Student loans are viewed as "assets" by the federal government ... until they become uncollectable, in which case the value of the assets eventually has to be adjusted through write-downs, just like mortgages in the mortgage crisis. Extensive use of Income-Based Repayment makes it possible for a student loan to be simultaneously uncollectable but not in default.
Folks, I am an unapologetic New Deal Democrat. But the current "system" of federal higher education financing is near perfect insanity. We set tuition and, no questions asked, the federal government writes us checks in exact proportion to students' willingness to sign loan papers. For young people who have never worked, it is all like monopoly money.
The only way the math works is if the real earnings go up en masse for virtually all college and professional school graduates. In a rapidly globalizing world in which our students are competing against Chinese and Indian professionals, the assumption of mass rising real incomes is implausible. See, e.g., views of economist Alan Blinder in this NPR article.
Right now we--higher ed and the nation as a whole--are maintaining the illusion of prosperity through debt financing heaped on naive young people. This is immoral in the extreme. Moreover, in the long run, it is economic and political ruination.
The only long term solution is cost containment imposed on higher ed by reforming the terms of federal financing. The financing has to incentivize educational productivity -- i.e., fewer tuition dollars expended to obtain better skills and learning as measured by marketplace earnings and innovation.
How many current legal academics are in a position to impart "better skills and learning as measured by marketplace earnings and innovation" to law students? Given that the most important skill for 93% of lawyers is how to acquire clients and get them to pay their bills, which is a skill 97% of legal academics are no more qualified to impart than they are to translate The Antichrist from Estonian to Urdu, this should be a fairly daunting question.
Organ compares 2011 to 2010 matriculant totals, and does a bit of extrapolating to this month's entering class:
ENROLLMENT IN DECLINE – Between 2010 and 2011, 141 law schools had a decline in enrollment (of which 63 had a decline of 10% or more), 30 had an increase in enrollment (of which 6 had an increase of 10% or more), and 26 had flat enrollment (within +/- 1% of 2010 enrollment). This means over 70% of schools had a decline in enrollment and that nearly one-third had a decline in enrollment of 10% or more. The decline in enrollment totaled roughly 4000 students or roughly 8 percent.
ENROLLMENT AND PROFILES IN DECLINE – Most significantly, 75 schools (roughly 38%) saw declines in enrollment and in their LSAT/GPA profiles, of which 37 schools saw declines in enrollment of greater than 10% and saw declines in their LSAT/GPA profiles. These 37 schools are highlighted here -- Download 37 schools with declines in enrollment of 10% or more and declines in profiles. Four of the schools are ranked in the top-50, while the other 33 schools are relatively evenly divided between the second-50, the third-45 and the alphabetical schools. There is some geographic concentration, with five Ohio schools (plus Northern Kentucky), three Illinois schools and four of the six Missouri and Kansas schools on the list. Notably, 16 of the 37 are state law schools, several of which are relatively low-tuition schools that should conceivably fare better in the current climate in which prospective students are increasingly concerned about the cost of legal education.
So the collapse has started, and is likely to accelerate.
FORECAST FOR 2012-- Given that LSAC has estimated a decline of roughly 14.4% in the number of applicants for fall 2012, from 78500 to roughly 67000, and given that the decline has been greatest among those with higher LSAT scores, one should anticipate further declines in enrollment and further erosion of entering class LSAT/GPA profiles for fall 2012. The admit rate will be the highest it has been this millennium, probably exceeding 75% and possibly exceeding 80% (after increasing from 55% to 71% between 2004 and 2011).
We've spent this week talking about law graduate debt. Yesterday CU's president sent a campus-wide email highlighting a public interest scholarship at the law school in the context of a broader fundraising appeal:
As we walked past the U.S. Capitol in Washington, D. C., on our way to an alumni event at the Library of Congress, a gentleman noticed my CU lapel pin and asked if we were from the university. I introduced myself and asked if he was an alumnus. No, he said, but his late brother graduated from our law school, so he was on his way to our event.
David Barash told me the story of his brother, Dan, who loved the outdoors, particularly the Rocky Mountains, and treasured his time at CU. After graduation in 2002, he pursued his passion and became a public defender in Colorado Springs before his untimely death at age 30. David and his family decided to honor Dan by creating the Daniel Barash Scholarship Fund to support students with demonstrated interest in criminal defense work.
When I asked how much was in the fund, I was shocked by the answer: $750,000. Most memorial scholarship funds never approach that. . . .It's of course a very fine thing that the Barash family has done, and I'm particularly pleased for Taufer, who was an outstanding student in a seminar on punishment I teach (I don't know the other recipient). Here are some other numbers relevant to this subject:
The first recipient of the Barash Scholarship, David Brown, received $1,000 in 2004. The 2011 recipients, Yona Porat and Jake Taufer, each received $13,000. The 2012 recipients, who will be annouced soon, will each receive $14,000. Of the 13 recipients since its inception, 11 are public defenders. All engage in pro-bono work or public service. It's a fitting tribute to Dan Barash's legacy.
Resident tuition at CU Law the year after Dan Barash graduated (2003): $7,645
Resident tuition last year: $31,115
In other words, if we had merely doubled resident tuition over the last eight years, we would have done the equivalent of giving every single CU law student either a two or three-year scholarship (everyone gets resident tuition after 1L) larger than the very generous one-year scholarships the Barash Scholarship Fund provided for two CU students last year.
A final stat: Number of graduates in the CU Class of 2011 who got jobs as public defenders: Two.