times piece, graduates arrive at law firms with an average of $185,000 in student debt. But $1,800 is still, as far as we know, $1,800 more than what Orrick’s peer firms are giving to their associates to help break the shackles of law school loans.
Will other Biglaw firms follow Orrick’s lead? If you’re aware of a major law firm that’s providing direct financial assistance to its associates in servicing their educational debt, please feel free to email us or text us (646-820-8477). We’ll be tracking this trend closely — and hoping, for the sake of our associate readers, that more firms jump on the bandwagon.
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P.S. If you’d like to learn more about how law school loan refinancing works, see Conquering Law School Debt And Buying A Dream Home — How SoFi Member Dan Brady Made It Happen, a sponsored post by SoFi, the company that designed Orrick’s tuition benefit (and, full disclosure, an ATL advertiser).
UPDATE (4 p.m.): Additional info about Orrick’s initiative, via Nell Gluckman of Am Law:
With 40 to 50 new associates a year, the commitment amounts to between $64,000 and $80,000 for Orrick. That’s just over half what it pays a single first year now that it has joined other top firms in raising first-year associates’ pay to $180,000.
The contribution may seem like little more than a rounding error for the firm, where profits per partner reached $1.79 million last year. But the move still drew praise from associates and industry observers.
“This is an important signal that law firms recognize that law school is too expensive,” said Kyle McEntee, executive director of Law School Transparency, a nonprofit that tracks tuition rates and student debt. “Even when a firm pays $180,000, the graduates still need help repaying their loans to live comfortably.”
…. Associates who graduated from law school in 2015 will be the first to benefit from Orrick’s program, which goes into effect Sept. 1. Handley said the payments can go toward undergraduate debt as well as law school debt, and are available to both partner-track and career associates.
Firms Offer Cash to Help New Lawyers Pay Student Debt [New York Times via Morning Docket]
Earlier: The Bonus Announcement You’ve Been Waiting For: Sullivan & Cromwell!
Biglaw Firm Helps Associates ‘Latham’ Their Law School Debt
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David Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at [email protected].
