“Do the Right Thing.” An Alumnus Donor Looks to Steer Students Towards Public Interest Law

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John F. Kennedy famously said, “Ask not what your country can do for you—ask what you can do for your country.” Fifty-eight years later, the starting salary for a lawyer working in the public interest sector is $56,000 while the average debt load for a law school graduate is $134,000.

As a result, the percentage of graduates choosing private practice, where the median first-year salary is around $135,000, has steadily increased, topping out at 54.4 percent in 2017. Meanwhile, the number of students choosing public interest law has remained stagnant at 7.2 percent. These numbers are all the more alarming given the fact that the federal Public Service Loan Forgiveness Program forgives most student loans after 10 years for lawyers working for the government and nonprofits.

The result is “the perfect storm for a huge drought” of attorneys willing to work in the public sector, says Michael Barrett, the state public defender director for the Missouri State Public Defender System.

Millions to Boost Underserved Law Students

Rick Caruso, the founder and chief executive officer of Caruso, a Los Angeles-based American real estate company, and his wife, Tina, want to change this dynamic. The couple announced a $50 million commitment to the Pepperdine School of Law to expand access to historically underserved student populations and strengthen the school’s academic programming.

More than half of the commitment, made through the Caruso Family Foundation, will be invested in needs-based scholarships and the Caruso Family Loan Forgiveness Fund—an endowed fund for graduates who are dedicated to a career in public service. The remainder will go toward programs supporting bar passage and job placement, faculty research, and collaboration. Caruso will also partner with the school to raise an additional $50 million in endowment funds over the next decade to continue and expand these initiatives. The school will be named the Rick J. Caruso School of Law in recognition of the gift.

The gift finds the Carusos joining a growing body of deep-pocketed alumni donors looking to boost opportunity for historically underserved students while mitigating the specter of crushing student debt, particularly for those pursuing careers in the public sector.

“The lack of affordable education in our nation and the student debt crisis is not only inhibiting underprivileged students from gaining equal opportunity to education, but also discouraging potential students from exploring careers in public service, roles that have a critical impact on society,” said Rick. “My sincere hope is that this gift will be one of the first steps toward reducing the barrier to entry for these students and will inspire the next generation of public servants.”

The 10th Wealthiest Angeleno

The grandson of Italian immigrants, Rick J. Caruso graduated from the University of Southern California (USC) in 1980 and received his J.D. from Pepperdine in 1983. He started his career as a real estate lawyer and went on to found Caruso, one of the largest privately held real estate companies in the United States. Caruso is behind successful properties like The Grove, a shopping and entertainment center in Los Angeles, which, according to Forbes, gets more daily visitors than Disneyland or the Great Wall of China.

He and Tina created the Caruso Family Foundation in 1991. In September, the Los Angeles Business Journal ranked him No. 10 in its list of the 20 Wealthiest Angelenos, with a net worth of $5.7 billion, up 19 percent from last year. (For those keeping track at home, No. 1 was was this guy.)

Caruso has deep ties to the USC. His father, Hank, attended the school, before founding Dollar Rent A Car. All four of his children have attended the university. Forbes’ Samantha Sharfs writes that the Caruso name appears on at least two campus buildings: the USC Caruso Catholic Center and the USC Tina and Rick Caruso Department of Otolaryngology. All told, the couple has donated or pledged more than $50 million to the school. Caruso has served as the chair of the USC Board of Trustees since May 2018.

Decades of Support

The Carusos’ commitment to Pepperdine reflects a cardinal truth of higher ed philanthropy, which is that a transformational mega-gift is nearly always preceded by a series of smaller gifts. In 1994, the couple created the Rick J. Caruso Research Fellows Program to support the ongoing scholarly work of the School of Law’s faculty, and in 1998, created the Caruso Family Chair in Law.

They launched the Caruso Loan Forgiveness Fund with $1 million in 2003 to partially repay the law school debt of students launching careers in the “fundamental, yet lower-paying, area of public interest law.” To date, 70 students have received financial support through the program. Seven recipients with five years of public service, for instance, have received an average award of $42,670. With the new Caruso gift, the school hopes all students who qualify for the fund will be able to cover their loan payments for 10 years.

The second key part of the Caruso gift involves scholarships. The average loan debt of a Pepperdine law school graduate is $144,000. More than half of the typical incoming class of 160 students receive scholarships ranging from $5,000 to $57,000, the annual tuition. The Caruso gift will allow the school to double the percentage of scholarship funds for underserved students to about 30 percent.

“These Kids Have Big Dreams”

The Pepperdine gift aligns with the Caruso Family Foundation’s longtime support for low-income families and children in need of education and healthcare. The couple is actively involved with Operation Progress, which guides hundreds of at-risk students in the Watts neighborhood of Los Angeles to and through college, and Para Los Niños, which provides healthcare, education and social services to poor Angelenos.

Rick elaborated on this theme of opportunity and access while speaking with the L.A. Times’ Teresa Watanabe about the Pepperdine gift. “It really hit me that these kids have big dreams,” he said. “So why not now take the next step and help them to higher education in a graduate degree?” Looking ahead, Caruso said, “If I get a bunch of these really smart lawyers who understand real social justice and real fairness in life, and you put them back into the system, I think it’s a game-changer.” He added that Pepperdine, which promotes both excellence and faith as a Christian institution, would encourage values to “do the right thing and not just the easy thing.”

Caruso’s gift comes at a time when several of his mega-donor peers are focused on reducing medical school debt. Experts have sounded the alarm that medical school graduates, faced with a 2018 median debt burden of $192,000, will opt for lucrative specialist jobs over in-demand and lower-paying positions. In response, New York University (NYU) School of Medicine and Weill Cornell Medicine have raised hundreds of millions of dollars to cover tuition so students, to quote Weill Cornell, will “focus their careers on their interests and talents, rather than the requisite future salaries to repay their loans.”

The problem, which I highlighted in a piece on NYU’s plan, is that neither school has a mechanism in place to incentivize students to, say, practice pediatrics in rural Oklahoma. While this has yet to deter donors—NYU has raised over $450 million for its program, so far—health experts are less bullish. Aaron Carroll, a pediatrician and researcher at Indiana University, said, “If you had to find some cause to put tons of money behind,” he said, NYU’s plan “strikes me as an odd one.”

Donors to the Rescue

Contrast the NYU/Weill Cornell Medicine model with developments out of Pepperdine. As noted, the school hopes to cover loan payments for all students who qualify for the Caruso Family Loan Forgiveness Fund for 10 years. After that, the Public Service Loan Forgiveness Program, signed into law by George W. Bush in 2007, should forgive the balance owed for those who stayed in public or nonprofit service. Ideally, this approach should keep students on track to graduate with degrees in public service with no debt.

But notice the inclusion of the word “should.” Recent news suggests that the federal program hasn’t exactly gone according to plan. According to the Department of Education, the program allowed loan forgiveness for a mere 518 borrowers’ applications out of the 73,554 applications it has received as of March 2019. Earlier this year, the American Federation of Teachers filed a lawsuit against the department, citing “gross mismanagement.” Meanwhile, the Trump administration has twice proposed eliminating the program altogether.

In the absence of clarification from courts, a more competent Department of Education, or a Democratic president, where can debt-saddled graduates turn for relief? You already know the answer to that question.

In related news, check our take on real estate developer Chris Jeffries and his wife Lisa’s $33 million gift to the University of Michigan Law School, earmarked for scholarships and other forms of financial aid, summer funding programs and debt management.