By Stephanie B. Goldberg
Article from Student Lawyer magazine
Nothing impresses legislators like the voices
of their constituents, thought Michael Pellicciotti, immediate
past chair of the ABA Law Student Division. So, during his final
months as chair last April, he e-mailed the association’s
law student membership, soliciting stories about their difficulties
with student loans. In May, he’d be traveling to Washington,
D.C., with a delegation of Division officers to take part in
the annual ABA Day, when ABA leaders meet with lawmakers to
discuss issues of concern to the legal profession.
The students’ goal for ABA Day was to bring
a message to members of Congress and their staffs: Crushing
educational debt loads make it impossible for law students to
consider careers as prosecutors, public defenders, and other
public interest positions.
Pellicciotti, then a 3L at Gonzaga University,
was inundated with e-mails from students—250 in the space
of a week. The picture that emerged was one of deep distress.
“My financial burdens are so enormous that
I have considered filing for bankruptcy just to get these creditors
to leave me alone,” one student wrote. “Last month,
my water, electricity, and phone were cut off because I could
not pay the bills. I tried to get a private loan, but was turned
down. … [T]he reason I came to law school in the first
place was to pursue my life-long dream of practicing public
interest law. Now I am afraid that I will not be able to do
so because of the massive amount of student loan debt I will
be facing when I graduate.”
A pair of social workers attending night school
was devastated by the double whammy of tuition hikes and medical
bills from a car accident: “I will graduate this month.
[My partner] has another semester [and] is currently …
training to be a public defender. We both would like to continue
our public service work … but the cost of living compared
with low public interest salaries does not add up. How can we
serve marginalized communities when we can’t afford to
pay our loans?”
Still another wrote: “As I enter into my
third year of law school, I am already haunted by the notion
that when all is said and done, I will owe approximately $135,000
for my law school education alone. … My dreams of becoming
a public service lawyer, so that I might be able to help alleviate
the need for young Spanish-speaking lawyers, is not one that
I am going to be able to realize because I simply won’t
make enough money to survive on my own.”
Says Pellicciotti: “The stories that touched
me the most dealt with basic access to education—students
being forced to drop out of law school because their loans were
so large that a co-signer was required even if they had a perfect
credit history.”
Many whom the student delegation met on Capitol
Hill—including an education staffer for Sen. Richard Durbin
(D-Ill.), the sponsor of several bills to create loan repayment
programs for prosecutors and public defenders—were more
than sympathetic. Others were either unaware of the issue or
skeptical that any lawyer would need financial assistance.
“It was a challenge,” says Chicago-Kent
3L Lindsay Hansen, who accompanied Pellicciotti to Washington
as a student member of the ABA House of Delegates. “We
faced some resistance, but, for the most part, there was recognition
that it was important to remove obstacles to public service.”
The dialogue with Congress is likely to continue
for some time as the ABA gears up for a coordinated national
effort to provide debt relief for young lawyers who take public
interest jobs. In 2001, the ABA established the Commission on
Loan Repayment and Forgiveness to study the problem and make
recommendations. Two years later, the commission completed its
work, publishing a report titled Lifting the Burden: Law Student
Debt as a Barrier to Public Service. At the commission’s
urging, the loan repayment issue has become an ABA top-12 lobbying
priority.
“The primary role for the ABA is to elevate
this issue so that the problem is universally understood,”
says San Francisco lawyer Curt Caton, the commission’s
chair.
In that objective, the commission appears to have
succeeded, having brought the issue to the attention of legal
and policy-making heavy hitters. Chief among them is U.S. Supreme
Court Justice Anthony Kennedy, who says the commission’s
report was a “revelation.” Eager to help publicize
the problem, Kennedy gave introductory remarks when the panel
unveiled Lifting the Burden at the ABA’s 2003 annual meeting.
He noted that it was “the duty of the profession to make
public service professions economically viable.”
The commission’s recommendations are far
reaching, envisioning the creation of loan repayment assistance
programs— LRAPs (pronounced EL raps)—at the federal,
state, and law school levels. The panel also suggested changes
in federal law to allow employers to include LRAPs in their
cafeteria benefits plans and students to fully deduct interest
on student loans. In addition, it recommended creating incentives
for public service employer-based programs, boosting the annual
payment for loan repayment for federal employees from $6,000
to $10,000, and establishing LRAPs for Legal Services Corp.
lawyers.
But the lion’s share of the ABA’s lobbying
efforts is directed at two of the commission’s proposals.
One would increase the cap on unsubsidized Stafford loans for
law students from $10,000 to $30,000. The second, for law graduates
who commit to government or public interest work, would slice
a decade off the current 25-year, income-contingent repayment
period, after which the remaining loan balance is forgiven.
“We think many more students would take advantage
of this program if the repayment term was shortened to 15 years,”
says Ken Goldsmith of the ABA Governmental Affairs Office in
Washington, D.C.
If you do the math, it’s easy to see why
law students are getting caught in the crunch. As of 2002, the
average cost of tuition was $24,920 at private schools, $9,252
for in-state residents of public schools, and $18,131 for nonresidents.
Almost 87 percent of all law students have to take out loans
to finance their education, preferring to participate in the
federal student loan program with its low interest rates and
deferment and consolidation options.
The problem is that the federal Stafford loan
limits of $18,500 a year—$10,000 for unsubsidized loans
(on which interest is compounded immediately) and $8,500 for
subsidized loans (on which interest begins accruing at the time
of repayment)—are too low to cover tuition at most private
and several state schools.
To bridge the gap, students must take out private
loans with higher interest rates and sometimes onerous requirements.
By the time they graduate, they’re substantially in debt—averaging
$45,763 for public school graduates and $72,893 for private
school graduates in 2003.
Most private practice lawyers can shoulder the
burden, but with an average salary of $36,000, public interest
lawyers struggle to make ends meet. The average monthly loan
payments of $451 for public school graduates and $718 for private
school graduates account for as much as a third of their salaries.
Click here for complete text.
by Margaret Tebo
Article from Student Lawyer magazine
The practice of small-business law, according to those who do
it, requires a lawyer to be part psychologist, part business consultant,
part venture capitalist, part marketing whiz, and, oh yes, part
lawyer. Take the example provided by small-business practitioner
Dennis Jacknewitz.
One day, an auto mechanic, a secretary, and a stockbroker walked
into his Belleville, Ill., office and told him they wanted to
start a day-care center. They asked Jacknewitz to form a corporation
for their new business entity.
But rather than merely take his new clients at face value, Jacknewitz
began to question the trio to determine whether incorporation
was in their best interest. Perhaps, he thought, some other form
of business entity might provide the liability protection the
prospective owners sought, while providing better tax and other
benefits.
"When most people think of starting a business, they automatically
think they need to be the ABC Company, Incorporated," Jacknewitz
says. "Well, maybe they do. Or, maybe they’d be better
off as a Limited Liability Company (LLC), or a partnership."
In the case of the day-care owners, the solution turned out to
be more complicated. Because of the potential liability involved
in caring for small children, as well as for tax reasons, the
group ultimately ended up forming a real estate holding corporation
to own the building housing the day-care center. That entity then
leased the building to a separate LLC that actually owned the
center.
Jacknewitz’s clients—small-business entrepreneurs—are
of a growing and diverse breed in the U.S. economy, which bodes
well for the lawyers who represent them. According to the U.S.
Small Business Administration, nationwide in 1997 there were 5.4
million businesses with at least one employee besides the owner
and 10.5 million self-employed individuals. Of the businesses
with one employee or more, nearly all, 99.7 percent, were classified
as "small businesses"—defined as those with 500
or fewer employees.
Between 1987 and 1996, the number of women-owned businesses increased
78 percent, to 7.9 million. African-American-owned businesses
jumped 46 percent, while those owned by Hispanics jumped 83 percent.
The number for Asians and Pacific Islanders, American Indians,
and Alaskan Natives also jumped 61 percent. New incorporations
were up 1.6 percent in 1997 over the previous year, as were business
failures—16 percent more small businesses failed in 1997
over 1996.
The legal and related issues small businesses face are numerous.
With a bit more probing, Jacknewitz determined his day-care center
clients also needed help finding financing, setting up tax-effective
bookkeeping, obtaining insurance, and even determining what sorts
of licenses they would need from state and local authorities in
order to open for business.
He referred the tax and insurance issues to an accountant and
an insurance broker. For the financing, he pointed the group toward
several nontraditional sources of funding, since banks will rarely
lend to brand-new, untested businesses. He investigated the licensing
issues himself. Besides the usual business licenses, his clients
needed background checks from the state’s Department of Children
and Family Services, a certificate from the state Department of
Education, and other clearances they hadn’t even considered.
Jacknewitz even found himself counseling his clients about potential
problems with the site they chose, noting that a national day-care
chain already had a facility nearby.
Jacknewitz also guides his clients in issues such as estate and
business succession planning, as well as other areas they often
fail to consider up front.
"Most entrepreneurs are great idea people. It’s the
details where they get fuzzy, and that’s where they need
a lawyer who can show them the big picture and help them make
informed decisions," Jacknewitz says.
Click here for complete
text. |
