How Student Loans Influence Legal Career Choices
With the cost of law school skyrocketing, many students feel that they have no choice but to work for a large firm, at least for a few years, in order to pay off debt. In recent years, one alternative to loan repayment besides high-paid indentured servitude is a loan forgiveness program. But are those programs sufficient to change students' decisions? In this past Sunday's New York Times magazine article, "Forgive Us Our Student Debts," Jon Gertner addresses the effect that schools' loan forgiveness programs have on students' post-graduation career choices. The verdict: not much, but for reasons that you might not expect.
According to Gertner, the best research on the subject comes from a study of the experience of several hundred New York University Law School graduates. Gertner describes:
"The pay disparities between public- and private-sector law jobs have widened over the past two decades to the point that law-firm jobs can pay three to five times what graduates earn in the public realm. Many elite law schools, and many bar associations and public interest law groups, have responded to the disparity with various pay incentives -- mainly, debt-forgiveness programs that try to ensure that highly qualified lawyers will continue to take jobs as public defenders and in law enforcement. But from 1998 to 2001, NYU Law tried something called the Innovative Financial Aid Study. Of the participants who received aid, some students received loans (meaning they would graduate with large debts) and some received grants of two-thirds tuition (meaning they would graduate with smaller debts). However, this randomized arrangement came with conditions: Students who received loans could have them forgiven if they took jobs in the public sector; students who received grants would see them converted into loans (and large debts) if they did not enter the public sector. NYU is tracking these students' job choices for 10 years. For all of them, of course, the choice was the same: low debt if they took jobs in the public sector versus high debt if they went into the private sector. But the psychological difference between completing school with low debt (thanks to tuition grants) or high debts (albeit with a promise of loan forgiveness) proved significant. When Erica Field, an assistant professor of economics at Harvard, analyzed the early survey data, she concluded that grant recipients had a strikingly higher rate (between 36 and 45 percent) of first-job placement in public sector jobs than those who had received loans instead. "I think what my results suggest is that people are debt averse and there's a psychic cost to debt," Field says. "If you can reduce the amount of time that they're in debt, people will value this. You can influence their behavior."
In other words, loan forgiveness comes too late for many students. The time to address the debt is before students start law school and take on debt, rather than after the fact. The "psychic cost" to debt also explains why many law students prefer the BigLaw job to eliminate debt rather than a lower paying public service job with loan forgiveness: the former option, while less personally fulfilling, can eliminate debt more quickly than the latter.
Posted by Carolyn Elefant on June 13, 2006 at 03:27 PM | Permalink
| Comments (6)