New Approaches to Financial Accessibility and Law School

Commencing with the JD class beginning their studies in 2015, Osgoode will begin offering some students admission to Law School on an income contingent loan basis. Eligible students who self-select for this program will not pay any tuition while they are law students, but will agree to repay the entirety of their tuition commencing when their income reaches a point where they can afford to do so. And, if their income never reaches that point, the loan will be forgiven incrementally over a period of years. This program would provide an entirely new way to access legal education, and when combined with existing bursaries, scholarships and graduation awards, advances the goal that every qualified student should be able to obtain legal education regardless of financial means.

Income contingent loans are by no means the only strategy Osgoode is or should be pursuing to address accessibility. Osgoode provides approximately $3.5 million annually in financial assistance. In 2012, Osgoode launched the Accessibility Fund, which has now invested over $800K in additional, one-time revenues in a variety of accessibility initiatives, from a need-based summer RA program (providing employment to law students in financial need and research assistance to Osgoode’s Adjunct Professors) to a free LSAT Prep Course, and the Wendy Babcock Graduation Awards (itself a form of back-end assistance: graduating students with high debt, high need, and who are pursuing public interest practice are eligible). In 2013, Osgoode introduced the Osgoode Opportunities renewable Entrance Awards, which provide a bursary equivalent to the full three years of Law School tuition – these awards are aimed in particular for indigenous students and students who are sole support caregivers. Additionally, in 2014, Osgoode is establishing the Osgoode @125 Match which will provide matching funds up to $125K for a student-led fundraising campaign for debt relief. Debt relief will also be the highest priority in our Annual Fund campaign which I hope will raise a further $125K in matching funds for debt relief. In order to sustain Osgoode’s ambitious goals for accessibility, we will need the support of the University, our alumni, the legal community and others to share our vision.

Income contingent loans are not a new idea – and have been recommended by the Rae Report (A Leader in Learning), the C.D. Howe Institute, among other academics and policy experts. The recently issued CBA Futures Report specifically called on Canadian Law Schools to explore forgivable loans as part of a strategy to address high debt and increasing law school tuition.

Income contingent loans have their detractors too and below I try to address possible concerns to which the proposal might give rise.

If accessibility is our goal, why not just lower tuition? Pursuing greater access to funding for students does not preclude changes to tuition (whether slowing the rate of increase or embarking on actual tuition reductions). Tuition is used primarily to preserve and enhance the academic program. Like most law schools, Osgoode continues to revisit and restructure our operations to ensure they are as efficient and effective as possible, but not at the cost of eroding the quality or innovative nature of our academic program. If anything, we are seeking to stretch our available funding to ensure the goals of our strategic plan can be realized. Experiential education, for example, costs more than large lecture classes, but represents a shared vision on how law ought to be taught. The income contingent loan pilot program proposed will be funded from one-time surplus funds and will not detract from our operating budget or the other ongoing priorities to which we have been committed (including other existing forms of financial assistance).

Assuming we wish to invest more surplus funds to advance accessibility, why not simply add to our existing bursaries – or create a back-end loan forgiveness program as U of T and several U.S. law schools have done? First, we are adding to our existing bursaries as well, since new endowed bursaries, our Accessibility Fund and increasing tuition set-aside funding from York will result in increasing bursary funds to be allocated, including a growing number of Wendy Babcock Graduation Bursaries (and we have already doubled the number of these awards from 4 to 8 over the past two years). Increasing this further in lieu of an income contingent loan program would provide additional funds to reduce debt loads for those in need. Income contingent loans, by contrast, are more targeted, and provide the most support not just to those in need when they arrive at law school, but to those whose need will flow from their career path over time. Back-end forgiveness of loans addresses needs that flow from career choices, but does little to address the sticker shock of high tuition and debt anxieties at the front-end. Again, income contingent loans are distinct in addressing both front-end and back-end debt concerns.

Other critics oppose income contingent loans as questions of public policy – CFS and CAUT, for example, have raised a number of concerns with income contingent loans aimed at provincial and federal governments. These concerns relate to systemic changes to tuition and postsecondary financing (ie. changes in how the Province or Federal Government funds postsecondary education), not individual University or law school-based accessibility initiatives. I summarize these concerns below (with a brief response following each point):

–          Income contingent loans shift a greater burden on individuals and away from government funding for postsecondary education

Many believe the solution to accessibility is not greater access to loans but greater access to education through lowering tuition and increasing government support for Universities and Colleges. I passionately agree. That said, there is no indication such a change in government policy is forthcoming any time soon. Until and unless there is some plausible pathway to greater public investment in postsecondary and/or professional education, the question is what we can do with the means at our disposal. Tuition now accounts for more than half of the cost of legal education at Osgoode (and, I suspect, elsewhere), and this proportion will almost certainly rise over time. Income contingent loans do not affect the balance between how much of the cost of legal education is borne by individuals vs. government. The hollowing out of public investment in this sphere is in many ways the catalyst for the high tuition, high debt dynamic in which we now find ourselves. This dynamic is not affected by income contingent loans. . Rather, income contingent loans represent a progressive alternative to the existing financing options at Osgoode (government loans + bursaries + private credit lines). It does not take the place of government loans, Osgoode bursaries or scholarships, but rather builds on them. Ultimately, for some qualified students, the option of income contingent loans is an alternative to turning away from legal education altogether. We should not, in my view, let the perfect be the enemy of the good. While greater government support of legal education remains an important ideal, its absence is not a justification simply to accept the status quo.

–          Income contingent loans result in higher income graduates subsidizing the legal education of lower income graduates

This observation is only accurate some of the time. The current situation distributes tuition monies in an arguably less transparent fashion than what will occur with income contingent loans. For example, right now the tuition set-aside sees a portion of tuition revenue siphoned off for use in University financial aid in Ontario. Osgoode diverts a further portion of operating revenues (funded by tuition) for other forms of financial assistance as well.

The difference is that in the current environment, the subsidy is tied to the access to wealth (or lack of it) students bring to law school. Under income contingent loans, it is the access to wealth of graduates (or lack of it) – tied to the value to which their legal education has given rise – that determines the nature and extent of the subsidy.

Income contingent loans lead to higher tuition

Most income contingent loan schemes (such as those in Australia) are funded and regulated by government. In some cases, these loan schemes have indeed been accompanied by higher tuition. In our context, of course, the income contingent loans would be offered by the University and would have no bearing on the government regulated tuition framework within which we now operate and would continue to do so in the future. In other words, income contingent loans would not lead to higher tuition at Osgoode, but rather are aimed at ensuring the existing tuition framework does not shut out those unable or unwilling to amass significant front-end debt as students in order to obtain their legal education.

–          Income contingent loans put a greater burden on low-income students receiving income contingent loans who pay interest in addition to tuition as opposed to higher income students who pay tuition up front.

This observation is also accurate but perhaps misleading. For the student who can pay for their legal education without taking on any interest bearing debt, the cost of legal education will be lower than for students who will incur debt—either in the current form (typically government loans and bank lines of credit of up to $100k for many) or on an income contingent loan scheme. The difference is that under an income contingent loan scheme, only those graduates who can afford to pay for tuition based on their income after graduation will be required to cover the cost of their legal education. This arrangement mitigates the risk that all law students otherwise take on (i.e. that their post-graduation income will allow them to repay the debt they accumulated in order to pay tuition). Further, income contingent loans avoid the “sticker shock” of front-end tuition payments (even if a bank is willing to extend a credit line to cover the costs).

I believe income contingent loans at law school will lead to a positive and progressive impact for those eligible. There are several key aspects of the proposal, however, that remain to be worked out and I hope active conversations with faculty, students, staff and alumni continue to refine and improve the proposal. For example, we need to carefully consider the eligibility criteria and the potential unfairness between those just above or just below the cut-off. The relationship between the process for selecting participants in this program and the existing process (and timelines) for selecting bursary recipients is an important question to resolve. Additionally, is it preferable to have a small number of students able to access legal education with no front-end financial burden or to have a greater number of students able to access legal education with less of a front-end financial burden? Similarly, the income threshold that would trigger payment of tuition and the time span over which the payment would be made are important details which will need to be determined.

Finally, I believe there is a need for further innovation in the future, both to grow the existing mix of accessibility initiatives, and to add new options to that mix. In particular, as I have written in an earlier post, I believe the time is right for the provision of flex-time JD studies, so that students who cannot afford to give up full-time employment or family/caregiving responsibilities can nonetheless pursue a high quality legal education. To that end we are striking an Accessible JD Working Group at Osgoode, and plan shortly to release a background discussion document on this option and its ability to further the goals of financial accessibility and inclusion in the JD program.