The Credit Crisis and Law School Loans: Take One

[WSJ_law_blog]

On Monday, in a move that left colleges scrambling, Wachovia said it was limiting the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund.

So what’s next for loan-seeking law students? The NLJ reports that, while the credit crisis won’t eliminate the type of government-backed loans that many laws students rely on to finance their educations — presumably, those subsidized and unsubsidized government loans that, in our day, amounted to about $18,500 per year — the price of private loans is likely to go up.

Because banks are doling out less money to lenders, private loans are getting harder to come by, New York Law School Dean Richard Matasar, who is also chairman of the board of directors of education lender Access Group, told the NLJ. “It’s a time for caution,” said Matasar, who also cited an uncertain 2009 job market. “It’s a time for students to plan well for how much debt they are taking on and how they will pay for it,” he said.

While the financial future may look a bit bleaker for some soon-to-be law school graduates, Matasar told the NLJ that increased enrollment in law schools overall could be a positive side effect of the slowing economy. Many people look to higher education as a way to wait out tough economic times and bad employment markets, he said.

Law Blog Readers: We know that those bar-takers with BigLaw jobs lined up can ask their firms for a hefty advance on their first year salaries. But others must rely on private loans to fund the two or three month stretch between graduation and the bar exam. We’re curious: Have rates on those loans gone up? Are post-grads still relying on them?