A new federal program promises student loan forgiveness for people who qualify after they've dutifully paid their debts for ten years. The program will also cap monthly loan payments depending on income. The act, passed in 2007, is set to become effective on July 1st. The National Law Journal reports the awesome news:

Some members of the class of 2009 will have less to complain about, however. A new federal program intended to help borrowers manage their student debt goes into effect on July 1. The legislation -- called the College Cost Reduction & Access Act -- will cap monthly loan payments according to income and forgive student debt balances after designated periods of time. For attorneys, the main beneficiaries will be those who go on to have long-term public interest careers. But the program will also make loan payments more affordable for all attorneys with high debt loads and relatively low incomes.

"There are a lot of things that are making it tough for new graduates, with the tight job market and the deferrals," said Heather Jarvis, a senior program manager at Equal Justice Works, an organization that encourages attorneys to undertake public interest law careers. "But there has never been a better time to graduate, as far as student loans."

Essentially this is the best piece of news for the class of 2009 since they got into law school in the first place. The government will forgive outstanding loans after ten years of payments for people who work in public interest and other qualifying organizations.

Obviously this program is geared towards students who take public interest jobs. Biglaw lawyers are still on their own with their debts:

This option wouldn't make sense for graduates who take jobs at large firms paying upwards of $100,000, Jarvis said, but it might be right for the sizable segment of law school graduates who don't earn that kind of money.

"The reality is that most law graduates don't take those jobs and earn those salaries," she said. "A lot of people make $60,000 or $70,000 a year. At these salaries, they would qualify for the income-based repayment plan. Debt loads are getting so high that it's typical for someone to graduate from law school with $100,000 or more in debt. If you were going to stretch out paying your debt anyway, [income-based repayment] is a good option to consider."

Right now, it appears that many students who can qualify for the program don't even know it exists. More details after the jump.

You'd be surprised by how often we receive requests for financial advice around here (even though that's really more the province of Dealbreaker). E.g., should I refinance my law school loans? How much should I be saving for retirement? I've just been laid off; what should I do with my 401(k)?

These questions lie beyond our expertise. So we've put together a panel of experts to offer insight into current market conditions and what they mean for your personal finances. This free event is taking place on MONDAY, JUNE 29, at 6:30 PM.

The roundtable will be preceded by a sunset cocktail hour, in a room with stunning Central Park views (see above). So come enjoy free drinks with the ATL editors (Lat, Elie, Kash and Marin); pick up some complimentary swag, including Above the Law t-shirts and gavel-shaped stress balls; and then sit down for an informative panel discussion:

MARKET VOLATILITY AND YOUR FINANCES

When: Monday, June 29, 2009, at 6:30 p.m.

Where: 1345 Avenue of the Americas, New York, New York

Speakers:

• Sam Mari, VP, AllianceBernstein
• Bob Stansbury, VP, AXA Equitable
• Deborah O'Neil, J.D., CFPTM, CLU, VP AXA Equitable's Advanced Markets Team
• David Lat, Above the Law (moderator)

Cost: The event is free and open to the public -- feel free to bring friends -- but RSVPs are required. Please email rsvp@breakingmedia.com.

The event is less than a week away, and although admission is free, seats are limited. We've already received a fair number of responses -- so if you think you might be interested in going, please rsvp to save a spot for yourself.

Hope to see you there!

The National Law Journal suggests that the down economy could be hitting the pockets of the Elect. Some firms are suggesting that the $250,000 bonus to hire a former Supreme Court clerk is just too expensive in today's economy:

At firms that have been shaken by the downturn, however, a $250,000 bonus will be hard to sell, some practitioners say. "Intuitively, it doesn't feel right to pay that kind of bonus when you are trying to make economies wherever you can at the firm," said veteran advocate Carter Phillips, managing partner at Sidley Austin's Washington office. Thomas Goldstein of Akin, Gump, Strauss, Hauer & Feld, where there have been cuts, agrees that it's tough to justify a $250,000 bonus when a firm is considering letting go a staff person paid $50,000. Because of that juxtaposition, he predicted bonuses will shrink -- though he said it's too early in the hiring season to say how much. "The number of firms willing to pay that amount of money will be down."

But surely these firms aren't talking about collusion, are they? SCOTUS clerks command top dollar, and firms that are struggling can't artificially deflate the price for this top talent -- even if they want to:

Firms won't be sorry to wave goodbye to what Goldstein calls the "incredible escalation" that the $250,000 bonus represents. Even before the recession, firms were grumbling about it because of a recurring pattern: Some clerks grab the bonus, work at the firm for a year or three, then skip off to academia with loans paid off and kids' tuition in the bank. "Firms are going to be more interested in clerks staying around and practicing law," [former solicitor general Paul] Clement said.

While some firms might be priced out of the Elect market, we are still talking about a "recession-proof" set of credentials.

More after the jump.

Here's some interesting information about the personal finances of Judge Sonia Sotomayor (2d Cir.), nominated last month to the U.S. Supreme Court. A tipster directed our attention to this post from the NYT's Caucus blog, observing: "You can't spend most of your professional life as a judge and get rich. Maybe Biglaw is the way to go."

This excerpt hits the highlights:

[Judge Sotomayor] disclosed few assets other than her home in New York. After 17 years on the federal bench, Judge Sotomayor reported having just $31,985 in cash and no stocks, bonds or securities. She has a $381,775 mortgage on her home, valued at $1 million, and owes $15,000 in dentist bills and another $15,000 in credit card bills.

Fifteen grand in dentist's bills? Well, she does have a nice smile.

In defense of Judge Sotomayor's financial state, she's a single woman, no kids, with a six-figure income ($179,500), high job security, and generous retirement benefits. For competing assessments of Her Honor's finances, see TaxProf Blog.

New Documents Reveal Sotomayor's White House Contacts [The Caucus / New York Times]
Judge Sotomayor's Savings [TaxProf Blog]

On Monday, we warned you that student loan forgiveness programs were under attack. Today, the University of North Carolina School of Law informed students that the school could not afford to make the promised loan repayments to students in low income jobs. Here's the email from UNC Law Dean Jack Boger:

We are writing to share news about a regrettable delay in our implementation of the new LRAP program at UNC School of Law. Unfortunately, because of the grave economic downturn that has hit the North Carolina state budget, we will not be able to go forward this spring with Loan Repayment Assistance Program funding. As you may know, various statewide freezes and other severe restrictions have been imposed this spring on all state funds, including the UNC law school account that was designated for LRAP purposes. Moreover, the state has made clear that it intends to 'recapture' those funds to meet its larger budgetary needs sometime before June 30, the end of this fiscal year. This will leave us without the financial means to make LRAP awards.

While we share your disappointment with this turn of events, we remain committed to the LRAP program - and will keep your application on file. We hope to be able to relaunch this program sometime during the 2009-10 fiscal year.

Thank you for your patience, and for your help in the development of this program. We also thank you for your continued support of Carolina Law.

Sincerely yours,

Jack Boger, Dean, UNC School of Law

UNC Law seems to be developing a pattern of raising people's hopes, and then dashing them.

A student affected by this decision shares an interesting viewpoint after the jump.

While the vanguard of the student loan bailout movement pushes on (vanguard = me and this guy), the bailout army is in danger of being outflanked. The New York Times has been reporting that student loan forgiveness programs may not be on solid ground, especially at the state level:

If you want to become a public defender, Georgetown University can be a great place to get your legal education. So Heather Gatnarek expects to take on well over $100,000 of debt to get her law degree there and hopes to graduate in three years.

Here's the problem, though. She's relying on a new federal program that forgives part of the student loan debt for graduates who enter public service fields. And she was scared out of her mind when she read a New York Times article on Wednesday on problems in Kentucky, where significant cuts in one of its loan forgiveness programs have put thousands of indebted public school teachers and nurses in a painful financial squeeze.

This must be how Roman generals felt when Hannibal was teaching them about double envelopment.

In fairness, we all know 1Ls who come in with humble dreams of working for the public good. Usually, money talks while commitment to public service walks. But given the retrenchment of the Biglaw market, absent strong loan forgiveness programs, many students will be looking at some tough options:

"I would be completely up a creek" without a loan forgiveness program, Ms. Gatnarek said. "I don't know what I would do. Marry someone rich, I guess. People say that I could just do corporate law for a few years, but I wouldn't last two days."

Is this just a problem in a few states? After the jump, the NYT tries to find out.

Illinois Governor Pat Quinn, the guy who replaced Rod Blagojevich, wants to institute public financing for judicial elections. He's set up a commission and everything!

The latest proposal floating around the Illinois statehouse would require lawyers to foot the bill on behalf of campaigning judges. A tipster reports:

[Pat Quinn] has proposed public financing of judicial elections beginning in 2010. Of course, Illinois, like many big states, is deeply in dept, so the governor plans to pay for this "reform" by taxing each lawyer $50, as an extra charge on his or her annual bar registration fee. Needless to say, many lawyers see this as bad policy and a terrible precedent. Why should a government, which has no money, pay for the cost of judicial campaigns, or transfer the cost to lawyers?

I'm surprised the government hasn't put more "sin taxes" on the legal profession already. Should lawyers have to pay for a judge's campaign? Probably not. Are you going to get the general public to rally to the defense of lawyers? Certainly not.

But it's not too late to act. More details about the plan after the jump.

The United Kingdom, (a/k/a: Mother England. f/k/a: The Little Island that Could), just lowered the student loan interest rate to 0%.

0%! God save the Queen:

More than 2.5 million students will pay 0% rate of interest on their loans from September, the government announced yesterday.

Hopes were raised last month that students would effectively earn money on loans after the Retail Prices Index (RPI), to which they are linked, dropped to -0.4%.

The new terms will apply to all loans taken out after 1998:

The new rate will affect those with outstanding student loans taken out after September 1998 as well as applicants for both maintenance loans and tuition fee loans in the current and next academic year.

Okay, it's not quite a full student loan bailout, but it is a start. Let's get into additional details after the jump.

A couple of months ago, it occurred to me that if the government didn't start tackling the student loan issue, people would simply stop paying off their loans:

The stick is this: nobody is really going to pay you back anyway. Where do you think loan payments rank on a priority list that includes: food, shelter, anti-depressants, and résumé paper?

According to USAToday, that is precisely what is starting to happen:

Student loan defaults are at their highest rate since 1998, and likely will go higher. And though federal student loans offer some payment modification options, private loans are far more onerous, because even filing for bankruptcy rarely wipes out the debt.

Congress might tackle bankruptcy law reform again this year, but it decided as recently as last year not to allow student loans to be easily discharged through bankruptcy filings.

Just to be clear, if you are a financial idiot and you rack up thousands of dollars in credit card debt on flat screens and rims, you can get that wiped out in bankruptcy. But if you take out loans to pay for your education, and you can't get a job because the economy has stopped, the debt will follow you to the grave.

More horror stories that the baby boomers don't want us to talk about after the jump.

When we reported on the salary cuts at Nixon Peabody, we mentioned that the firm would allow associates to make up some of the money come bonus time. Here's how the firm explained the opportunity:

With our new levels of base pay in place, we will be introducing a bonus program that offers the potential of up to 30% of base pay based on firm and individual performance. We believe this innovative pay structure will reward our highest performing associates while lowering total compensation for those who perform at lower levels.

We've gotten a look at Nixon's proposed "up to 30%" bonus structure. This hasn't been finalized, but here is what is going around the office:

Let's break this down, after the jump.

Villanova is more well-known for its basketball team than its law school. But Villanova has a law school -- in fact, a tier 1 (or at least top 100) law school.

But sadly, the school is out of summer work-study money. I've never heard of that happening to a law school, but here's the message from the assistant dean for financial aid:

I am sorry to report that we have run out of funds for work-study for this summer and many of you have applications in for these funds but we will not be able to give you an award. If you are a PA resident and applied to a PA employer, you would have already received an award letter so you know that you have these funds. If you are not a PA resident or you are trying to work other than in PA you probably do not have an award letter but that does not mean that funds haven't been reserved for you - we may be waiting on your contract from your employer before your letter goes out or it may mean that we ran out of funds before your folder was complete. We will let all of you know as soon as possible.

Sorry - I wish the news were better.

Are there other schools that are out of work-study money?

This news is primarily directed at 1Ls, the ones most likely to have applied for some kind of unpaid internship for summer work.

Which begs raises the question: what are 1Ls doing this summer? Are 1Ls working? Are they living in tents and basements across the country? Are they eating ramen and mayonnaise sandwiches?

Or maybe everything is okay?

Send us your 1L stories.

Earlier: Nationwide Pay Freeze Watch: Welcome Brooklyn Law School Faculty

The American Association of University Professors (AAUP) published a new report detailing the faculty salaries at major universities. The report is titled "On The Brink," so right away you know that faculty are as scared as everybody else.

The report covers all faculty, so we don't have the breakout just for law school professors. But TaxProf Blog has teased out the information on the highest paid faculty. It is probably safe to assume that law faculty are paid along the same general lines as other professors in the university system. It's not like law professors coach basketball.

The top ten universities in terms of faculty salaries are not all that surprising:

1. Harvard: $192,600
2. Stanford: $181,900
3. Princeton: $180,300
4. Chicago: $179,500
5. Columbia: $175,200
6. Yale: $174,700
7. California Institute of Technology: $172,500
8. NYU: $170,700
9. Pennsylvania: $169,400
10. Yeshiva: $168,300

I'm sure they pay the faculty at M.I.T. in Federation Credits.

If we just look at the salaries available at public universities, there are a few surprises.

More rankings after the jump.

There has been a lot of salary cut news and rumor this week. Given the deflationary pressure on associate salaries, one question keeps popping up: at what point does New York City cease to be a viable market for a young attorney?

If you've been following along with New York's dual budget and mass transportation "crisis," you know that city residents aren't that far away from having to pay a tax on "air and other breathables." Subway fares are going to go up, and they might put a surcharge on taxicabs to subsidize what they can't bilk out of MTA riders. Cigarettes are about to cost as much as beer, and you pretty much can't own property in the city unless you are a captain of industry or Derek Jeter.

On top of all that, if you do get laid off, finding a job in the city is "like a haystack needle."

After the jump, is it still worth it to live in the city?

As mentioned previously, your above-signed writer is currently at the annual education conference of the National Association for Law Placement (NALP). Yesterday we attended some excellent events.

One of our favorite presentations, despite its deeply depressing nature, was "Understanding the Current Legal Economy." Law firm management guru James Jones -- Managing Director of Hildebrandt International, and former managing partner of Arnold & Porter -- spoke to a packed ballroom about how the legal industry is, in short, completely screwed (at least for 2009, and probably beyond).

We took some notes on Jim Jones's talk, which we've written up in this post. It is, we confess, what some might call a notebook dump. Alas, we don't have the time for a more polished write-up.

Even if inelegantly written, we think you'll find it interesting. Check it out, after the jump.

"I invested with Bernie Madoff. I knew Bernie Madoff. Bernie Madoff robbed me blind. Marc Dreier, you're no Bernie Madoff."

But Dreier is getting a little closer to attaining the Master's stature, if government allegations are accurate. From the WSJ Law Blog:

New York lawyer Marc Dreier allegedly defrauded investors out of approximately $700 million, a far higher figure than previously had surfaced in the criminal case, according to an amended indictment unveiled Tuesday.

The attorney was indicted in January on conspiracy and fraud charges for allegedlly selling fictitious promissory notes to hedge funds.

Previously, prosecutors had claimed Dreier sold almost $400 million in fictitious notes. Now, according to the latest indictment, the attorney stands accused of peddl[ing] almost $700 million in notes to 13 different hedge funds and three individuals, whose names were not identified in the filing.

Good for Dreier. Why should guys like Madoff and Robert Allen Stanford have all the fun? A haul of $750 million begins to approach respectability among Wall Street fraudsters.

With New Indictment, Government Cranks up the Heat on Marc Dreier [WSJ Law Blog]

Earlier: Prior ATL coverage of Marc Dreier

Ed. note: Welcome to the latest installment of "Notes from the Breadline," a column by a laid-off lawyer in New York. Prior columns are collected here. You can reach Roxana St. Thomas by email, at roxanastthomas@gmail.com, or find her on Facebook.

My friend Giovanna is bright, capable, and quite possibly the hardest worker I have ever met. Despite factual indications to the contrary, as demonstrated with respect to countless lawyers (including me), I believed that these qualities -- plus the four years of blood, sweat, tears, lost weekends, and late nights that she had given the firm -- would provide her some modicum of job security. So when she calls, in tears, to tell me she has gotten the proverbial pink slip, I come close to blurting, "You're kidding."

Alas, she is not kidding. The firm is doing a second, bigger round of layoffs, and her head is among those on the chopping block. But, for better or worse, Giovanna has the benefit of collective wisdom, gained from the experiences of people -- like me! -- who have gone before her. Unlike me, Giovanna is ready for her close-up -- confident that she would not barf, indifferent to whether they saw her cry, and more concerned with making sure they knew that she wouldn't take it lying down. She tells me about how the meeting went.

When Giovanna got The Call from the assignment partner, she knew that Bob from Human Resources would be in his office when she got there, squirming uncomfortably while she was given the anodyne consolation speech. She was prepared when the assignment partner told her that, because the layoffs were economically driven, she "had nothing to be ashamed of." "I'm not ashamed," she snapped, "but you should be."

Giovanna reminded them that she had virtually enslaved herself to the case she had worked on for so many years. How many times had she just gotten home, then turned around and gone back to the office at 11:00 at night because her boss wanted something else done? How many weekends, nights, weddings, dates, and birthdays had she forgone because of one work-related demand or another? She thought of those things while sitting in the assignment partner's office -- next to Bob from Human Resources, who was staring awkwardly at his feet -- and any qualms she had about making demands vanished. She asked them to pay for her COBRA benefits, and some of her other expenses, for the next few months. They did not completely relent, but she walked away with a slightly better deal than I had gotten. The lesson: ask, and you may receive ... something.

And what about my expenses? Read about my finances -- expenses, savings, and liabilities -- after the jump.

Dear President Obama, First Lady Obama, Treasury Secretary Geithner, Education Secretary Duncan:

Hello all. I am writing on behalf of the massive amount of educational debt that I am no longer able to pay. Like so many young Americans, I got into a much better and more expensive school than my family could afford. After being told approximately 5,000,000 times that education was the "silver bullet" that was necessary to live the "American Dream," I decided to fund my education through various loan programs. At the time, it seemed reasonable.

After I completed my four year degree program, I sadly learned that I wasn't qualified to do anything particularly interesting. I'm not really good with computers, so creating the web application that simulates blow jobs or farts wasn't an option for me. Based in part on the advice of nearly every intelligent person I've ever met, I decided to double down on the "education" gambit and get a post-graduate degree.

Mind you, I did eventually want to do real work and earn real money for a living, so I didn't pursue a Ph.D. Instead I opted for a professional degree. A J.D. if you must know.

Once again, I decided to go to the best school that I could get into, instead of the cheapest school I could find. Once again, I received a significant amount of federal aid to accomplish this. At the time, I knew that I was signing myself up for years in a grueling job that I wouldn't really enjoy, but I understood that there was "no such thing as a free lunch." I was willing to sacrifice.

But, it looks like America is not holding up her end of the bargain. Please continue reading.

It goes without saying that the recession is forcing all sorts of Americans to confront the prospect of financial ruin. But lawyers have a particular cross to bear, one that involves a crushing amount of educational debt that was supposed to be serviced by the income from lucrative, highly secure law firm jobs. Now that job security is a thing of a past, there are a lot of lawyers who need a financial makeover. Sunday's Chicago Tribune provided advice for struggling attorneys:

Aukse Rimas of Chicago is a trial attorney with a big new raise and a promising career. But she is losing sleep over what the recession-wracked economy could do to her.

The 29-year-old is juggling $225,547 in education loans and credit card debt--about three years' worth of her $75,000 annual salary. She has a modest retirement nest egg and virtually no savings.

Something tells me that the financial experts are going to tell Aukse to spend less money. I haven't read the full article or anything, but every financial planner I've ever talked to essentially tells me "your intelligence profile indicates that you're too stupid to follow a budget."

Am I right? After the jump.

It's a new year, and for Biglaw that usually means it is time for firms to go out and get a loan.

Obviously, this year it might be a little more difficult than usual. The American Lawyer is reporting that the credit crisis is coming to a partnership near you:

Law firms, typically considered good credit risks, are now experiencing the toughest and most expensive lending conditions in years. "Even good borrowers, prime borrowers, are having more restrictions and more difficulties than they used to," says Altman Weil consultant James Cotterman.

Most firms will still be able to get loans to cover their immediate expenses. But to do so they will have to submit to more vigorous financial vetting than they did in the past. And, of course, it's going to be a whole lot more expensive to borrow money:

Meanwhile, firms that didn't secure a credit line early last year, and who went looking for it in recent months, discovered that credit wasn't cheap anymore. "We just took out some lines from several different banks," says the head of one firm, who asked for anonymity to speak frankly. The firm let its credit lines expire in 2003 and relied instead on capital contributions from partners. The banks used to give the firm credit for free. "Now we had to pay for the lines," he says.

Rates have doubled, from below 1 percent in 2007 to 2-3 percent today for the top 50 firms, says Andrew Johnman, head of professional services at Barclays plc. "If they need additional money or if they need an amendment to their credit facility, then we reprice it to current market pricing," he says.

Apparently, banks are worried that additional firms will dissolve like Heller and Thelen. More on that after the jump.

Let's start off 2009 with some good news. Litigation boutique Kasowitz Benson announced bonuses just before the New Year, and will be paying out Skadden dollars at the end of the month.

So don't stick a fork in the New York market just yet.

Associates at Kasowitz are understandably ecstatic:

It really is a fantastic place full of extremely smart trial lawyers that sometimes litigate, as opposed to all of the other firms where litigators sometimes do trial work.

There are a couple of wrinkles. Unlike Skadden, the Kasowitz memo contains language saying that bonuses will be "up to" Skadden levels. According to the firm, individual payouts will be based on a couple of factors:

As in prior years, the above are benchmark amounts which are subject to adjustment to reflect individual performance and hours worked.

Still, our tipsters expect that most people will receive the full amount:

I have never heard of people not getting the full amounts that are stated. We are crazy busy and have been so I would say most will.

The mere opportunity to receive an above market bonus should be enough to have Kasowitz associates singing the firm's praises well into the new year.

Read the full Kasowitz memo after the jump.