On August 24, 2022, President Biden announced a student loan relief plan which will provide between $10,000 and $20,000 in federal student debt relief for low- and middle-income borrowers. This plan is a direct boon for students with federal loans. It’s also a direct boon, argues a coalition of alumni and students in an open letter to Harvard.
This open letter, sent to Dean Manning on Tuesday, September 6, 2022demands that the school, which will benefit from Biden’s loan forgiveness, pass on its savings to LIPP participants.
“Harvard needs to make sure that this forgiveness money, which is meant to relieve alumni who are going through the catastrophic inflation that we’ve tolerated, and the pandemic and all that – Harvard needs to make sure it doesn’t pocket that money,” said Brendan Schneiderman JD ’21, one of the letter’s authors. “It has to go to the people it’s meant for.”
How exactly does this program benefit Harvard? “Unless you spend a lot of time thinking about student loans, it’s hard to see the LIPP benefiting from it,” said Lindsay Bailey JD’19, another author. “The basic math is that the LIPP is a loan subsidy program,” Schneiderman explained. “Harvard needs to have money set aside to pay student loans, and when their loans go down, Harvard gets a windfall.”
This calculation is undeniable: For each of the hundreds of students participating in LIPP with an unpaid federal loan balance, Harvard will save thousands of dollars that would have been paid out as aid. For some students, these savings will be greater than the fixed sum of $10,000 or $20,000 given back, taking into account the interest that accumulates year after year with these loans.
These interest rates indicate another windfall that Harvard received but did not pass on to alumni. The federal government has, during the pandemic — 32 months so far — put a pause on accruing interest on federal student loans. Meanwhile, Harvard, as the loan recipient for LIPP participants, again saved a significant amount that they would otherwise have had to pay. This windfall, mentioned in today’s letter, was also mentioned by Schneiderman in an interview with The record this past April.
But while students with federal loans will at least directly benefit from these initiatives, a significant proportion of LIPP participants have only private loans and may not benefit from them at all. In fact, international students do not even have the option of taking out federal loans. Additionally, the letter argues that domestic students are being pressured into taking out private loans rather than federal loans. “Through his Preferred Lender ProgramHLS has also encouraged many students who might otherwise have chosen federal loans to take private loans from institutions such as Harvard University Employees Credit Union,” the letter states.
“When you look at the Harvard Law financial aid website, and you have a chart that shows these terms in an easy to understand way, showing a lower interest rate and lower loan fees for private loans , that’s one of the main reasons why a lot of people might have chosen private loans,” explained Beth Feldstein JD ’21, third author of the letter.
Although HLS recently announced a decent increase in LIPP aid, this increase was aimed at fighting inflation, not the inequalities newly created by the cancellation of federal loans, the letter argues. “Students must receive 100% of the benefit and the institutional endowment does not require it,” Schneiderman said. “These are such exceptional circumstances and the relief is so rare – it must reach the people it is intended for, not the vaults of Harvard.”
So far, the letter has been sent to the HLS administration, while a growing list of alumni and student petitioners await a response. “Part of what we’re asking for is transparency,” Schneiderman said. “None of us know how much money LIPP is saving,” Bailey added. What we would really like to know is exactly how much of an HLS bargain will get, and for them to explain how they will use that bargain.
Such transparency could benefit LIPP participants, public interest students considering entering the program, and prospective HLS students, who may soon begin the law school application process.
“Law schools are not the intended beneficiaries of student debt forgiveness. We are simply asking HLS to commit to this principle,” Feldstein said.
Marty Strauss is a 3L at Harvard Law School and the current editor of The Harvard Law File. He plans to pursue a career in the public interest after graduation.