Stop making sense

Update:  I have a piece in Salon on the law school side of the student debt equation.

The New York Times is running a series on student loan debt.  The first two installments appeared Sunday and Monday, along with reactions from various commentators (I recommend this one in particular from Andrew Hacker).

Many of the details from the series will be very familiar to critics of legal education: Schools with runaway cost structures marketing deceptive pitches to naive prospective students and their families; state governments withdrawing support for public higher education; institutions featuring administrative bloat, unnecessarily expensive amenities, and tenured faculty who teach less and less; and as a consequence of all this increasing debt loads for graduates.

All of this is of very direct relevance to people interested in reforming legal education, both because it illustrates the extent to which some of the same dysfunctions that plague laws schools afflict higher education in general, and because it is almost impossible to get a law degree in the United States without first getting an undergraduate degree from a four-year college.  (Interestingly, to this point the series has not mentioned the costs of graduate and professional education).

We have no data yet on what sort of undergraduate debt people who enroll in law school are carrying.  One striking aspect of such debt is that it appears to some extent to vary inversely to the prestige of the institutions where it is acquired.  This interactive map features undergraduate debt levels at hundreds of colleges and universities.  It reveals, for instance, that 77% of 2010 Princeton graduates had no debt at all, while the 23% who acquired undergraduate debt had a mean debt of $5,225 at graduation.  Meanwhile the 74% of 2010 graduates of the Richard Stockton College of New Jersey (a public school I have never heard of) who had undergraduate debt had a debt of nearly $31,000.

Overall, undergraduate debt averaged $23,300 nationally in 2010, with ten per cent of 2010 graduates having debt loads of more than $50,000, and three per cent having debt of more than $100,000. (Note these figures apply only to graduates who graduated with debt.  Approximately one third did not).

On the one hand these debt levels are quite modest by comparison to those law school graduates are incurring.  The average law school debt of students graduating this month with such debt -- nearly 90% of all grads will do so -- is going to be about $110,000: a figure that is likely to rise to about $125,000 for the current rising 2L class.  On the other the undergraduate and law school debt figures must be considered cumulatively, since unlike almost every other legal system in the world we make an undergraduate degree a prerequisite to enrolling in law school.  Thus average educational debt for current law students is probably going to be in the range of $150,000 upon graduation.

Because the average interest rate on this debt is going to be around 7.5%, that means current law students will, upon graduation, see their debt loads increase by nearly $1,000 per month, until, in theory, they start paying down the principal they will owe.

How many will acquire jobs that will allow them to start servicing their debt in a timely manner, even on a 25-year repayment schedule? On such an extended schedule they will have monthly debt payments of $1,100 dollars.  Note that such a payment would represent nearly 30% of the after-tax monthly income of someone earning the median salary of $63,000 reported by 2010 law school graduates who had their income reported to NALP nine months after graduation.  But only 41% of graduates had their income reported by their law schools to NALP, which means, of course, that four out of five 2010 law school graduates did not have a reported income of $63,000 or more.

And while it is true there were some graduates who had incomes higher than that who did not have their incomes reported, it is also true that some graduates had incomes reported that were higher than their actual incomes (my auditing of reported income suggests this latter phenomenon is far from rare).  Indeed these two factors probably come close to more or less cancelling each other out. This in turn means that approximately four out of five 2010 law school graduates were not earning even the minimum salary (generously construed) necessary to service what has become the average educational debt necessary to graduate from law school.

In other words, law school no longer makes financial sense for most people who go to law school.