In the wake of the credit crisis, one question that has been top of mind for many prospective law students is whether the hefty loans relied upon by so many will, in fact, be available when it comes time to cut the check to the old office of the bursar.
The loan packages required to attend an elite law often soar well above $100,000 in total and are typically cobbled together through a variety of government-backed loans (Stafford, Perkins, and PLUS) and private loans. Given the way loans are drying up in other markets and industries, it was a reasonable question to wonder if they would still be there for students.
Finally, word is trickling down from sources like NYU Law School Dean Richard Matasar that the government-based loans will most likely be unaffected by the credit crisis. So most of the financial aid necessary will still be there.
Unfortunately, it doesn’t look like private loans will be as readily available. The National Law Journal worries about students applying for bridge loans to get from graduation to the bar exam, but those expenses are often covered by law firms as a benefit to the 2L summer associates who accept offers of employment in advance.
Of greater concern is what a reduction in loan availability will do to school choice and the inevitable leveraging game that follows when students are forced to make financial considerations the top factor in selecting a program. In the current J.D. market, students often bypass large scholarships in favor of loan-heavy packages in order to attend the top program or best fit available. However, if those discretionary private loans aren’t available, students may not have a choice but to take the bigger scholarship packages. This tends to create an environment where schools get leveraged by other programs willing to spend big, and the result is confusion in the marketplace with regards to where top students will congregate and where top employers need to go to recruit.
All of that said, the major takeaway is that most of the loans will still be there, which should continue to fuel a recession-driven spike in graduate school applications.