This year, students debated different paths forward to increase public interest participation, including reforms to the Low Income Protection Program. As this 1977 Record archive article on future Supreme Court Justice Stephen Breyer’s proposal for income-based deferred tuition shows, this debate has been happening for a while.
“Pay Later” Schemes Debated
by Terry Keeney
April 15, 1977
The Law School faculty is currently considering proposals to allow students to defer paying tuition bills until after graduation.
The proposals, discussed at the March 30 faculty meeting, are far from the implementation stage. But if the Law School adopts some form of tuition deferral, students in the future may choose to obtain loans for all or part of their educational expenses. Then they would not be required to repay their loan obligations until as late as five or ten years after
graduation, when the rate of repayment would be determined by their income level.
Proponents of the plan argue that tuition deferral would accomplish two purposes. First, it would further shift the burden of ﬁnancing the student’s legal education from the parents’ current income to the student’s future income. Second, it would remove the pressure on students to take high-paying jobs to repay educational debts and, some proponents hope, encourage more students to enter the less lucrative public-interest career.
Discussions of the tuition-deferral plans seem to follow the trend of Harvard’s ﬁnancial-aid policy to allow students, rather than parents, ﬁnance the three years at Harvard. Prof. Lance Liebman, in a memorandum to the faculty on loan repayments, noted, “The transition from parental payment of law school expenses to lawyer repayment is underway. We couldn’t stop it if we wanted to.”
Russell A. Simpson, assistant dean and director of financial aid, expressed enthusiasm that tuition deferral would make students, not parents, pay. “One of the things that would be ideal would be to shift tuition from the current income of parents to the future income of students,” said Simpson.
But, there is disagreement among members of the Financial Aid Committee as to the effect of a deferred tuition plan on students’ inclination to enter public-interest careers. Committee member Prof. Stephen G. Breyer believes that some students may shy away from low-paying public interest careers because of their heavy financial obligations. Although the Law School currently requires graduates with ﬁnancial aid debts and income less than $14,000 to repay their debts at a rate of eight percent of income, Breyer believes that the Law School doesn’t provide sufﬁcient incentives for students with ﬁnancial obligations to enter public-interest jobs.
Liebman sees little correlation between the amount of a graduate’s debt and his career choice.” People with loan burdens do not seem to choose different careers than people who owe no loans,” Liebman said.
Simpson believes that educational debts are not a controlling factor in student decisions not to enter public-interest practice. Simpson noted that many public-interest opportunities are located in areas many graduates find unattractive. “They are willing to accept public interest positions in San Francisco or New York, but not in Dubuque, Iowa,” Simpson said.
The proposals are similar to an experiment in tuition deferral which was ended this academic year by Yale University. Under the Yale plan, students throughout the university could defer payment of their financial obligations. In its five-year existence, between one-fourth and one-third of new students each year took advantage of the plan.
The Yale plan was discontinued last September because the University did not want to continue borrowing money to ﬁnance the plan. John E. Ecklund, treasurer of Yale, noted that Yale had no problem obtaining the required credit from banks to finance the plan, but Yale could not stand uncertainty of obtaining sufficient funds to meet spiralling tuition and other costs.
“If you are going to defer the obligation to pay the tuition, you have to have some source of receiving tuition to pay the bills,” Ecklund said.
The Yale experiment did accomplish several worthwhile goals, Ecklnnd said. The experiment showed that deferred tuition is administratively feasible. He hopes that the Yale experiment may still interest the federal government in providing the capital for financing degerred tuition for higher education.
Simpson is also hopeful that the federal government will provide the capital to get any type of deferred tuition plan off the ground.
“I see no place where sufﬁcient capital could be raised except the federal government,” he said. Simpson noted that the Law School Admission Council and the American Association of Law Schools have proposed that the federal government start a pilot program for deferred tuition, using graduate and professional schools. Collection of tuition could be administered by the Internal Revenue Service or Social Security Administration through some kind of payroll withholding. Such a method of collection would avoid the problem of loan defaults which have plagued existing federal loan programs. Simpson reported that about 20 percent of all outstanding student loans are “seriously delinquent” —more than six months behind in payment.
Breyer has proposed one possible method of obtaining sufﬁcient initial capital without federal intervention. He has suggested that the Law School increase tuition by $1250 for incoming students. But this $1250 would be used as an interest-free loan that students would not have to repay until ﬁve or ten years after graduation.
When students begin to repay their $1250 at $250 per year, the Law School would ultimately have additional funds which could be used as loans to existing students or to decrease the ﬁnancial obligation of students in the same class who have lower incomes.
Breyer argued that this tuition plan might work, despite the experience at Yale. “I don’t think Yale’s experiment is necessarily pessimistic,” Breyer said. He noted that his plan would apply only to the Law School, where the Yale plan applied to all students from the law school to the divinity secs
Ecklund agreed that the Yale experiment did not necessarily foretell doom for any Harvard attempts to defer tuition. He noted that the Law School would encounter less strain in obtaining capital because the number of students seeking aid is much lower. In addition, banks may be more interested in providing capital for Harvard Law School, because of the earning power of law school graduates.
Braver noted that the costs of operating the Law School will increase dramatically, especially from the expected increase in faculty salaries which have traditionally been kept equivalent to government salaries.
‘Whether we like it or we don’t like it, law school costs are going to go up in the future,” Breyer predicted. “Law school is labor-intensive and when there is inﬂation the cost of labor-intensive products tends to increase faster than the cost of other products.’
Along with the increasing cost of law school, Simpson noted a growing reluctance of parents to pay for their children’s law school education. “Fifteen years ago parents were willing to scrimp and save and put their children through Harvard Law School. Today that’s not as true.” he said.
Breyer argues that it is fairer to make students pay for increased tuition through future income than to force ﬁnancially strapped parents to foot the bill. But Breyer
fears that deferred tuition might decrease alumni contributions, so that the check sent to repay a student loan to Harvard might replace the annual donation.
“If we cut the alumni giving, then we will gain nothing,” he said.