Friday, August 31, 2012

Making student loans dischargeable in bankruptcy: First steps

Student loans aren't  dischargeable in bankruptcy except under extraordinary circumstances.  This unjust, inefficient, and socially destructive exception to the bankruptcy laws was extracted from Congress by shills for the financial industry, who in the 1970s began mounting an effective propaganda campaign based on classic Nixonland tropes about dirty hippies flipping off the man and then making millions off the system anyway etc. etc.

Getting rid of this exception is going to be a long hard political battle.  A good place to start is with professional degrees in general, and law degrees in particular.  The law school scam is in some ways an ideal launching pad for a campaign to make student loans dischargeable.

(1) More than any other supposedly respectable institutions of higher education, law schools have taken full advantage of the combination of federal loan financing and non-dischargeability to price-gouge naive students, through highly deceptive marketing practices, that would never be tolerated if engaged in by ordinary businesses.

(2) As a result, law school graduates carry truly extraordinary levels of student debt.  A recent estimate puts the percentage of student loan debtors who carry balances of $100,000 or more in student loans as around three percent.  Yet the average (mean) educational debt of people currently enrolled in law school is going to be about $150,000 at graduation. 

(3) A professional degree that is a prerequisite for obtaining a license to practice that profession is a perfect candidate for discharge through bankruptcy.  This is because essentially all of whatever net positive economic value that degree has is captured by whatever value it adds by enabling those who have it to obtain that professional license.  This creates an opportunity for a simple, eminently fair trade: A graduate can give up his or her license to practice the profession in exchange for making the graduate's student loans dischargeable.

Creating this opportunity would create real-world consequences for offering degrees that end up having negative net present value.  (A comment posted yesterday suggests some people in legal academia don't understand this concept. Omniscience isn't a prerequisite for determining the net present value of an asset.  A degree has negative net present value if the holder of it is at present willing to in effect give it back in return for consideration less than that which the holder paid for it. Obviously the right to discharge student loans in bankruptcy is much less valuable than actually getting your direct costs and opportunity costs incurred while attending law school refunded).

In addition, as a commenter points out, allowing people to renounce their law licenses in exchange for bankruptcy right would begin to address the massive oversupply of lawyers, and would be beneficial to everyone working in the legal system other than law school employees.

A law degree has economic value to the extent that the right to practice law has economic value.  (It's to say the least extremely unclear if a law degree is on net a positive on the typical law school graduate's resume if that person isn't practicing law).  If holders of law degrees are willing to go to the extreme of renouncing the latter right, then what argument could there be for not allowing them to in effect treat the degree as a toxic asset, whose toxic effects should be able to be -- very partially -- ameliorated through bankruptcy?


280 comments:

  1. If you are going to make student loans dischargeable, there has to be some due dilligence regarding credit risks before these loans are given. And that would cause most law schools to go out of business.

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    1. This should be the standard. I will be willing to give up the law license as long as anyone else who goes through bankruptcy is forced to give up their trade permanently. Too many people here act as if bankruptcy is a walk-in-the-park, get-out-of-jail-free card when in reality it has serious consequences for a long time and no sane or moderately successful person would ever want to go through it (unless you're in charge of an LLC or corp, that is).

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    2. Feature, not a bug.

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  2. Yes, heaven forbid we require a small degree of personal responsibility from lawyers.

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    1. Right . . . so let's:

      1) Get rid of limited liability arrangements. Damn freeloaders trying to avoid responsibility!

      2) Get rid of E&O insurance requirements. What, honest hard working people should have to pay for the mistakes of others? Try going somewhere else for your hand-outs commie!

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    2. 5:34:

      You are a douche. I bet your dick is so small you pee on your balls.

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    3. Perhaps you can think of some situations where debt should be dischargable ? We aren't talking about lessening personal responsibility for all lawyers.

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  3. regarding propaganda, I agree that propaganda was used to mold and direct the public opinion years ago, decades ago, on student loan issues, on welfare state issues, other issues that help fill fat investor wallets, etc.

    That is how the USA operates: consent is manufactured through the use of propaganda disseminated over a period of years via the mass media. Industries and their lobbies use their money to access the mass media and disseminate this propaganda. When their polls and focus groups indicate they have manufactured sufficient consent in sectors of the public mind, they go to the politicians, campaign donations in hand and, viola, truth, justice and the american way prevails.

    You wrote:
    "The law school scam is in some ways an ideal launching pad for a campaign to make student loans dischargeable."

    Agreed. In fact, when I jumped in on the law school scam crusade a few years ago, as a nontraditional 3L who had been forced out of a job as a patent agent due to loss of clientele after the dotcom bust, I thought we had a decent chance to actually raise this issue in the public mind because of the specific set of circumstances in existence. First, lawyers occupy a dominant niche in the societal mind due to their role in court decisions and TV shows etc etc. And there existed a perception of wealth and elite status for lawyers. So, showing the seamy underbelly of this game is a sort of 'man bites dog' news story with legs. And in this new media age of website mass media controlled by computer algorithms in search of eyeballs, whatever attracts readers of a certain economic status is going to get play in the media. And this law school scam story got some play. Also, law is a small world in some ways. So it is easier to tackle that taking on the whole higher education industry.

    As far as driving this issue so far as to prompt congress to take action, it will take a while. Things will have to get worse before congress takes any action.

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  4. dont dump your irresponsibility on the taxpayer.

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    1. Fuck you. Those in charge took away my BK rights two years after I started law school. See the 1998 Clinton BK amendments to the HEA. I worked as a lawyer for many years, paid on my student loans, have paid nearly all I borrowed yet still owe 1.5 times what I borrowed. After over a year of unemployment I now have a government job making slightly over half what I did yet I still owe 2X my yearly salary in student loans. I would gladly give up my law degree for BK on these loans....and I have an 800 FICO. Again, fuck you.

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    2. Ah, but doesn't current rhetoric say that education is the responsible path? Get educated so that we can become good, contributing members of society, and all that.

      Law Schools price gouging due to a distorted, federally-guaranteed market--- that is irresponsibility to taxpayers.

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    3. That's exactly what this is trying to avoid. Tell me who the irresponsibility gets dumped on after students start going on IBR in droves. Who will the irresponsibility be dumped on when large portions of our best and brightest are saddled with debt, cannot buy houses or afford children, and don't have the freedom to innovate?

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    4. If it was irresponsible to take the loans out then it was also irresponsible to make the loan. Just like no one forced a student to make the loan, no one forced the back to make it. Responsibility is a two way street.

      You don't seriously maintain the position that it is "responsible" to make debt slaves out of people, do you? You know these people from Cooly will never be able to pay off these loans. The debtor will have to live with BK on the credit report. The lender should also bear some responsibility here.

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    5. When I graduated in 1991 law school was not a choice because of the costs. The economy was awful so I took a job selling tires.

      Today, I am in my second career as an attorney and paid cash for my law degree. I am no genious but was smart enough to understand I needed to work before taking on debt.

      Anyone going to law school regardless of what the stats say is making a poor choice that I don't want to pay for regardless if the Feds are asleep at the other end of the transaction.

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    6. Then tell the Feds not to make the loan in the first place, douche-wad.

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  5. A lot of these debates miss the larger issue. That is, COA law school is set at a price point that causes to many people to go to law school, not to few. Higher cost of education will lead to less students going to law school. This will help solve the problem with the over supply of lawyers. In reality higher education cost is the solution to the real problem of over supply of lawyers, and not the problem.

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    1. Nice try, tenured law professor trying to hang on by his fingernails to 20 hour work weeks, 6 figures and various perks.

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    2. No. You need to understand that people go to law school because they mistakenly believe that they will have a better life and a better job. Now that people are realizing that there aren't jobs, they aren't going to go to law school
      As long as people believe they will be getting rich out of law school, they will pay any price and the government will gladly lend it to them.

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  6. 5:50 am - if we sharply limit the amount of federally guaranteed student loans and we permit dischargeability in bankruptcy of any and all student loans (with real underwriting appurtenant to those loans), then the current price points of law schools will be ridiculously high, and the objective of having less law students go to school will be reached.

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  7. 5:50 - If you got rid of the no questions asked government loans, I might agree with you. Problem is, the true COA law school doesn't become apparent until after you graduate. And by then, its too late.

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  8. I think this is a wonderful idea.

    How many attorneys would weep with joy at being allowed to trade their license and have their student loans wiped out?

    I know a few...

    This would be a tremendous boon to attorneys who are still practicing. Just think about how many people would exit the profession. Instead of having 1 million too many attorneys, we would only have 250K too many attorneys.

    A win/win situation, except for the skools. They need to have some accountability. Then it would be win/win/lose and some semblance of justice would be restored.

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  9. To the anonymous cockroach who posted at 5:34 and 5:48,

    Where is your "personal responsibility" argument, when massive U.S. corporations receive taxpayer bailout?! By the way, moron, economic apologists argue that bankruptcy exists because "We want to give people a fresh start and we don't want to punish risk takers."

    Basically, everyone other than student debtors can discharge their debts. What makes students and graduates worthy of this exception?!?! After all, you are talking about ambitious and somewhat intelligent people. Yet, people who piss away $30K on the craps tables in Vegas can have that debt wiped out in BK court. The same applies to the irresponsible ass-hat who purchased too many consumer items that he could not afford. In some cases, that person can still hold onto his expensive car and other possessions.

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    1. Just pay back the cash you took to spend on yourself Fernando.

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  10. It would be unquestionably good for students if they could do this, but there's an infuriating lack of consequences for the law schools that misled (and continue to mislead) these students and got paid up front in 100-cent dollars.

    I think Tamanaha is right that some sort of cost control must be imposed on schools in the form of individual limits to what any one school's enrollees can borrow from the federal government in a given year. As much as that cost control would help, I think it would also make sense to force schools to pay some sort of premium to the Department of Education based on the amount of help their graduates needed from the Income Based Repayment program over some number of the past few years - somewhat like federal deposit insurance for banks with the FDIC. IBR's cost will mean a great deal to its survival going forward, and it seems unfair to make the taxpayer cover the expense when it's only the schools that reap almost all of the benefits. Maybe Harvard's IBR premium will be zero, and maybe Cooley's IBR premium will be most of its annual budget. So be it.

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    1. How about clawbacks? Or even better, make law schools co-signers for the loans their students take out!

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    2. Listed in order of least to greatest difficulty for reformers to accomplish:

      (1) Force law schools to publish accurate employment data that actually conveys a sense of a JD's worth to 0Ls.
      (2) Create groundswell for student aid reform that ties future lending to students of a given institution to the past ability of its graduates to repay their loans without government assistance.
      (3) Make law schools jointly liable for their students' debts.
      (4) Make law schools repay previous graduates for costs incurred during period of misinformation going back to X.
      (5) Convince every law school not named Harvard, Yale or Stanford to close.
      (6) Convince the average law professor that anything is wrong with how law is taught in America.

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    3. Eureka! A list of six things that will never happen.

      Hilarious ==> "force law schools to...create groundswell...make law schools...convince every law school...convince the average law prof...

      The general public despises lawyers. Why does anyone think a Republican House of Reps would ever countenance such a student loan bankruptcy reform?

      Not gonna happen. But "the reformers" should stick to it by all means.

      How about just paying back the money deadbeats?

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  11. You are all thinking too big! And thinking big in this arena means that nothing gets done.

    All that we need to be asking for is the removal of bankruptcy protection for private lenders, not student loans as a whole. This way, students are realistically limited to borrowing $20,500 per year from the government because private student loans will, for all intents and purposes, become impossible to obtain (and could be trashed in bankruptcy if law school didn't work out.)

    About $60K for law school is "reasonable", including living expenses. And with this little money going into the law school system, law schools will be forced to slash prices and save money. Some schools may even close if they cannot adapt.

    Asking for all student loans to be dischargeable in bankruptcy gets laughed at by politicians. Asking for half of all law schools to be closed down by the ABA gets laughed at.

    Start with asking for something we could realistically achieve. Get it. Then move on to the next challenge.

    But I think that merely getting the private lenders (and thus the corporate profiting) out of the law school funding game will cause a chain reaction of positive reform throughout the system.

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    1. Private lenders are already out of the game. Almost all law school loans are now federal loans. $20,500 per year is just the limit on Staffords. Everything borrowed beyond that is GradPlus, with a 7.9% interest rate.

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    2. My mistake. I stand corrected.

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    3. Private loans account for $150 Billion of the $1 Trillion outstanding, the Federal Program with $850+ Billion is the real issue here.

      The Straw man is laughable.

      I get your point, small goals, then big goals, but the federal program is a dog, giving loans out to everyone without considering ability to repay, that IS predatory lending.

      Bring back BK protections for student debtors.

      Eliminate the federal loan program.

      Allow private lenders to establish rates on loans based on actual risk and students ability to repay.

      You want to go to Law school? Loan is 18%, you can have it if you are credit approved, or have a cosigner that can get you approved, no guaranteed approvals from the Gov't, no bailouts.

      Students that default ruin their credit, but get debt removed in bankruptcy. Lenders eat their losses, and make interest off the loans that do get paid back. And life goes on without this government boondoggle of a loan program.

      Let's stop pretending that federal student loans are "financial aid" because they approve regardless of credit history or pursued major.

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  12. i was reading this article earlier this morning and i thought "i'm surprised someone hasn't done a mass shooting over their law school debt." the more coincidental thing is he is a painter and only about $20,000 in debt.

    http://www.dailymail.co.uk/news/article-2195784/Dean-Holmes-family-murder-Indebted-father-shoots-dead-wife-daughter-11-hands-stopping-McDonalds.html

    the point is that it would probably take something like a mass shooting for this issue to be on a national platform to affect politics.

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  13. Fernando,

    548 here.

    i was not in favor of the corporate bailouts.

    i am not in favor of allowing individuals to wipe out their debt (whatever the cause/source) so easily in bk.

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    1. Then you love misery, or profit off it somehow.

      Labor camp for you.

      Siberia.

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    2. Or perhaps I love seeing people pay their debts rather than seek to leech off of everyone else.

      Debtors' prison for you.

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  14. As an FYI, student loan debt is dischargeable in bankruptcy in Canada after seven years (and in extraordinary cases after five), subject to certain conditions. Details here:

    http://student-loan-bankruptcy.ca/

    I think there are a lot of Americans who have been burned by the law school scam who would qualify under these rules.

    I can tell you that while law school tuition in Canada has risen since I attended in the mid '90s, is still a great deal less expensive than in the US.

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    1. Interesting point. Worth a closer look.

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  15. "price gouging" lol. Lawprof's 1st grader understanding of basic economics remains adorable. It's a shame because I think LP loses a lot of credibility when he uses nonsense terms like "price gouging," which as best as I can understand, means: "the price you're charging for your product/service offends my subjective notion of what a 'fair' price would be."

    Anyway, correct me if I'm mischaracterizing your position LawProf, but basically your change to the bankruptcy code would make the professional credential the "collateral" to the student loans, much like the house is collateral to the home mortgage.

    If an individual is "underwater" on either (meaning NPV of professional credential < NPV of loans) than a debtor would have the option of strategic default, with all of the ramifications that go along with that. And, just like the crash in home prices precipitated a lot of strategic defaults on mortgages, a major change in the legal employment market (much like the last 5-10 years) would correlate to a large number of strategic credential defaults.

    It's a good idea. I think it would be more politically feasible if it applied as a condition to newly originating loans, as opposed to retroactively changing existing notes, but the concept is solid.

    Publius Lex

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    1. Speaking of kindergarten econ concepts, I'm using "price gouging" to signify real world deviations from the Magic Fairyland of Unicorns, Rainbows, and Efficient Transactions Between Rational Maximizers of Utility. Law schools rip people off by using real world phenomena (asymmetrical information, cognitive biases) to charge far more for law degrees than they're worth.

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    2. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:29 AM

      "... nonsense terms like "price gouging," which as best as I can understand, means: "the price you're charging for your product/service offends my subjective notion of what a 'fair' price would be."


      Aren't the usual elements for gouging all in place?

      Provider(s) of the goods in question sets the price it wants to set. Provider(s) of the goods in question have a patent from the government (or quasi-gov't agent ABA) meaning that the goods in question may only be obtained by the authorized providers. The goods are also not fungible in the sense that no one else is permitted to provide any goods that reasonably substitute. (Absent vanishingly small percentage of "reading for the test" type exceptions.)

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    3. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:32 AM

      (Gack - should proofread first)

      "only be obtained by the authorized providers" s/b "only be obtained from the authorized providers".

      The Department of Typographical Errors Corrections Sincerely Regrets This Error.

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    4. I don't mean to be pedantic, or distract the conversation from the larger point about student loan reform, but I do think you need to be careful with the language that you use.

      My point is 1) the term "price gouging," even when used properly, is a dubious concept no matter what economic model you are comfortable with; and 2) your use of the term to refer to law schools' utilization of asymmetrical information and cognitive biases (to convince 0L's to pay six figures for a law degree) is incorrect, because that is not what the term means.

      Law schools do rip people off in the sense that they intentionally convince individuals to pay a price that they know does not come close to reflecting the FMV of the degree.

      That isn't price gouging; that's just fraud. Using precise terms is important.

      Publius Lex

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    5. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:43 AM

      Well, PubLex, what definition would you use for price gouging?

      A reasonable one for the layman (me!) is charging over market price when other sellers aren't available.

      Clearly other sellers (than law schools) aren't really available due to the power the several states have ceded to the ABA.

      So where might we disagree? I guess the concept of "above market price", which is inherent in this layman's definition.

      So how do we decide whether LS charge "above market price" or not?

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    6. "That isn't price gouging; that's just fraud. Using precise terms is important."


      Ooooooh! Well, well, well, I do declare!

      So, that's the distinction you were clinging to when you decided to flame out thusly:

      "Lawprof's 1st grader understanding of basic economics remains adorable."

      Well done!

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    7. Seems extremely pedantic to point this out when 99.99% of the people reading this understand the professor's point and how he's using the term.

      The fact you say he has a 1st grade understanding of economics also shows you think think this is a REALLY BIG DEAL when just about no one else would agree with you.

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    8. "None crushed Publius Lex today" - putting that in my journal

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    9. "A reasonable one for the layman (me!) is charging over market price when other sellers aren't available."

      Half correct.

      A better definition is charging over market prices FOR ESSENTIAL PRODUCTS OR SERVICES when other seller's aren't available.

      When purchase of the product is voluntary and not essential for daily life (e.g. not food, water, utilities, shelter), then there is no price gouging. Just ripping off. So law school is a rip off, and nothing to do with price gouging.

      We do need to sharpen the focus here. Calling law school "price gouging" is dumb, because it's not even close. It's a bona fide rip off. But that's different.

      If the law school scam movement is to be taken seriously by those with the power to change things, it needs to sharpen its focus and stop miscategorizing the nature of the problem and the extent of the problem (e.g. price gouging in this post, and some stupid "plucked out of someone's ass" figure of $20,000 for annual malpractice insurance that was used by many people as a legitimate reason why solo practice is impossible in a prior thread, to name just two obvious and recent examples that send many readers off shaking their heads at how poorly informed and sensationalist these blogs have become.)

      It might seem picky, but it's important to be precise. There are so many people out there who will look at this movement and dismiss it because it can't even get its own facts correct or frame the problem accurately.

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  16. Those corporations are actually paying back their debts. As opposed to whining and trying to weasel out of them.

    American college and grad students are among the most coddled groups of people to have ever walked the face of the Earth. There are maybe a billion people in the world who would kill to trade places with your typical American student with his smart phone, beer belly, and parents' house (with high speed internet) to crash in.

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    1. So nobody in the US can ask for *any* reform until those living in slums in India have running water?

      How about the idea that if we are better off in the US and have more spending money, we are more likely to help the "billion" or so people who would kill to trade places with us?

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    2. You are right in saying that there are a billion people who would kill to swap places with our graduates.

      But you are wrong in dismissing this particular "first world concern."

      It may not be apparent now but the crisis will have serious consequences in the future.

      Such as lower birth rates and lower economic spending as they service their loans for 30 years.

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    3. Yes, because we approach all of our public policy problems one at a time and in order of greatest karmic importance.

      Also, Jesus Christ.

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  17. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 6:57 AM

    First thing let's do is discharge all the lawyers

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  18. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:04 AM

    LawProf, editorial note, 1st graph 2nd sent., "began mounted" s/b "began mounting".

    (Feel free to dispose this comment if you decide to make edit)

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  19. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:09 AM

    "(1) More than any other supposedly respectable institutions of higher education, law schools have ... price-gouge ... deceptive marketing ... [etc]."


    My gut says this is correct, but then I've only been really paying attention to the issue as it affects law schools.

    Yesterday someone posted a link to firedoglake with some entertaining-yet-sobering CG videos on "don't go" to LS.

    Among other videos on the firedoglake site were some similarly themed "don't get MBA school scammed" type videos.

    Leaves me wondering, are b-schools ripping off their matriculants also, even if at smaller scale?

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  20. someone needs to contact Frontline. if Frontline was able to expose for-profit colleges, then the LS scam is a mere extension.

    http://video.pbs.org/video/1485280975

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  21. For student debt to be dischargeable in bankruptcy, the lenders must be private lenders who chose underwrite the risk on the loans. When all loans are federal and public money is given out with no limits and no underwriting discipline, it is unfair to the taxpayers to allow the debt to be discharged in bankruptcy.

    I firmly believe that getting to a place politically where student loans can be dischargeable in bankruptcy requires making student lending a private market again.

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    1. Dick_The_Butcher_21st_CenturyAugust 31, 2012 at 7:39 AM

      Soo... the gov't currently "owns" about $0.8T in student loans, right?

      So what's the solution. Sell it all off at a reasonably underwritten amount ($0.35T? $0.5T?) to private lenders, where the discount is based on an amalgamated SWAG as to likely default/BK discharge rates?

      Delete
  22. and no one will lend to a law student outside of the toptier schools. thats not a bad thing.

    also fewer useless undergrad degrees. another good thing.

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  23. If student loans were immediately dischargeable, hardly anyone would get them. Most students do not enter university with assets or income that would support the debt that they take on. If they could get the loans discharged, they would file for bankruptcy right after graduation. Obviously student loans can't work that way.

    One solution is to impose conditions: your loans can be discharged after X years PROVIDED THAT you have seriously and consistently tried to find and retain adequate employment AND you have consistently made payments whenever your income and assets have allowed AND ...

    Above all, the availability of student loans for law school must be restricted. Most law students are lousy and never should have been admitted at all—and certainly should not have been handed hundreds of thousands of dollars to spend. Of course, this position of mine will be extremely unpopular in a society committed to the belief that everyone and her goddamn Yorkshire terrier should be able to become a lawyer.

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  24. To Dick the Butcher at 7:39 -

    Right, I was speaking more on a going forward basis. Your idea seems like a decent one if it would work.

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  26. Where's BL1Y? He's thought more about this (and the moral hazard of it, as well as its punitive effect on those who paid their way through school) before and he argues for making payments a substantial tax credit. I'm not well-versed enough in tax policy to discuss this, but I do think that retroactively making all loans (which were disbursed under a law making them non-dischargeable) is probably not the best idea (and I have a big loan balance that I personally would benefit from if forgiveness occurred). I think changing the law for all future loans, as well as a combination of a tax credit (for those who want to keep their license) and limited forgiveness (in exchange for giving up the license to practice) of some percentage/flat dollar value of loans is probably the most realistic solution that accounts for as many issues as possible. Willing to listen to counterarguments too. I just want to see the system changed.

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    1. The problem with that idea is that you already get a deduction in the years when you pay tuition. The interest you pay afterwards is tax deductible.

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    2. Not a deduction. A credit. Those are two different things.

      I found some stuff BL1Y has written on it for people who want to read a more thought out take than mine.

      http://www.constitutionaldaily.com/index.php?option=com_content&view=article&id=1729:because-loan-forgiveness-is-stupid&catid=42:news&Itemid=71

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    3. I'm aware of the difference between the two. I assumed you meant a credit for loan payments made. That article makes almost no sense at all, particularly at the undergraduate level.

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  27. Economist Justin Wolfers has called a policy of discharging student loans the "Worst Idea Ever."

    http://www.freakonomics.com/2011/09/19/forgive-student-loans-worst-idea-ever/

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    1. He has some decent points.

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    2. Great link!

      Student loan debt forgiveness will not happen.

      Thank goodness.

      Delete
  28. Everyone attacks "for profit" schools because they are politically unpopular. Law schools make the "for profit" scammers look like pikers.

    Step 1: bring back dischargability of student debt after a period of time, say 7 years.

    Step 2: federal grad lending capped at 20k per year.

    Step 3: law school student debt problem solved.

    The law school well would run dry. At 20k in federal lending, highly qualified disadvantaged students still would be able to attend LS somewhere if they really, really wanted to and were willing to sacrifice geography and a few years working to make it happen. Tuition would fall through the floor. Private lending would dry up or would require sureties and/or double-digit interest rates. 50 law schools would close in year one including Cooley. Teaching burden would increase on faculty at the expense of "scholarship."

    We'd see a legal educational system that resembled what existed in this country before 1970 (i.e., before the Boomers totally fucked it up). People who were intelligent and wanted to sacrifice to obtain education would do so, just as they do in almost every other western nation.

    The downside that will really stick in leftists' craws is the fact that wealthy people would have more of an access to education, just as the wealthy have an easier time obtaining food, shelter, automobiles, clothing, health care, luxuries, novelties, etc. I guess that just sucks, as it does in all other parts of life.

    If you are poor, you will have to be that much smarter and harder working to obtain legal education than if you were a wealthy child of privilege. But if you do obtain it, the sky will be the limit as it used to be.

    Now, if you're poor, you can obtain legal education. You will graduate with a ton of debt, remain poor, and never be able to crawl out from beneath it. In my humble opinion, the former system was better.

    ReplyDelete
  29. How about a middle-ground solution?

    A new section of the Bankruptcy Code is created under which individuals can file specifically to restructure student debt. Authorize the bankruptcy court to cram the restructuring plan down on the lenders as long as it provides that the debtor pays X% of gross income monthly on the debt, for 10 years. After 10 years, whatever is left is discharged. And provide that it won't be taxable income, either.

    ReplyDelete
    Replies
    1. How about you pay back all the money you wasted on yourself?

      Delete
  30. Hey 0Ls! Please check the above and similar comments on this thread re. Reason #337 not to go to law school: So that you won't have to listen to anonymous libertard trolls lecture you about frugality and responsibility when you're a jobless, spouseless virtually homeless JD slowly strangling to death on six figure debt.

    BTW, great post LawProf.

    ReplyDelete
  31. Whatever you all do, let's not at all make the horrendous logical leap from the fraud the law schools perpetrate on their own behalf to the risk that law students won't be able to pay off their loans. Those things are in no way connected, especially when you can inject between them an arrogant judgment of the borrowers' worth as human beings.

    Fuck me. Did it ever occur to you that possibly, just possibly, if law students weren't lied to by the hundreds, they wouldn't need bankruptcy? Did it ever occur to you that even if lending were completely private, a much better solution to bringing the future cost of private loans down from 18% might be making sure the law schools don't get to lie and thereby create an oversupply of people who can't repay their loans?

    No, just some more predictable, insulting, judgmental shit about personal responsibility from a bunch of people I wouldn't slow down for even if they were in a crosswalk. Fuck off.

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
    2. That's about protecting future borrowers, which is important. But it doesn't solve the student debt crisis faced by past borrowers, which is another important issues.

      Delete
    3. Awwwww, did someone borrow too much money and now can't pay it back?

      Gosh, why don't people understand that you are a victim?

      You shouldn't have to repay a dime.

      Everyone else should.

      Delete
  32. I had to Google "omniscience." Still, good post.

    ReplyDelete
    Replies
    1. Sorry, to clarify what I mean't by "I had to Google omniscience" is that I didn't know what the word "omniscience" meant; likely because I am not an omniscientist.

      Thx.

      Delete
  33. This is a great post and a good road map for the next step. As much as I would like to see government out of the student loan industry entirely, realistically that will not happen. Others here have suggested 2 great ideas:

    1. Cap student loans at a certain level--20K per year sounds about right.

    2. Make SL debt dischargable in BK after a certain period of time. The Canadian guidelines sound reasonable. If someone still cannot pay back their loans 7 years out of law school, the chance that they will ever be able to do so is minimal.

    I would also add that law schools which do not meet certain criteria (e.g. average TRUE salary, % bar exam passage, % of graduates in real legal jobs) should get their SL eligibility yanked.

    ReplyDelete
    Replies
    1. Yep, anything that leads to your debt being paid by someone else "sounds reasonable."

      Surprise.

      Delete
  34. LawProf,

    I don't agree with the concept of withdrawing from the Bar in exchange for allowing one's student load debt to be discharged in BK. I know many lawyers who discharged hundreds of thousands of dollars in BK as a result of their investments in real estate collapsing coupled with large unsecured debt (credit cards) yet they were not forced to give up their law licenses.

    BK laws for student loans should be restored and the free market should take over.

    ReplyDelete
  35. Law school should not cost as much as it does! When I attended it was a little over $10k a year in tuition. Twenty years later, it is over triple that. I paid off my student loans years ago and it wasn't easy. But if I were looking down the barrel of $150k+ in student debt and then the interest, I don't know what I would do. I never had the internet to rely upon when I started but anyone considering law school should really heed the warnings. This post is actually proposing surrendering your law degree/license to have your student debt discharged in bankruptcy...now what does that tell you?

    ReplyDelete
    Replies
    1. Exactly what kind of fool borrows $150k+ to gamble on a degree and then expects others to pick up the tab when he loses the bet?

      Delete
  36. Article in the NYTimes on this topic today - http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?_r=1&hp

    ReplyDelete
  37. 8:11 am -- In a nation that believes in equal opportunity, grossly unequal access to education should stick in rightists' craws too. In fact, the prospect of grossly unequal access to education does stick in the craws of the thoughtful conservatives I am privileged to know.

    ReplyDelete
  38. i guess as someone who was responsible and used my savings (yes, non traditional law student; deferred buying house and marriage to pay for law school) and scholarships to pay for college,

    where can i sign up to get free money for being responsible?

    ReplyDelete
    Replies
    1. I guess you want to end foreclosures and other forms of bankruptcy too. Thank god you're on all the relevant forums bleating on about getting free money for those too.

      Delete
    2. Yes I am and you are very welcome.

      Deadbeats should pay their debts.

      Delete
  39. In the meantime, you still may have better odds of getting your student debt discharged in bankruptcy than getting a job. Just represent yourself and go for it. Per the NYT:

    "Rafael Pardo, a professor at the Emory University School of Law, and Michelle Lacey, a math professor at Tulane University, examined 115 legal filings from the western half of Washington State. They found that 57 percent of bankrupt debtors who initiated an undue hardship adversary proceeding were able to get some or all of their [student] loans discharged.

    Jason Iuliano, a Harvard Law School graduate who is now in a Ph.D. program in politics at Princeton, examined 207 proceedings that unfolded across the country. He found that 39 percent received full or partial discharges. . . While his sample size was small and he agrees that it’s not easy to prove undue hardship and personal hopelessness, his assessment of bankruptcy data suggests that as many as 69,000 more people each year ought to try to make a case. And they don’t necessarily need to pay lawyers to argue for them, as he found no statistical difference between the outcomes of people who hired lawyers and those who represented themselves."

    http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?pagewanted=all

    ReplyDelete
  40. Economic argument against discharge: people will continue to enroll in law school because they will continue to have worthless liberal arts degrees. The law schools won't change a thing about what they are doing. Arguably it will be a more compelling reason to go to law school. If you are top 10% great you get a job. Bottom 90% who cares discharge it. There wasn't political will to allow mortgage cram downs to save the housing industry. This is a non starter.

    ReplyDelete
    Replies
    1. Do you really thinks student loans will still be generally available if they can be readily forgiven?

      Not likely.

      Delete
  41. "So nobody in the US can ask for *any* reform until those living in slums in India have running water?"

    There's a difference between asking for reasonable reforms and whining and weaseling out of personal responsibility.

    ReplyDelete
  42. Paul, you're insane.

    Negative NPV doesn't mean that someone is willing to give the thing back for less than what they have in!

    To top it off, you CAN'T GIVE YOUR EDUCATION BACK unless we're now in Total Recall land and you can go and get your brain cleansed.

    Your argument is so flawed and so unrealistic I am upset with myself for even taking the time to read it.

    ReplyDelete
    Replies
    1. It cracks me up when people take issue with math / economics points made in Paul's arguments. If you can't see that a law degree has a monstrous and debilitating negative NPV (however you define the term) for the majority (or at least a huge minority) of people that earn the degree in 2012 forward then please leave the internets, go back to playing with the shiny object you put down in order to type this comment, and never return.

      Delete
    2. I think 10:06 is referring to LPs method of calculating NPV. For example, under LPs example Ellie Mystal would probably have a negative NPV on his law degree even though his actual NPV would not be negative.

      I agree that type of situation is probably in the minority.


      Delete
  43. Student loans are NEVER going to be dischargeable in BK because IBR does the same thing in a fairer way.

    As soon as you try to push for BK protection, get ready to hear IBR IBR IBR. The politicians saw you debtors coming long ago and already put an insurmountable bear trap in your path.

    Sorry, suckas!

    ReplyDelete
    Replies
    1. How is compounded interest on minimal payments because of lack of sustainable employment over 25 years "fairer." And the politicians created these debtors.

      Delete
    2. Right- so create a system where the debt level rises faster (because the interest on 200K of loans is accruing faster than the principal is being paid down by IBR). Make that system disincentivize leaving the system, because then the interest capitalizes, leaving you with a higher loan balance than before.

      IBR was created for the undergrad with 20K in debt, not the law student with 200K. The law student is so far out on the bell curve that Congress probably did not even consider how the program would work in their case.

      Delete
  44. I honestly don't know what to do about this. I feel that at minimum the hardship standard should be less harsh. Some people will never be able to repay their debt, they should be able to at least get rid of it. What is the point in keeping up a pretense that these loans will be paid?

    ReplyDelete
    Replies
    1. The point is moral hazard. If you cannot pay the debt, you suffer the consequences...even if you can never pay the debt.

      Delete
  45. This seems like a tough nut to crack, but I agree that it's one we have to take on. Even if we can cap loans going forward (and that will be tough as well, given the political voices of education and finance), we have to do something about the graduates who have been harmed in the last ten-plus years. And we also have to put student debtors on a fair footing going forward.

    For the existing loans, could we distinguish between physical disability and other categories? For physical disability, BK would be available at any time under the standards applied to other debt. For other applicants (again on existing loans), discharge would be available under usual BK standards starting 5 years after graduation. I would rather say immediately, but the 5-year window (which once existed) might be more palatable politically for existing loans. And most grads have already served part of that time. Also, as a practical matter, it seems that judges would require the debtor to spend some time trying to make the degree work, wait for the job market to get better, etc. If they're going to do that anyway, maybe an automatic 5-year window helps to get the bill passed.

    Going forward, the 5 years wouldn't need to be an absolute requirement--although, again, it might be a way to get the bill passed. And, again, not that much different from judges who would defer decision while imposing a period of time for the graduate to try to make the degree pay? Just a thought.

    ReplyDelete
    Replies
    1. 5 is too short. Try 20 and say to yourself, "IBR."

      That's the best you're gonna get. Maybe you can get IBR down to 15; better start with that.

      Delete
    2. We do not have to do anything about "the graduates who have been harmed in the last ten-plus years."

      They are getting exactly what they deserve.

      Delete
    3. There's something to be said for social revolutions, if only that they lead to people like 2:22 being lined up against a wall and shot.

      Here's hoping!

      Delete
    4. Yes, because anyone who thinks borrowers ought to repay should be killed. Ludicrous.

      Delete
  46. Then you also have things like this happening when enough 2L students begin to think that the ROI on a law degree isn't worth it (you hold a special meeting doing your best to talk everyone into staying!):

    http://thoughtfullaw.com/2011/09/14/why-stay-in-law-school-advice-to-law-students/

    Throw this on top of misunderstanding sunk costs, shame, parental pressure, etc. and you guarantee to keep the blood flowing!

    ReplyDelete
  47. I can think of several rebuttals to Justin Wolfers (quoted in the Freakanomics column above). First, although the distributional side of me is tempted to give money to the poorest citizens, there is no political movement to do that. We have to consider, realistically, what policy proposals are on the table, then compare educational loan forgiveness to other ways we could spend our money as a society.

    Second, I think Wolfers greatly underestimates the stimulus effect of discharging educational debt. It's true that the grads won't go out and spend the full value of their forgiven debt the next month--but we don't want them to. We want them to be able to save to buy houses and cars, to get married, to pursue new more economically productive careers, and even to establish new businesses. Those are the things that will really make the economy grow. I find it bizarre that Wolfers thinks that immediate spending by the poor would be a better boost to the economy.

    Third, going back to distributional arguments, the distributional issue here isn't between rich and poor--it's between generations. For decades, we've been shifting money to older generations through social security and medicare. By allowing educational institutions to raise prices so dramatically, student loans have added to that burden. In a distributionally fair society, I think the older generations should invest in the education of the young. Instead, we've created a system that requires the young to mortgage their futures. BK discharge would address THAT distributional issue.

    One more thought to follow on this...

    ReplyDelete
    Replies
    1. I think you missed the point about $1000 going to 200 different people will do much more for the economy than $200000 to one person.

      There is no plausible way you can argue that the above is not true.

      Delete
    2. Actually, this point illustrates another problem with Wolfers' argument (one that I thought was so clearly wrong that I didn't mention it before). When a court discharges $100,000 in student debt, it doesn't have $100,000 to hand out. Instead, it has an income stream of about $1180/month for 10 years to distribute. I don't think giving that money to a different person every month over 10 years will do more to stimulate the economy than restoring the income stream to an educated worker, potential home-owner, etc.

      From a distributional point of view, I might want to give the money to a different poor person every month, but from a macro-economics point of view, I don't think it helps the economy. The discharged debtor almost certainly will spend that additional $1180 per month. Wolfers' idea that the government has $100,000 to hand out now seems to misunderstand debt and repayment.

      Delete
    3. DJM,

      Wolfers is arguing about a different point entirely. He wrote that the movement to forgive student debt is misguided and horrible. I agree with him.

      I also agree with Campos that student loan debt should be dischargable in bankruptcy after some period of time and with certain consequences. These are not incompatible positions. I believe that mortgages should be dischargeable in bankruptcy but that the government should not "forgive" mortgage debt ex ante. Really I may be in the minority, but I believe that the 13th Amendment means that all debt should be dischargeable in bankruptcy, but none of it should be forgiven by Congress absent bankruptcy.

      Bankruptcy used to be a negative outcome with serious stigma and consequences attached. It should still be. It's an opportunity to give an honest debtor a fresh start; but it is a bad outcome, not a good one.

      Delete
    4. Gotcha--thanks for clarifying this. I linked too quickly from the comment above and thought he was addressing the same idea. I agree that forgiving all student loans across the board would be a bad idea. I'm so exasperated with politics (both left and right) that I haven't been following much of the recent proposals like this one that Wolfers was addressing. I'll comment my clarification below as well!

      Delete
    5. So tell us again, how many angels can dance on the head of a pin?

      The Republicans will NEVER pass student loan bankruptcy reform. Obama and the Dems had control of both houses of congress from Jan 2009 to Dec 2010 - they could have done anything they wanted on reform yet they did precisely nothing.

      So just pay back the money folks or endure the consequences.

      Delete
  48. Put it this way:

    I have quadrupled federal student loan debt.

    If I had been able to declare bankruptcy 8 years ago, it would have saved the taxpayer close to two hundred thousand dollars.

    And whoever said bankruptcy is a walk in the park anyway? It carries with it a stigma in the form of ruined credit for 7 years the last I heard.

    Ans as far as my law degree goes, I took my diploma from Touro law school out of the frame and ripped it up after my debt has passed the 200K mark.

    And the crazy person that thinks the JD will bring in lots of money over a lifetime is wrong.

    Nothing repels non legal employers more than a JD on a job applicant's resume. I know from experience.

    It doesn't impress anyone in fact, because just about everyone you meet in the street has a friend or relative that went to law school and is "not doing so well"

    ReplyDelete
    Replies
    1. And how do you think this would have "saved the taxpayer" anything additional over and above your original loan?

      All the rest is smoke and mirrors...it is a paper gain and a paper loss. It will cost the taxpayers nothing because it was never loaned to you. You owe it, but you never had it. So if you don't pay it back and you die...poof it is just gone back into the ether.

      Delete
    2. JDP, you must present yourself much differently at interviews than you do online if you think it is because of the JD that you aren't getting hired.

      I'm just not quite sure that you can control the many other variables, especially in your case, in order to isolate that JD as the culprit.

      Delete
    3. The credit implications really aren't that severe. Many credit card companies will seek your business again in a year or two after bankruptcy since they know you can't file again.

      Delete
    4. For you the problem is not inability to get the debt discharged in bankruptcy; it's that you were admitted to law school despite being supremely incapable of succeeding.

      Delete
    5. JD Painter = "Debt Man Walking"

      Delete
  49. Final thought on Wolfers' column: Sadly, I think his position illustrates one of the political difficulties of pushing for educational debt forgiveness. Wolfers, like many economists, is an academic. That will lead him and other academic economists to greatly overestimate the value of an educational degree. It will be hard to get academic economists to recognize the stimulus and other effects of changing the BK laws because that implies that their own schools aren't producing value for the tuition they pay.

    Then again, economists are an argumentative lot. Hopefully there will be some out there to support BK relief.

    ReplyDelete
    Replies
    1. Oops, comment withdrawn--thanks to an anonymous commenter who pointed out that Wolfers was addressing across-the-board loan forgiveness, not bankruptcy discharge.

      Delete
  50. Economic argument against discharge: people will continue to enroll in law school because they will continue to have worthless liberal arts degrees. The law schools won't change a thing about what they are doing. Arguably it will be a more compelling reason to go to law school. If you are top 10% great you get a job. Bottom 90% who cares discharge it. There wasn't political will to allow mortgage cram downs to save the housing industry. This is a non starter.

    What do you think of my middle-ground proposal at 8:14?

    ReplyDelete
  51. 10:30AM sounds like my old friend.

    Yes I remember your lesson in economics and I was a terrible student of economics, but still, did not all the extra interest and penalties and fees go into the Collection Agency's and also into Sallie Mae's pocket after they invoiced the US Treasury?

    My credit report says, word for word: "Claim filed with Government. Balance paid by Insurance Company.

    And BTW, there is so much talk nowadays about worthless liberal arts degrees.

    Supposin' now that everyone got wise to the notion and no one decided to study the liberal arts anymore?

    What would happen? Would half or more than half of the liberal arts professors be laid off or let go?

    I mean, if no one wants to become a liberal arts major anymore, than it seems like a lot of colleges that teach only the liberal arts would languish if there was a sharp drop in enrollment?

    But Goddamn I remember people used to say way back when that some Corporations see a liberal arts degree as valuable since the degree holders are critical thinkers and all.




    ReplyDelete
  52. Tell you what, come with me on the next interview and decide for yourself.

    But you won;t be able to hide as Anon.

    ReplyDelete
    Replies
    1. You're way too unstable to meet in person, my friend.

      Delete
    2. "Next interview"????

      What ARE you smoking?

      Delete
  53. @10:33AM

    I wrote long piece that I called: "The Allstate Interview Story". I intended said story to illustrate the typical frustrations that come with trying to find non-legal work with the JD on the resume.

    It was based upon a real life experience of mine where a manager from a local Allstate Commercial claims office said point blank and on the evening of my third and final interview that my JD made me overqualified for the job as a commercial claims examiner.

    A true story.

    I guess I will have to repost the long story.

    I had so many similar experiences and after so many years the underemployment pretty much cements one's fate.

    Prosective employers want to see a steady progression from school and into the workforce.

    They do not want to see 6 months of serving pizza or waiting tables or whatever.

    And after a while, unless one has friends or family to help with the job search, one has a black frame around the resume.

    Oy!









    ReplyDelete
  54. @10:45 AM

    And if you are so stable how come you are hiding as Anon?

    Oh well, insult me all you want. I'm 325K in debt and end of story.

    I'll paint a bullseye on my forehead and everyone can come and attack me.

    But in the end there has to be some kind of institutional responsiblilty.

    Taking away bankruptcy is one thing, but allowing student loans to doube, or triple or quadruple is another and how can anyone defend a system that allows that?

    ReplyDelete
    Replies
    1. JDP is pushing 50 with nothing to live for except his scamblog "persona".

      This is why he threatens to depart forever every few weeks and then comes crawling back for a few scraps of attention.

      Being such a monumental failure cannot be easy.

      Delete
  55. Absolutely amazing. I love the idea. I'd give up my right in a heartbeat.

    Prof. you're right. Thanks for continuing to advance the discussion.

    ReplyDelete
    Replies
    1. Of course you would.

      After all, that debt is someone else's obligation, not yours.

      Delete
  56. The legal roadmap on how to discharge your student loan debt: Desormes v. Charlotte School of Law (case #10-05014)

    ReplyDelete
  57. The market is definately broken here. One way to reduce law school COA would be to dramatically cut prof salaries. I think the gov't should regulate this to keep one school from offering higher salaries to lure prof away.

    Even if the gov't regulated, do you really think profs are going back to biglaw?

    ReplyDelete
    Replies
    1. No, the argument is that they will not be able to attract the best "talent" if they slash salaries for entry-levels. I'd argue that their definition of "talent" needs to change.

      Delete
    2. The same canard about "talent" is used to justify the obscene "compensation" packages that top-ranking corporate (mis)managers get. Funny how often that "talent" runs a going concern into the ground. Is there any evidence that such "talent" yields better results than the best person one could hire for $50k and a tiny handful of stock options?

      Delete
  58. My thanks to an anonymous commenter above--and apologies to Wolfers. He was addressing a very different idea, across-the-board forgiveness of all student debt. I agree that's a terrible idea on both distributional and any other terms. I was surprised that an economist would be so opposed to BK discharge for educational debt, but now I understand: He's not (or at least not in this column).

    My apologies--next time I'll read all the fine print more carefully.

    ReplyDelete
  59. My Law School Transcript is here.

    It belonged to me when my debt was 79K

    But I feel that it somehow belongs to the public, which has paid for this transcript 4X over. In other words, my debt is quadrupled and is now 325K:


    www.jdpainterguy.blogspot.com


    ReplyDelete
    Replies
    1. You know, I love you as performance art and as a bright and shining example of the law school fiasco, but I'm wondering whether you have actually tried bankruptcy to see whether you can dishoard this debt.

      You could even blog about it in real time as a public service and as a warning to others.

      If it works, you could be an archetype!

      Delete
    2. Challenge the constitutionality of the test as applied or argue that at some point the sheer size of the debt, or the size of the debt in relation to the original principal constitutes an undue hardship. Maybe some of that has been tried already, and if so I'm sure I'll be corrected pretty quickly. But it's not such a crazy idea to try to get someone to represent you. It's something positive to work on, and it might be the best chance you have.

      Delete
  60. I am trying to understand the consequences of dischargeable student loans. Assuming these loans are privately funded, it seems that lenders accurately pricing in the risk of default will charge lower-income students, people with worse undergraduate colleges (because less likely to get hired by a firm), and others with less likelihood to make $ substantially more. These impacts probably will reduce the number of people going to law school, but are these social costs we are willing to live with? I'm not sure.

    ReplyDelete
    Replies
    1. IMO, there are huge social costs to saddling the children of the poor and middle class with large loan debts that far outweigh the supposed benefits of a legal education. It is obvious that a large percentage of law students will perpetually be on IBR, without hope of ever leaving the program because their interest will then capitalize. You're creating a perpetual underclass hampered by debt. I would rather those smart, deserving kids go into some other field, even if not so prestigious, and use their talent, hard-work, and smarts to rise above rather than put themselves 200K in the hole before they start living.

      There is a body of literature out there that says that someone with college level test scores and grades who doesn't go to college ends up in substantially the same position as the average college grad (same with state school kids with 2300s vs. Ivy Kids with the same scores). The idea that you need an advanced degree to be middle or upper-middle class is a myth.

      Delete
    2. That's a good point.

      Delete
    3. If the idea is a myth, then they should not have borrowed the money for law school.

      So pay it back or don't and deal with the consequences.

      Delete
  61. These impacts probably will reduce the number of people going to law school, but are these social costs we are willing to live with? I'm not sure.

    My response is a resounding YES. There are way, way too many people going to law school now.

    ReplyDelete
  62. I think the comments arguing that we might be doing a desservice to income-disadvantaged kids by admitting them are quite interesting.

    Is there any info on how lower-income students tend to fare in OGIs? My instinct is that people who are more upper-class, i.e., resemble the partner doing hiring, are more likely to land a big firm job. But is there any data?

    ReplyDelete
    Replies
    1. If you think law-firm partners are "upper class" you are so out of touch with the American class system that I don't even know where to begin.

      Delete
    2. My experience corroborates that. I come from a lower-income background and cannot get an interview, never mind a job, despite being at the top of the class at a high-ranked law school, holding an internship at the appellate court, editing the law review, teaching first-year legal writing and research, working as a research assistant for two professors, speaking numerous languages, having extensive experience in business....

      Meanwhile, down in the bottom half of the class, the scions of the great and the good easily get jobs at white-shoe law firms despite having very little to offer other than Daddy's Rolodex.

      Mind you, age has something to do with it: I am in my forties, a fact that is evident from the dates on the obligatory transcripts. Apparently a person of my age just is not wanted anywhere though she or he walk on water.

      Delete
    3. Especially when they're so modest as you seem to be.

      Delete
    4. Obviously I posted that not to boast (I actually am a modest person) but to point up the nexus between wealth and employment in the legal profession.

      Delete
    5. "...age has something to do with it"

      DUH, ya think?

      What kind of moron goes to law school in his forties?

      I guess the same kind that prattles on like a child about his many "achievements" in law school.

      Enjoy solo practice old boy!

      Delete
    6. And what exactly is so moronic about going to law school in one's forties?

      Delete
  63. It would seem that if the loans are guaranteed by the taxpayer then the interest rate, on a performing or non-performing loan, should be no more than the prevailing LIBOR rate which is currently about eight tenths of one percent. Pumping up the interest rate and adding penalties does hurt the student; it also hurts the taxpayer who will have a greater likelihood of paying the note if sanctions and penalties are imposed as well as being forced to pick up the greatly inflated debt.

    ReplyDelete
  64. My instinct is that people who are more upper-class, i.e., resemble the partner doing hiring, are more likely to land a big firm job. But is there any data?

    Big firms want people who are smart, hard-working, and not social klutzes, in that order of preference. Being a WASP male is meaningless if those three boxes aren't checked. In addition, no big firm has "a partner" who does hiring. They all use committees and gather feedback from multiple interviewers before making summer offers. The only point when one person's prejudices could sink an applicant is during OCI.

    ReplyDelete
    Replies
    1. Oh, I've seen plenty of little rich kids who get jobs despite being neither smart nor hard-working.

      Delete
    2. Really?

      That's AMAZING!

      Delete
  65. The real problem here is that most of this debt has absolutely no business existing in the first place.

    So, yes, some of it should be vaporized.

    There are two points to be made here:

    (1) The demand for credit is infinite
    (2) The supply of credit is not infinite

    What we have here is some kind of idiot deformed credit system where we mass produce debt that is never, ever going to be paid back.

    We are nowhere near the point of recognition for student debt.

    Our financial system is completely deformed right now because of the credit bubble.

    The next decade is going to include lots of pain.

    ReplyDelete
  66. If this, in fact, came to pass, what might be most interesting is what percentage of law school "winners" opted for this route. How many are in high paying jobs and want to leave but are feel trapped by their student loans, and would decide that hitting the reset button is more attractive option than a lucrative career practicing law?

    ReplyDelete
  67. "How many are in high paying jobs and want to leave but are feel trapped by their student loans, and would decide that hitting the reset button is more attractive option than a lucrative career practicing law?"

    I think a lot of "winners" might consider doing that. But in the end, very few actually will.

    ReplyDelete
  68. Another argument for allowing SL debt to be discharged is that it is eventually going to be discharged anyway based on undue hardship.

    Assume one defaults on SL in their 20's and is thus perpetually fleeced until they hit 65 (or whatever the social security age will be, assuming it's still there). Presumably, all of that fleecing made it very difficult for SL debtor to build any retirement savings, so most likely the sole source of income is SSA.

    Now, the sole reason for expanding social security to cover all seniors was to help keep seniors out of poverty conditions in old age. If SL debtor is over 65, he is presumably unable to work any longer. His sole source of income is SSA, which can and will be garnished by SL collectors, thus driving 65+ SL debtor into poverty.

    With SSA as sole source of income and, with the garnishment making it unable for 65+ SL debtor to meet basic living expenses, doesn't the above scenario meet the 2 prongs for dischargability, namely 1) inability to ever pay back and 2) undue hardship? And isn't garnishing SSA income repugnant to the very idea of why the program was put in place in the first place?

    And, if that's the case, and the debt will be discharged eventually anyway, why not allow for it now?

    ReplyDelete
    Replies
    1. Because each and every deadbeat should bear the burden until the last possible moment.

      That's why.

      Delete
  69. @12:00PM

    Yes I can try, but 3 bankruptcy atty's so far over the last decade have been extremely dismissive and rude, and declined to represent me.

    I have told my story over and over and over.

    I am ruined, and I feel such deep anguish and regret for having gone to a lower tier law school.

    What people do not seem to realize is that debt makes one feel a great sense of shame and dishonor.

    And yes I did invest my fruitless 3 years too at one time as I was coming up in the world.

    ReplyDelete
    Replies
    1. How much anguish and regret do you feel for collecting a fistful of marginal grades? You don't believe that you would have fared better at a higher-tier law school, do you? Or are those low grades someone else's fault?

      Delete
    2. Unnecessary, Anonymous 1:02. And fuck right off. You know law school grades on a curve.

      Delete
    3. No offense, J.D., but you only contacted three bankruptcy lawyers in 10 years? Perhaps you should forget about contacting bankruptcy lawyers and contact a constitutional lawyer instead about this issue? What a great victory this would be and what a great thing you could do for other people who are just as desperate as you are if you made a bit more of a fight of it.

      Delete
    4. What does grading on a curve have to do with it? Evidently he was consistently near the bottom of the curve in course after course.

      Is it any surprise that employers won't line up to hire someone from the bottom of the class at a low-grade law school?

      Delete
    5. Never mind. I can't be bothered with you. I did quite well but ended up where he is, so your continued and snide ridiculing of him is both offensive (hence my aforementioned "fuck right off"), pointless (hence my now-mentioned "fuck right off") and quite boring.

      Delete
    6. I have sympathy for people who did well but couldn't find work. I don't have sympathy for people who farted around in law school and barely graduated but frame themselves as victims and expect us to shed crocodile tears over their plight.

      Delete
    7. BTW, JDP gave up trying to pass the bar exam 15 years ago.

      So yes, he is a quitter but at least he is also a whiner.

      Delete
    8. And at least you avoided being a petty distraction in a discussion about the constitutionality of student loan bankruptcy rules.

      Delete
    9. Yes, we must do away with all of the petty distractions in this high-minded and oh so influential forum!

      NO SOUP FOR YOU!

      Delete
  70. "Meanwhile, down in the bottom half of the class, the scions of the great and the good easily get jobs at white-shoe law firms despite having very little to offer other than Daddy's Rolodex."

    And you know this how?

    ReplyDelete
    Replies
    1. I know who is hired where. I've seen résumés and have heard GPAs. And it's not hard to tell who is the darling child of Croesus when someone skips the first third of the semester to go yachting across the ocean.

      Delete
    2. Said the fool who went to law school in his forties and whines like a schoolgirl when no one will hire him.

      Hilarious.

      Delete
    3. I'm waiting to hear what is so foolish about going to law school in one's forties. What would you recommend? Is it equally foolish to go into accounting, plumbing, teaching in one's forties? Was it foolish for Sandra Day O'Connor to go into law when women weren't being hired (she was offered a job as a secretary when she applied to a law firm)?

      Discrimination is an indictment of the profession, not of the excellent professionals who find themselves arbitrarily excluded.

      You're just shilling for ageism.

      Delete
  71. My only problem with this entire idea is that we are forgetting the years lost (about 5) studying useless stuff and doing unpaid internships.

    And if we take away licenses from those who are simply so poor that they can't keep up on their bills, that leaves only the well-to-do in the profession. So getting (and keeping) a law license largely becomes dependent entirely on what class you come from and your economic background. Is this really the kind of profession we want?

    ReplyDelete
  72. So getting (and keeping) a law license largely becomes dependent entirely on what class you come from and your economic background. Is this really the kind of profession we want?

    Yawn.

    ReplyDelete
  73. Bankruptcy relief should only be provided if we can limit the number of law students and lawyers who will need to claim such relief in the future. In the short term that would mean defunding law schools and reducing the number of student slots to a number approximating the new jobs available each year. If we do not do that, bankruptcy will be used as a selling point by law schools the way they are claiming IBR is a "backdoor" scholarship.

    At the very least, every time a graduate of a particular law school declares bankruptcy, the school should have a position in its incoming class cut as their reward for helping to create more unpayable debt.

    ReplyDelete
  74. 12:58 AM--you are correct, coming from money makes it easier to enter the legal profession, and that will not change if SL's are reformed. Coming from money makes life in general easier and that is never going to change.

    If a poor student has good grades and good test scores the scholarship oppportunities will still be there. If such a person does not have good grades and/or test scores then no one is helpigng them by letting them take on ruinous debt.

    ReplyDelete
  75. "I had to Google "omniscience."

    Best sentence ever.

    ReplyDelete

  76. OT -- Here's an interesting article about the California Bar's Task Force on Admissions Regulation Reform, and its concerns about the recent labor market.

    “We will have created more highly competent, unemployed lawyers,” said Greg Brandes of Concord Law School.

    http://www.calbarjournal.com/September2012/TopHeadlines/TH1.aspx

    ReplyDelete
  77. You shouldn't have to surrender your law license (a potential means to earn a livelihood) in order to get a BK discharge. We don't make day laborers cut off their right hand to get one.

    If the government wants to implement some type of "Guns for Cash" equivalent program for law graduates who see no future for themselves in law, that is fine. Correcting one injustice, only to replace it with a slightly lesser injustice, is not an adequate solution.

    ReplyDelete
    Replies
    1. You should have to repay money borrowed and spent on yourself.

      Delete
    2. Again. Go fuck yourself.

      Delete
  78. Getting rid of this exception is going to be a political battle because your neighbor does not want to be a forced cosigner of these terrible choices made by individuals.

    Law schools should bear these student loan costs up to the time they were releasing fraudulent data on placement, debt and salaries.

    ReplyDelete
    Replies
    1. Yes, and the world should be a fair place.

      Signed,

      Pollyanna

      Delete
  79. How about you pay back all the money you wasted on yourself?

    I did. I'm what's known around these parts as a law school winner. But that doesn't stop me from wanting to find a way for the non-winners to get out from under crushing debt that they'll never be able to repay anyway.

    ReplyDelete
  80. This comment has been removed by the author.

    ReplyDelete
  81. "Or maybe the four referenced to above have something in common in that they all have an investment portfolio that includes 'debt bonds' and so commenting on this topic would be a conflict of interest somehow?"

    Sometimes I wonder if you have any connection to reality at all.

    ReplyDelete
  82. This comment has been removed by the author.

    ReplyDelete
  83. "Reality is saying who you are and not being anon.

    I might be in error, but being wrong is real, and so far you are anon an not real"

    lolwut

    ReplyDelete
  84. The idea of forfeiting your degree in exchange for BK of student loans is creative, but would likely be dismissed as a gimmick by most people.

    Making loans dischargable in BK doesn't resolve the problem of too many law schools producing WAY too many lawyers each year.

    The only solution I can imagine will change the law schools is to address the ease of unlimited federal student loans. There needs to be a cap on the annual ammount that a student can borrow from Grad Plus.

    Right now there is nothing at all stopping new law schools from opening to grab the unlimited student loan money available.

    ReplyDelete
  85. This comment has been removed by the author.

    ReplyDelete
    Replies
    1. What exactly would be the point of "debating" a middle-aged psychotic?

      Just wondering.

      Delete
  86. "But to have me ridiculed continually by Anon commenters that are probably makeing 10X my income is hardly what anyone would call a debate that is open and fair."

    Dude, you do it to yourself. You're like the crazy old drunk guy who can hardly stand while he keeps challenging kids to a fight. "Come over here, you shun of a bish! I'll kick your ash!"

    ReplyDelete
  87. JD Painter Guy. Sorry about the idiots. You're just gonna have to ignore the fools. This real issue is why should anyone, anywhere be allowed to declare bankruptcy if student loans can't be discharged?

    If you get emergency medical treatment why should you lose that debt through bankruptcy? How about people who borrowed money for homes during the bubble?

    BTW: George Will is an ass.

    ReplyDelete
  88. I think a good middle ground would be to allow discharge (AND let a Debtor keep his or her bar license) in a Chapter 13 bankruptcy filed at least 5-7 years after graduation. In a Chapter 13, the Debtor is required to pay ALL of their monthly disposable income to the Chapter 13 Trustee for FIVE YEARS. Having worked as a bankruptcy attorney for the last several years, I can assure you that this requirement would be a significant deterrent to anyone not in extreme financial hardship.

    ReplyDelete
  89. Has Mr. Infinity posted any more youtubes?

    ReplyDelete

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