Revenue, expenses and federal loan funding at New England School of Law, July 2010-June 2011
Nominal Tuition Collected: $41,546,619
Actual Tuition Collected (i.e., tuition minus "scholarships"):
$32,841,264
Total Nominal Revenue:
$43,423,500
Total Real Revenue:
$34,718,145
Total Nominal Expenses: $33,945,288
Total Real Expenses: $25,239,933
Net Real Revenue Over Real Expenses:
37.6%
Legally speaking, NESL is a "non-profit" institution, which means among other things that this surplus is not subject to federal or state taxes.
Legally speaking, NESL is a "non-profit" institution, which means among other things that this surplus is not subject to federal or state taxes.
Federal Loans Disbursed to NESL Students, July 2010-June 2011
First Quarter:
Subsidized Staffords: $3,944,156
Unsubsidized Stafford: $5,515,978
GRADPLUS: $9,716,434
Second Quarter:
SS: $68,137
USS: $103,697
GRAD: $386,136
Third Quarter:
SS: $3,957,473
USS: $5,471,922
GRAD: Unreported, but since GRADPLUS originated $19,276,698 in loans during the first quarter destined for distribution to NESL students, and almost exactly half of that sum was distributed in that quarter, we can assume the remaining sum was distributed in the third quarter, i.e, $9,560,264
Fourth Quarter:
SS: $145,510
USS: $44,192
GRAD: $1,139,055 (The GRADPLUS loans distributed in the fourth quarter were used by students enrolled at least half time in summer school, or NESL's summer abroad law program, which I'll have more to say about soon).
Total federal loans distributed to NESL students in FY 2010-11: $40,052,965
A couple of quick points:
94.6% of NESL's revenue comes from tuition.
NESL students took out 22% more in federal loans than NESL collected in tuition. Slightly more than half of those loans were GRADPLUS, which feature an interest rate of 7.9% and an origination fee of 4%.
NESL produced 308 graduates in 2011, of which 17 had jobs with law firms of more than ten attorneys nine months after graduation. Four of these people had jobs with law firms of more than 50 attorneys. 34% of the class was reported to have a full-time long-term job requiring bar admission. 14.2% of these positions were graduates who listed themselves as having begun a solo practice.
NESL tuition in 2004: $22,475
NESL tuition in 2012: $42,490
NESL tuition in 2004: $22,475
NESL tuition in 2012: $42,490
From Merriman-Webster:
Definition of BUSTOUT
slang
: a confidence scheme in which an established business is taken over, a large stock of merchandise is purchased on credit and quickly sold, and the business is then abandoned or bankruptcy is declared
http://www.youtube.com/watch?v=5ydqjqZ_3oc
ReplyDeleteCan you explain the difference between real and nominal?
ReplyDeleteAs between tuition types, it's explained above.
DeleteAs between real/nominal expenses, like you, I would be interested in an explanation of this difference.
Real is adjusted for inflation.
Delete@ 7:20, ha-ha-ha-plop.
DeleteA law school's balance sheet handles tuition discounts in the following way: The total tuition collected is treated as if every student were paying the nominal tuition. So revenues reflect this number. But the school's real revenues aren't that high, because the school doesn't actually charge full tuition to more than, at most schools, around half of all students. The rest get "scholarships" in the form of discounted tuition.
DeleteThe school's list of expenses counts these discounts as expenses. These are accounting formalities. The school's real revenue and real expenses consist of revenue minus tuition discounts and expenses minus the same discounts.
Not entirely "formalities," at least not everywhere. At my school the University calculates its general charge - the 33% or so of tuition that it diverts for its own, nonlaw, expenses - using "nominal" revenues as its base. Among other things, that means that it desperately wants to continue raising nominal tuition (and it, not the law school, decides whether and how much law tuition goes up). A higher nominal tuition brings the University more lucre for itself than an algebraically equivalent real tuition.
DeleteOn the other hand, the University doesn't care about our real tuition, because financial aid money comes out of the law school budget. A petition like the Duke petition would have no effect at my school. We couldn't freeze our nominal tuition even if every student, every faculty member, and every dean and assistant dean united in favor. The University makes these decisions, and its incentives do not include helping law students, improving legal education, or even helping those infamously coddled law faculty who I read about on this blog.
This seems a bit fraudulent, right?
DeletePrivate school prof:
Delete(1) That's an interesting general point about nominal tuition and the rake that goes to central, although it doesn't apply to NESL, which isn't affiliated with a university.
(2) Has anyone at your school actually tried to do anything about rising tuition? At my law school tuition declined in real terms this year (after rising 130% in real terms over the previous seven years), after a ruckus was raised about the issue by a handful of faculty.
Our nominal tuition is going up, because the University wants it that way. Our fin aid is also going up, because the law dean and faculty want it that way, and the University does not object. Net: total real tuition revenues are down a little.
DeleteAs this blog has noted, the reduction is not evenly distributed over the students.
Private School Prof, does your university allow the law school to charge a premium rate? Or is law school tuition the same as other graduate school tuition? At many universities, the law school is allowed to charge a premium above the basic graduate tuition hike. But then the university gets to keep its share (33%, 25%, whatever that might be) of the premium as well as of the basic tuition.
DeleteUnder this structure, law schools have "fattened the calf" for universities over the last twenty years. By consistently choosing increases higher than the foundation graduate school rate, schools have generated more money for themselves--as well as for the central university. Now that we're facing hard times, the university doesn't want to give up the revenue stream that we created for them.
But for me, that sounds like a point of negotiation--not an absolute bar. Whatever a university's financial structure, it seems that law schools should be considering the interests of their students and graduates. Freezing nominal tuition may require the law school to slash its own budget, but given how much schools have increased budgets during the last twenty years, it doesn't seem that should be off the table.
The cut for central was something I was aware of in academic medicine. When a researcher applies for a grant, say from NIH, he/she has to calculate the ~30% share that central will take in addition to "rent" for one's office and other expenses.
DeleteWhat's left over is what actually goes towards research. That's why even simple research projects require $800,000 grants.
Someone has to pay for all of those philosophy and sociology professors.
"Someone has to pay for all of those philosophy and sociology professors."
DeleteActually, it's the legions of "administrators" that need to be paid for...
10:47 (philo or soci prof) don't get upset. I think what 10:34 means is, certain areas of the univ. bring in funds, while others do not. Philosophy and sociology among them (although to be fair, socio depts do get some grants... ...just not as much as real science departments).
Delete10:34 here. Yes, 11:00 has it right.
DeleteAlso, I'd agree that administration is the big bloat. There's a dean for almost everything these days, dean of retention, dean of disability, dean of multiculturalism. And all of these deans have assistants and other staff.
That all adds up.
What is the point of all these hanger-ons? Does it improve the schools USN rankings?
DeleteAnd I've been thinking that raising the tuition so high, as well as making money, could also serve to send a false signal that this is a high-prestige school. A lot of 0Ls aren't that wise, and might equate high cost with high prestige.
"What is the point of all these hangers-on? [FTFY] Does it improve the schools USN rankings?"
DeleteIn some measure it does. It hits the "expenditure per student" metric.
The prestige-signaling theory that you've mentioned has also been discussed here and elsewhere as a potentially valid point. In addition, LS deans themselves have hinted that if they don't charge enough tuition, they can't attract and hold the "prestigious" professors.
(Sorry about the correction btw. One of my personal peeves.)
Right on the money 12:14
Deletehttp://www.theatlantic.com/business/archive/2011/09/why-is-college-so-expensive/245839/
http://en.wikipedia.org/wiki/Veblen_good
My husband went to New England Law many years ago. He blew up when I sent him links to some of this stuff. I think there is a disconnect among the alumni how far the value of their degrees have fallen. And I'm not saying NEL was ever Harvard but there used to be alumni pride that has been violated.
ReplyDeleteAlso, do you think the schools with the bigger bubbles are the ones more likely to go under?
Curious, Ma'am, is he still employed as a lawyer? (Asking because a frequent theme in the comments here is that, even if one lands a job relatively soon after completing LS, people argue that less than half are able to hang onto a legal career after about 15 years or so.)
DeleteThank you.
Yes, he is still working in a two-person firm. He went from federal government work to mid-sized firm to series of small firms. The work dries up so you need to keep shifting your practice. The law runs hot and cold as does the money.
DeleteLet's put it this way: in hindsight, my husband should have either kept the federal agency job or used his VA disability rating to try to land an administrative law judge position which his friends kept telling him to do. Private practice is spotty, up and down, and he has basically been self-employed for the past fifteen years. You can land a good file or client and be doing okay then things change and you have no money coming in for a long stretch and you are back looking for files. But it is hard to retool at a certain point. You lose energy in your 50s hate to tell you guys!
DeleteThanks again and thank you for taking the time to respond.
DeleteSorry to hear about the circumstances. But it is interesting to get these data points from the field, so to speak.
Best of luck to you and your husband!
(7:22 from above)
We are going to be just fine. It's the young kids with the debt I am sick about. I tried talking to so many young people who just simply would not listen.
Deletethese numbers are worse than even i, someone aware of the scam, would have thought. i have half a mind to fly up to NEL and wear a sandwich board with these numbers on it until the local news does a story about it.
ReplyDeletehttp://taxprof.typepad.com/taxprof_blog/2013/01/boston-globe-.html#comments
ReplyDeleteThere is some serious delusion over at taxprof blog. One commenter entertains the possibility that New England Law actually adds more value to their students than Harvard. Another commenter says New England's outrageous tuition serves the interest of the students, describing it as a win-win situation.
and the issue here is to what degree is this sort of scam, the law school scam, the higher education scam, etc, central to the core of what america really is? America is not a nation, and maybe it never really was. Always, america has been to some degree in the grip of the propaganda put out by scammers. Back more than 100, 150 years ago, there was propaganda put out by scammers trying to sell land out west: "Rain follows the plow!" they exhorted, trying to draw in more suckers. The propaganda of scammers is core to the real history of america.
ReplyDeleteThe establishment always supports the scammers until the scam becomes so obvious to so many that the establishment is finally forced to concede...
"Rain follows the plow!"
DeleteNice...perhaps I could propose the modern equivalent:
"Jobs follow the crushing debt!"
Kids, you are being led to ruin by syphilitic whores wearing academic gowns.
CAS127
If there is a such a large "profit" as recently as 2011, then it will be quite some time before this law school is forced to close.
ReplyDelete"NESL produced 308 graduates in 2011, of which 17 had jobs with law firms of more than ten attorneys nine months after graduation. Four of these people had jobs with law firms of more than 50 attorneys. 34% of the class was reported to have a full-time long-term job requiring bar admission. 14.2% of these positions were graduates who listed themselves as having begun a solo practice."
ReplyDeleteWhat a great return on "inve$TTTmenTTT," huh?!?!
Somebody should post a link on the Boston Globe article comments section to shut up the mouthbreathers who think this is a "private" school.
ReplyDeleteYeah, those comments are depressing. Joe Sixpack apparently doesn't understand how the student lending system works, which makes it seem all the more improbable that there's going to be any government reform on this issue.
Delete"Who cares? It's a PRIVATE school, derp derp derp..."
This is incredible. Law Prof, three questions:
ReplyDeletea) Expenses--does that include salaries?
b) NEL--does it have a parent university?
c) If a) is "yes" and b) is "no," where in God's name could all that profit be? A bank account?
NEL does not have a parent uni. It is a standalone dump in the theater district of Boston.
ReplyDeleteA friend told me that that his father-in-law's firm (partner at a BigLaw downtown Boston firm) won't even bring in grads from this place to interview. Poor lemmings.
"Legally speaking, NESL is a "non-profit" institution, which means among other things that this surplus is not subject to federal or state taxes."
ReplyDeleteThis seems to me to be the key to the whole post (although it gets swamped a bit by the mass of detail).
Bottom line, many rotten law schools should be referred to the IRS - which has a *lot* of requirements to qualify for "non-profit" status (which, as here, is often little more than a legitimizing front for rank opportunists).
In a nation riddled with debt, with institutions serving the opposite of a public purpose, the stripping of non-profit status should be a no-brainer.
Doing so would probably put these fraud factories out of business.
I wonder if there are private plaintiff side firms that specialize in taking down black-hat "non-profits" as private AGs...or if only true AGs (who usually are focused on many other tasks) are allowed on to the field...
CAS127 (Comment Sig not working...)
7:52 - I am not sure the best angle here is "stripping" the not-for-profit status of law school such as NESL. This is not to say that you are incorrect, but let's get to the source of the problem. The core issue at hand is that the school receives virtually all of its revenues from federally guaranteed student loans, which are issued without underwriting or any review of ability to pay and which contain awful terms, including non-dischargeability in bankruptcy. Like the sub-prime market, the law school and increasingly the university businesses survive based on their ability to rip-off customers, all with government policy behind their backs. I always thought Congress committed a significant error when only going after the "for profit" universities. Yes, the for profits are little more than conduits for student loans, and they often have horrible graduation rates and/or job prospects to boot. But the for profits differ little from the not-for profits, as this anecdote about NESL reflects. My favorite not-for-profit anecdote is Boise State, which spends millions on its football team and commits money for Washington lobbyists to change the BCS college football bowl system rules, yet has a 5% four year graduation rate. Boise State is far cheaper than NESL, of course, but it is still a rip-off and prodigious taker and user of student loan proceeds, with, of course, lousy results (other than a a good quasi pro football team). No effort to strip the Boise States of the world of their tax status will be successful, and this is why the focus must be on radically changing the student loan system, as it is the heroin which feeds a privileged class of progressive administrative apparatchiks.
ReplyDeleteLawProf, where did you get that info? Was it on Guidestar?
ReplyDeleteI think the remnants of the Sicilian mob are kicking themselves for not getting into the law school racket.
ReplyDeleteOut of all the characters in the Godfather, Tom Hagen could be the one driving their business right now. Who needs drugs or hits or numbers when you've got students carrying blank checks? Tom could have set up a law school in Vegas (Nevada's only got one!) in the 70s, call it "Cooley West" and he'd be the envy of the mafia dons. It's dirty AND as legit as possible.
And frankly, Mafia Law has way more practical application than International Law.
"...kicking themselves for not getting into the law school racket"
DeleteSo, just who does own Sterling Partners, anyway? (Charlotte, Fl.Coastal, Phoenix Law Schools)
I could tell you, but I don't fancy taking a stroll along the bottom of the Hudson in concrete over-shoes . . .
DeleteFOARP - and here I've always been told Sharks can breath under water...
DeleteHey, maybe all that money goes to employee benefits. In a Globe survey, New England Law was voted one of the top places to work in 2012!
ReplyDeletehttp://www.boston.com/jobs/topworkplaces/2012/top _places_to_work_midsize/
In all honesty though, I was puzzled when I saw this on the list last year.
"34% of the class was reported to have a full-time long-term job requiring bar admission. 14.2% of these positions were graduates who listed themselves as having begun a solo practice."
ReplyDeleteMath nerd question: do you mean 14.2% of 34% (i.e., 4.8% of the total and thus 29% have something approximating a real job) or 14.2% of the total graduates, thus giving less than 20% something approximating a real job? Obviously everyone should steer clear regardless, but if it really is under 20% while the dean makes that much off the scam... holy cow. All things considered this may be the worst scam in the country. Fitting that this guy was in charge of regulating law schools.
Geesh, just look it up and spare us.
Deletewww.lawschooltransparency.com
I suppose when enrollments decline and schools are forced to merge or be acquired, NESL with its substantial surplus will be in a position to acquire some of its competitors. Maybe they could buy the Harvard name.
ReplyDeleteI have yet to see an attack on the immoral interest rate that's being charged on these "student loans."
ReplyDeleteBanks are borrowing from the Fed at close to 0%. The Feds have got a boat load of money for their own loans.
There's little to no risk, since these loans aren't dischargeable.
Why the 7%-9% interest rate? And why not attack THAT?
I will bite. The rate (Along with guarantee and origination fees) Allow federal loans to have guaranteed approvals for anyone, as long as they are admitted to attend a "qualified" institution. The high rate is based on the risk of default. No federal loan accounts for an individuals credit score on an application, so there is no chance for someone with good credit to get an interest rate reduction. Good borrowers have to pay a higher rate to allow this loan program to be made available to anyone. People rip on private loans, but they receive no public subsidy, and can deliver a loan at about 3.5% for people with good credit. Federal loan program gives loans to everyone without considering income, ability to repay, or prospects that come from the degree program completed.
DeleteAs mentioned on this blog many times, cut back the guaranteed federal loan program, starve the beast, unnecessary law schools must shut down. (And all unnecessary Higher ed programs too)
What? Cut government spending on education? The horror!
Delete@11:38 - but you can't default on student loans...your paycheck and social security will be garnished. Still doesn't explain the huge markup in interest when the true default rate is so low.
DeleteLet's be clear: these "toilet" schools (like NELS) were not so much "toilets" 20 years ago.
ReplyDeleteBack then, there were less total lawyers practicing law, and the number of new law school graduates per year were less than they are now.
Also, insurance companies were reimbursing law firms for about 100% of the billable hours they'd charge, which meant law firms were interested in hiring as many revenue generators (i.e., associates) as possible.
Thus, the billable hour scam: hire associates to do trivial, useless things in order to bill the client (specifically, their insurance company).
So back then, the market allowed for these 3rd and 4th tier schools to spring up, but NOW the market will force them to go.
An interesting tidbit getting too little play in the Globe article is that one of the Trustees of NE SOL is a practicing attorney and was paid $70k+ annually for 15/hr a week of work.
ReplyDeleteIn other words, he was taking $90/hr for something most people would consider community service. I'm not licensed in Mass and not familiar with their ethics rules, but that should be unethical conduct and an abuse of a fiduciary/trustee position, IMO. A rather flagrant one.
It's clear these idiots view their positions at NE SOL as a license to pay themselves handsomely instead of positions of public trust. They are in severe breach of moral, if not ethical, duties, and if the Massachusetts court/bar/whatever had any stones, they would slap these people and this place.
And that's 15 hpw "nominal", as LP would put it.
DeleteWonder what the "real" hpw were, on average?
I'm guessing fewer than 8.
BTW, some of what you mention was brought out in the Globe article. No, they didn't hammer on it, but (IIRC from reading the other day) they did point out how unusual it was (and/or I think said that it was now a discontinued practice).
they said it was a discontinued practice.
Deletebut hey, if i steal, er, pay myself 10k/year to manage my client trust account, but then i discontinue the practice, guess who's still getting disbarred?
Oh this was one of my favorite episodes of the Sopranos. Tony lets a family friend gamble because he knows the friend owns a sporting goods store. When the friend inevitably loses, Tony sends in his guys and they take everything. Meadow's friend ends up with no money for college.
ReplyDeleteSounds like the same practice at work. This Dean gets all the cash he can knowing that the government will gladly hand it over to the students.
He deserves jail.
http://www.avclub.com/articles/the-sopranos-bust-out,43126/
DeleteThe third video down is the clip where Tony explains how the bust-out works.
re: SL interest rates
ReplyDeleteAnd how absurd is it that it is impossible to refinance at a lower rate? Is there any other debtor that, assuming he or she is credit-worthy, cannot take advantage of the current, near zero, interest rates? Draconian.
Excellent point! And don't forgot those thieving origination fees.
DeleteAlthough I saw something on TLS where the law has changed and you can borrow the origination fee now.... Or something. Not sure how that works.
"borrow the origination fee now.... Not sure how that works."
DeleteYou borrow the origination fees, then, after grad and once repayment commences, you get to try to start paying off (1.18)x(total origination fees).
OT but snother part of the scam: "college textbooks have risen in price by 812 percent since 1978, far outpacing even the 559 percent increase in tuition and fees over the same period." The Week (citing HuffingtonPost.com)
ReplyDeleteBut knowledge of American History 1607-1789 and Organic Chemistry and Calculus has changed so much!
DeleteOrganic chemistry some - Calculus not. American History - hmmm
DeleteOrganic was a pain. I learned it the first time under the old nomenclature system, then went back years later for another degree and they'd changed all the names.
Delete"Whaddya mean, we're not spozeda call it t-butanol anymore? When did they decide "2-methyl-2-propanol" was more appropriate? And why wasn't I notified!"
"another"
ReplyDeleteI used to work for probably the biggest college textbook store at a certain land grant university. In almost every case, we marked up USED textbooks 10-30% every year compared to what they were sold for (as USED) the year before.
ReplyDeleteScrew SBS.
DeleteA lot of my professors are posting the readings on the Internet. I'm not even buying the $140 bundle of photocopies for one course; I'm making do with the free electronic versions.
DeleteMore on Judge Kane @ http://blog.simplejustice.us/2013/01/14/benchslap-2-judge-kanes-fix-for-law-schools.aspx From the webmaster, 'In the process, one commenter engaged in an attack that has become sadly and pathetically common among his peers, the attribution of baseless characteristics to diminish the worthiness of his enemy. Not only is it a low-rent logical fallacy, but its pervasive use by baby lawyers suggests that they neither appreciate sound argument nor have the competence to respond with anything better than such puerile crap.'
ReplyDeleteAs long as there are still TV shows that glamorize being a lawyer, this scam will continue. It is like having free TV commercials (60 minutes long) for the law schools.
ReplyDeleteWe need some unemployed law school grads, working as a waiter or bar tender, as the subject matter of a hit TV show. Then you will see some changes.
I was thinking that myself. The word of how worthless law degrees are for most people is slowly getting out there, but it needs to fasttracked somehow.
DeleteWait - didn't 5 of the 6 Friends on Friends have JDs? (The other being a paleo, and we all KNOW they can't buy a job).
DeleteI thought the other five were liberal artists of various stripes.
DeleteChandler had some for of data analyst job. That is typically a $50,000 to $80,000 type of salary.
Delete"Wait - didn't 5 of the 6 Friends on Friends have JDs?"
Deletelol what?
It was a play on "We need some unemployed law school grads, working as a waiter or bar tender, as the subject matter of a hit TV show. "
DeleteWe need the "Friends, Law School Scam Edition".
Special snowflakes will dismiss those few people as isolated losers.
DeleteThis year's U.S. News Rankings are going to be the death knell for a lot of law schools.
ReplyDeleteAny school that drops significantly in rank will find it that much more difficult to get their more qualified admittees to actually attend, particularly in light of the fierce competition that will occur from relatively higher ranked schools as they scramble to fill their seats towards the end of the admissions cycle.
Also, we know that U.S. News is going to revise the way it computes employment scores, which are a major element in the rankings formula, to reflect "the more accurate information now available about outcomes" (thanks LST!!!!!)
But, no one knows exactly how the methodology will change, so law school administrators are sitting on the edge of their seats, sweating.
Get your popcorn, this is going to be fun to watch!
If the employment criteria is given serious weight in ranking the law schools, I predict Georgetown will finally be knocked out of the T-14.
DeleteThe T-14 are pretty well predetermined - USNWR's formula/algorithm has been designed to look reliable by delivering the expected answers for each major metro and overall across the US. I doubt who is in the T-14 will change other than a rank up and a rank down. Plus a few T-20 T-30 schools are set to drop because they falsified their data and USNWR will lower them to make it look objective - so Villanova University and the University of Illinois will fall hard to prove the rankings are rigorous (not)
DeleteIDK about VU, but UIUC was before the last set of rankings came out, and they got hammered already (something like, # 22 to 35).
DeleteProving yet again that we all went to law school because we are bad at math. They can't ALL fall in rankings if they ALL fall in the relevant metrics. It's all relative.
DeleteNuh-UH! I hears Youwassnooze And Whirled Rapport is a-gonna have one of them there "high-ate-us-is" between the T14 and number 85.
DeleteThat means a skool like New English Skool of Law will fall from nubmer 145 to nubmer 216.
For you tax folks: How would things really change if New England Law (and many others) lost tax-exempt status. Yes, it would be harder to deduct contributions. However, wouldn't the school become an LLC or S Corp.? If so, it still wouldn't pay corporate income tax. Rather, all of the income would be attributed to the members, and undoubtedly the Dean would just pay himself more (assuming he is a member or S Corp shareholder). One difference, and this really would matter, is that schools occupying prime real estate (like New England Law, Suffolk, Brooklyn, NEw York Law) would pay a lot in property taxes.
ReplyDelete"would pay a lot in property taxes."
DeleteA good reason to contact local taxing authorities in addition to the IRS.
"Non-profit" status isn't handed out like candy (although it is *still* heavily abused...) and there are many statutes and regulations concerning its use.
The law schools' corruption has vitiated their claims to public purpose - a tax starved jurisdiction might very well sharpen their knives for these recently exposed bad actors.
Remember...they got Capone on tax evasion...
Can we talk about more Crooklyn dean, Joan Wexler? How does Joan get to retire from all the hassles and negative publicity of a deanship, yet still get to collect half a million per year, by declaring herself "President"? What the heck does a "president" of a free standing law school do, anyway? What a fraud this is.
ReplyDelete"What the heck does a "president" of a free standing law school do, anyway?"
DeleteUm, more than you do?
Just a SWAG, though.
My God they take in a lot of S Loan tuition money! I am serious. Holy Crap!
ReplyDeleteBut when exactly were the federal loans made nondischargeable?
And when were the private loans made so?
And as for this post and the one prior to it:
This is really a surreal situation and all one can do is laugh. Sure Joe 6 pack might not understand the cunning behind the rip off, but some people do and you can;t fool all of the people all of the time.
The scam has been allowed to perpetuate, and system has been so badly abused for so long, and if no one ever speaks up, people like O'Brien could be making 2 million bucks a year or more.
Seriously, isn't ANYTHING going to be done about this travesty?
@2:27
ReplyDeleteFed student loans were initially made pseudo-nondischargeable in 1978. After that point, one couldn't discharge them without making five or seven years' worth of payments (I forget the exact length). They were made fully nondischargeable in the late 80's, I believe.
Private student loans were made nondischargeable in 2005, most likely to bolster the fast-growing SLABS (Student Loan Asset-Backed Securities) market that Sallie Mae created. Some of the largest borrowers of private student loans at that time were law students, as Staffords only covered $18.5k or $20.5k (can't remember which offhand), and GradPLUS loans... didn't exist. There were plenty of law schools that cost north of $60k in 2005, so IBR is a very limited help for those grads, many of whom never found full employment or are about to get the senior associate axe from BigLaw.
LawProf:
ReplyDeletehttp://www.jdunderground.com/ot/thread.php?threadId=39796
If true, wow.
Well, it was all so long ago. At least for the Federal loans. Does anyone remember the rationale for keeping Student Loans non dischargeable? In simple language?
ReplyDeleteAnd in all fairness to the law schools, they did not make the debt non dischargeable. They just took huge advantage (that has all been discussed before) of that aspect or element of the whole situation.
Whatever the motivation was, it does not change the fact that unlimited guaranteed loan funds made available with no underwriting or risk to the lender is counter to all basic business sense and whatever it all is, it ain't Capitalism.
But can it be said that the law schools were involved with making sl debt nondischargeable?
I doubt it, and if I was someone like O'Brien that would be my first and much repeated defense.
The rational was that people couldn't run up a big debt and then skip out on the bill. Now technically the loans are not entirely non-dischargable. Under ICR and IBR, the loans will be discharged after 20 years, so it similar in concept to Chapter 13 bankruptcy, with much more lenient terms.
DeleteNow we have been through this several different times already with you on this board. How many more times must we explain it to you, JD Painterguy?
"Rational" is not a noun.
DeleteArgggh!
I would gladly surrender my JD if bankruptcy were allowed.
ReplyDeleteI have nothing but remorse and regret for having wasted three years of my life at a law school.
I have also learned to never tell anyone I have a JD anymore because it just makes people uncomfortable, and besides that life is dead for me.
How I wish I could impress the dire reality of all of this upon a lemming thinking about taking on debt and enrolling in a lower tier law school.
I never tell anyone I am an attorney either. People think you have money and you don't. Please hang in there and look for opportunities in life. Things can change in a heartbeat.
DeleteThis has been another JD Painterguy rant.
Delete@356,
DeleteWhat are you TALKING about, dude? The day you enrolled in law school was the greatest moment in your life. Three years at a lush private resort, and you've been on a vacation from work ever since then.
federal loans became nondischargeable on October 7, 1998. (Higher Education Amendments of 1998 P.L. 105-244, 112 Stat. 1581)
ReplyDeleteFrom what I understand, early boomers (i.e. folks who graduated college from 1965 to 1975) sometimes filed for bankruptcy immediately after acquiring their degree. Hence, the early efforts to limit grads' ability to discharge student loans.
ReplyDeletehttp://business.time.com/2012/02/09/why-cant-you-discharge-student-loans-in-bankruptcy/
ReplyDeleteThey used to be. Before 1976, all education loans were dischargeable in bankruptcy. That year, the bankruptcy code was altered so loans made by the government or a non-profit college or university could not be discharged during the first five years of repayment. They could, however, be discharged if they had been in repayment for five years or if the borrower experienced “undue hardship.” Then, the Bankruptcy Amendments and Federal Judgeship Act of 1984 made it so all private student loans were excepted from discharge too.
Two decades of further tweaks to the bankruptcy code ensued until 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made it so that no student loan — federal or private — could be discharged in bankruptcy unless the borrower can prove repaying the loan would cause “undue hardship,” a condition that is incredibly difficult to demonstrate unless the person has a severe disability. That essentially lumps student loan debt in with child support and criminal fines — other types of debt that can’t be discharged.
Wasn't the actual number of people taking advantage of bankruptcy fairly small? (even among law students) Does anyone know why student loans were made nondischargable in bankruptcy? It probably deserves a study all its own. I have a feeling its partly due to the peculiar reverence that Americans hold for education.
DeleteTo many people higher education is a sure guarantee of wealth and success. There is no way an honest person would ever need to discharge educational debt, since education always pays for itself.
3:47,
ReplyDeleteIf that story is true, it makes me want to take one step closer to doing something really evil.
Re: The rationale:
ReplyDeleteI seem to recall some kind of an argument about "human capital" and the "potential" of a higher ed or law degree for greater earnings over a lifetime, and therefore the debt is carried until payoff or death.
For instance, how many times have we heard that such and such a study somewhere shows that a college grad. makes an average of a million dollars more over a lifetime than one who has no higher ed.
But all of that was before the new economic realities; before the SL debt bubble grew to a trillion dollars. And the country was no where near the incomprehensible 16 trillion of debt that it has now.
In essence, 1 in five American households now has nondischargeable SL debt.
How can anyone defend such crazy circumstances?
Is this the kind of stuff that goes on as a civilization in on the wane?
The very premise of calling a nation's legal educational system a scam is very disheartening as well. Because it is like:
Who can you trust?
And wow, 20 IBR years from now, who knows what the world will be like. Really, it is all so surreal.
@Paintroach,
DeleteYes. Society is teetering on the brink of collapse, all because it won't pay off YOUR debt.
The debt is carried until payoff or death, you say? Well, if you are planning on living more than 10 years, maybe you should get a job for the government and discharge your loans that way?
@10:33, I think you've missed your mark. There may be a slight superficial similarity topically, but otherwise the style is all wrong.
DeleteNations can rise and fall in a 20 year IBR period.
ReplyDeleteI realize that Mr. Infinity/Epic Fail is going to reply with something really vile because his generation came of age in a declining America and is mostly culturally pornographic and uncouth.
But I recall seeing at 3AM or thereabouts a long commercial for a boxed DVD set of the old Dean Martin "Man of The Hour" celebrity comedy roasts.
People old enough will recall seeing, and on that show, Dean Martin, Johnny Carson, Orson Welles, Frank Sinatra, Audrey Meadows, Michael Landon, Redd Foxx, Jack Klugman, Ronald Regan, John Wayne, Red Buttons, Eddie Albert, George Burns, Mickey Mantle, Howard Cosell, Gene Kelly, Lorne Greene, Ernest Borgnine, Telly Savalas, Ginger Rogers, Milton Berle, Ted Knight, Bob Newhart, Dom Deluise, Jack Benney, George Kennedy, Jonathan Winters, Shelly Winters, Phyllis Diller, etc etc etc.
I mean lots of celebrities, and most of them are now dead.
20 or 25 years later and these people mentioned are ALL DEAD.
How many of us will be here 20 to 25 years later after our IBR term expires?
20 to 25 years is an entire generation. Fine for a home mortgage, but for student loan debt?
Come on!
The whole thing is surreal.
Hm, you might actually live longer if you just paid back all that money.
DeleteHaha, you must be from that lost, noble generation where people promise to pay back borrowed money - and then don't.
Now keep your promises and stop posting here already!
Oh noooo! Some sick animal has left a huuuuuuuuge rotten "Seton Hall Law" sticking out of the office toilet! The janitors have bsen notified but their powers are useless against it!
ReplyDelete@ Jan 14, 10:39PM - Go Fuck yourself Epic Fail/Mr. infinity/Terrified Law Student/Hopeful Law Student/World Traveling Law Student/Coward.
ReplyDeleteI hiope Character and Fitness does not give you a pass.
Why, because of all the promises that *I* keep breaking? LOL.
DeleteOn Dec. 29th 2012, Epic Fail wrote:
ReplyDelete"Signed,
The World Traveling Law Student [WTLS] (yes, it was me all along. Thanks for having me on your blog Nando :) It was a pleasure)"
For those who don't know, the World Traveling Law Student used to troll Third Tier Reality.
Epic fail also posted:
"
I want to pass the NY and California bar (I will probably be moving from New York around the same time the bar results roll in, as my wife is thinking about graduate school in San Francisco. (yes, I've been married 11, almost 12 years (in an amazing relationship, may I add, she has always thought the scambloggers were crazy and put up with my running this blog for a long time) -- sorry to burst the bubble on that one. The engagement stuff was just for fun -- in fact, a lot of the stuff on this blog has been fictionalized. Also, I'm not nearly as young as people think."
He also wrote:
"Ever since I stopped reading Campo's hypocritical blog, I have felt good about my life."
@ January 15, 2013 at 5:04 AM
ReplyDeleteJD Painterguy, why did you even go to law school anyway?