BigLaw Embraces Student Debt Refinancing As Retention Tool via Law360

Posted on 07-06-2016 by
Tags: Industry Insights & Trends , lawstudents , LIT

The article below has been republished in full courtesy of Law360, written by Aebra Coe.

Law360, New York (May 2, 2016, 4:08 PM ET) -- Kirkland & Ellis LLP recently began offering a student loan refinancing program to its associates, joining a slew of other BigLaw firms that now work with lenders to help attorneys lower interest rates on often-massive student debts, a service firms say helps increase morale and promote retention.
 
The increasingly popular programs leverage large law firms' might to connect attorneys with lenders who refinance their student loans, reducing interest rates and payments and ultimately freeing up young lawyers' income to be spent on something other than whopping loan payments, like investing in their retirement.

Sally King, chief operating officer of Akin Gump — which has had a loan refinancing program in place since July, 2015 through Social Finance Inc., or SoFi — said that 58 employees at her firm have saved a total of $1.5 million to date through its program.

"We've sought to provide an array of benefits that enhance our employees' lives both in the office and outside of it," King said. "Our partnership with SoFi was born out of an understanding that debt is a significant burden on many throughout the legal industry, and we're thrilled not only to be able to offer this benefit, but also that so many of our employees have found it to be valuable."

In 2006, the number of law school students expecting to owe more than $100,000 in student debt was 36 percent, but that figure hit more than 50 percent last year, according to a recent survey by the Indiana University Center for Postsecondary Research. Meanwhile, over the same time period, the number of those expecting debt to hit over $120,000 rose from 4 percent to 17 percent.

According to Catesby Perrin, head of business development for SoFi, his company began offering law firms a corporate benefits program focused specifically on employee loan refinancing about two and a half years ago. Since then the program has exploded, he said, with around 50 of the United States' largest 100 law firms by revenue participating.

Perrin said that in April alone, the lender had seven law firms sign up to participate in the program.

"The pace of growth has been exponential," he said. "It really has become standard in the legal profession. A firm that isn't offering it stands out more than a firm that does."

SoFi has refinanced just over $1 billion to date for more than 10,000 law degrees, with a total estimated savings of $295 million, the company reported.

And SoFi is not the only lender on the market providing the service to law firms. Republic Bank & Trust Co. and CommonBond Inc. have also become big players in the refinancing marketplace, among others.

According to CommonBond Chief Marketing Officer Phil DeGisi, his company currently partners with a dozen of the top law firms in the country and will, by this summer, have more than 50 law firms participating.

"We have seen a substantial interest from law firms in taking steps to promote financial wellness among their employees, and many are finding that tackling student debt is one of the most effective ways to do this," DeGisi said.

Through the programs offered by the lenders, associates and staff of the participating law firms are able to consolidate and refinance their student loans, often lowering their interest rates. The lenders do so by examining applicants' financial information, job history and future earning potential, instead of through the traditional methods banks use to set interest rates.

Siobhan Handley, chief talent officer at Orrick Herrington & Sutcliffe LLP, said her firm has been working with SoFi since it first began offering its corporate benefits program in 2013, saying the ways in which the company looks at borrowers' earning potential makes it an especially good fit for law firms. 

"Unlike a traditional lender, SoFi's interest rates are customized to reflect each individual's credit profile and estimated ability to repay. We think it's a great model for law school graduates," Handley said.

She pointed out that, in addition to the consolidation and refinancing the lender provides, it also offers periodic webinars and informational session with finance experts to help associates with student debt repayment strategies. So far, 59 Orrick employees have saved roughly $1.7 million through the program, she said.

"It's part of our strategy to be the best law firm in the world to work for. Back in 2013, when we adopted this strategy under our then-new Chairman Mitch Zuklie, we took a careful look at the associate experience. What where the pain points? Where were the opportunities? How could we innovate? Student debt checked off all three," Handley said.

Latham & Watkins LLP was another early adopter of refinancing for its associates. The BigLaw firm uses both SoFi and First Republic Bank to service its program, through which approximately 150 associates have refinanced over $20 million in student debt, for an estimated $4 million in savings.

"Knowing that many associates have made significant investments in their education and carry considerable debt at high interest rates, we worked to help our associates find a way to materially lower their interest rates and shorten their loan terms," said LeeAnn Black, Latham's chief operating officer. "We're pleased with the results of the program to date and are encouraged that these issues have taken on increased importance within the legal community."

Her sentiment was echoed by a number of other law firms who have linked up with lenders to reduce attorneys' student loan debts. The practice allows associates to lighten their loan burden, even if only by a bit, and allows them to prioritize how they use their income and save for the future.

And the future financial health of associates is, after all, the future of the legal profession, as those associates become partners and owners of law firms.

A spokesperson for Kirkland & Ellis explained that the firm was prompted to join its peers in offering a refinancing program to associates for that very reason.

"Associates were looking for additional information on financial and retirement planning, including how to reduce the cost of their student loans in order to allow them to increase their retirement savings," the firm said.

Goodwin Procter Chief Human Resources Officer Heidi Goldstein Shepherd said her firm also recently launched a student loan refinancing program with the goal of supporting its employees in their careers and helping them plan for the future.

"These loans help associates consolidate their debts, pay them at a reduced interest rate, and therefore increase their disposable income," Shepherd said. "Supporting the next generation of talent is key to Goodwin Procter's culture, and offering this program is part of this commitment."

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