I take for my text this morning Luke 17:2:
It were better for him that a millstone were hanged about his neck, and he cast into the sea, than that he should offend one of these little ones.
This is a warning about the uniquely wicked character the already grievous sin of betrayal of trust takes on when it involves taking advantage of the innocent and naive. This moral judgment is reflected by the criminal law, in statutes that provide increased punishment for those who abuse their positions of trust or authority to harm especially vulnerable victims, such as children or the elderly.
Several readers of this blog, including a couple of legal academics, have emailed me to argue that I haven't put enough emphasis on how the legal academic establishment's continued willingness to advertise essentially phony placement numbers ought to be considered a genuine public scandal. And on reflection I believe I have become prone to a form of mistaken belief that anyone who becomes knowledgeable about a particular subject always risks falling into. That belief is that the general level of knowledge regarding the subject in question is much higher than it actually is.
In brief, it's easy to fall into the mistake of thinking that because one has become intimately familiar with how deceptive law school placement stats are, and because there has now been some mainstream media coverage of this issue, and because anyone who googles "law school employment numbers" will find those stories, along with a bunch of furious scam blogs addressing this issue in the bluntest possible terms, it follows that prospective law students are not likely to be fooled by those numbers. It's merely another step from that assumption to the belief that people who are reckless enough to borrow six figures of non-dischargeable debt to go law school, and especially a non-elite law school, in some sense "deserve" the fate that most probably awaits them.
But for several reasons these beliefs and assumptions are unrealistic. First, I think it's difficult to overstate the extent to which law schools abuse their cultural privilege when they mislead prospective students about the actual job numbers. As incredible as it may seem to those of us who see the sausage being made every day, it appears your average 20-year-old who is considering taking the LSAT in the next year or so actually expects law schools not to lie to him or her about this all-important issue. This expectation is a product of among other things the great lengths to which law schools go to present themselves as bastions of disinterested rectitude and servants of the public good.
Consider the following real-life example. Last spring, the dean of a certain law school authorized the school's public relations person (that law schools now employ PR people ought to give all those naive 20-year-olds a helpful hint all by itself) to distribute a press release, which as a consequence of the economic necessities that govern contemporary journalism was then transformed into a "news story" by the "reporter" who attached her byline to it before reprinting it. This story claimed that the nine-month employment rate for the school's graduates was nearly 90%. Now this claim wasn't true even if one employed the statistical chicanery (counting all jobs as legal jobs etc.) that law schools use to generate their phony numbers. But leave that aside. If a prospective law student read that "nearly nine out of ten graduates were employed within nine months, according to the law school," what would be the reasonable inference for that person to make?
I submit the answer is that this person would assume nearly nine out of ten graduates had gotten real legal jobs (permanent full-time employment requiring a law degree). Would it occur to the average 20-year-old that "employed" meant in many cases "employed at Starbucks or Home Depot?" Unless the average 20-year-old is someone who assumes that institutions with the cultural prestige of law schools ought to be treated as being as reliable as unsolicited emails from Nigerian former oil ministers looking to transfer millions of dollars into their correspondents' bank accounts, the answer would seem to be "of course not." And in fact at the time the law school's administration caused these statements to appear in the media, it was well aware that less than half of the previous year's graduating class had real legal jobs, even defined generously.
In other words, the law school's representations -- which we should note were completely gratuitous claims that didn't even have the benefit of the standard excuse of "this is how the ABA/NALP/USNWR reports the information it gathers from us" -- were fraudulent. Now I am quite certain that the law school's dean would have been shocked to the very core of his being if anyone had told him to his face "You are committing a fraud on the public. You are inducing relatively vulnerable and naive persons to give you very large amounts of money under false pretenses." You see, that simply could not be the case, because the dean was a man of enormous personal integrity, as all his many friends and admirers would be happy to inform you. The statement "you are committing a serious fraud on vulnerable people" would have struck him, I'm quite sure, as being equivalent to the statement "you are a brain in a vat and the external world is an illusion." That is, he would have understood the statement as a purely theoretical possibility, which had no possible relevance to the actual state of affairs in the real world: the world in which this man of impeccable personal rectitude was being paid nearly $400,000 per year to perform an undeniably valuable public service.
The nasty old common law doctrine of caveat emptor ("let the buyer beware") held that sellers were under no obligation to disclose any facts about the things they were selling to prospective buyers. But even that doctrine, which has since been rejected by all kinds of consumer protection laws, did not allow sellers to affirmatively misrepresent or fraudulently conceal material facts about the things they were selling. You could omit to inform a buyer that the roof of your house leaked, but you could not lie to him if he asked you about it, let alone were you allowed to claim to prospective buyers before they even asked about it that your house had a water-proof roof.
To anyone who has taken the time to investigate the subject, it's obvious that the standard practices of law schools regarding their employment numbers fail to leap even this low bar. To any law professor who happens to be reading this, let me pose a question: Have you done anything at all to signal to your school's administration, or even to your colleagues, that you find this situation unacceptable? And if you haven't the explanation for why not had better not be, "prospective law students should know better." Why should they know better? Because we live in the fantasy world where Econ 101 is taken as a literal description of reality, and everyone is dutifully gathering information about the "arm's length" transactions they're engaging in, on the road to the rational maximization of their utility? In the end that's nothing but blaming the victim.
Sunday, September 11, 2011
Caveat emptor and law school employment numbers
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Bravo! Right on point. Keep it up!ReplyDelete
Good post. This is what I find especially vile about the law school scam - it preys on the young and naive who pay for the scam with a life of crushing debt. Bernie Madoff scammed millionaire and billionaires. Law schools scam kids who pay with debt. Pure criminal despicable evil and any law professor who defends it deserves all the ignonimy in the world.ReplyDelete
Also: Do you believe it is appropriate that law school be a caveat emptor proposition?ReplyDelete
Hear, hear! I would also NOT like to hear the excuses of "We didn't know" or "It's law school, not lawyer school," or "We can't tell the Dean/Career Services/Admissions Office what to say." Just FTR.ReplyDelete
Forget about law schools hiring PR people. Some law schools are rebranding themselves.ReplyDelete
Branding: We’ve taken on a significant branding project with Hofstra Law School to conduct in-depth research followed by creative and technical work. We know this project will involve a new website and implementation of a content management system—and other elements determined by what we learn from our focus groups and surveys.
What a gigantic waste of tuition!
@11:30 AM: I knew I was done at the public law school where I used to work when the "development" shills insisted on bringing in a third-party vendor (a buddy of one of said development shills) to school us on "social network marketing" i.e., snake oil, and convinced half the administration that what the law school really, REALLY needed was to develop a mobile Website. This while the school was contemplating a huge tuition hike (and the only real question I heard asked at faculty meetings was "so, how much of a raise are we getting?"), the school was throwing away money on BS "programs" like one aimed at teaching athletes how to manage conflict, and the employment situation was so bad that even some law review folks couldn't find work.ReplyDelete
Yeah, it's amazing the crapola that students are paying for with their life-ruining, non-dischargeable loans. I would not be sad to go back to the days where the law school administration consisted of the dean, the dean's secretary, and a modest library staff. I'm not even going to get into the millions of dollars wasted in the arms race between every TT and TTT in the country to build the biggest, bestest palaces money can buy. How many years of full-tuition scholarships could be funded instead of erecting a $10, $15, $20 million building?
Yes, indeed. This is the fundamental point. Law schools across the country have been knowingly defrauding and swindling students. In addition to being immoral and unethical, fraud is an actionable tort and sometimes also a crime. Most if not all of these schools are guilty of mail fraud and could be prosecuted by the feds and/or by state attorneys general. The dean whose fraudulent scheme you describe should be the subject of a grand jury investigation. It's really that simple.ReplyDelete
Amen, Prof. Campos.ReplyDelete
Some people have no shame.
How much is a Law School Dean's soul worth when his or her salary is the misery of a generation?
The Dean at the law school where I used to teach used the faculty members to shill for the admissions office by call up all of the top potential students to sell them on the school. Now these folks have no idea about the job picture or anything else outside their little academic world but they were given free rein to pump up the law school and get the high number prospects to sign on the line, especially if there were out of state students who would pay double the in-state rate.ReplyDelete
You are a great and honorable man for exposing the horrendous injustice inflicted by law schools on their marks.
However, the discussion has to change. We live in a world where there are some protected blue collar groups, i.e. cops, firemen, court officers, certain labor unions in metropolitan areas, which receive six figure salaries, pensions, and benefits. These groups, outside of the elite, are the only protected groups.
People generally hate people that try to improve themselves, its called envy, and people really hate lawyers. We can beg, plead, argue, and rationally explain that what is happening to the modern educated class, particularly new lawyers, (and with the few exceptions of the ultra elite) is an injustice. It will get us nowhere. People like what is happening because it confirms to them that dropping out of high school and/or going to community college for two years was a good bet. This being the case because it lead them to a better place (or the same place without debt) than those that followed the “go to school” religion advocated for since birth. They also hate lawyers and revel at their pain because they are of the belief, right or wrong, that lawyers are parasites that support the source of the world’s injustice.
There is only one way out of this. The public has to realize that it is getting harmed in two ways by the LS industrial complex: 1) the public will have to pay for the student loan default that is coming. It doesn’t matter that students cannot discharge the debt. The bottom line is that they can’t pay it back, and the public is going to pay for it one way or another. 2) Desperate attorneys file law suits that increase the cost of total economic activity.
Does it make sense for the public to suffer this cost? Even if law students should have known better, even if law students are douche bags, even if caveat emptor is morally sound, even if they are arrogant for wanting a better life, and for not dropping out of high school at 16, getting a GED, going to community college for two years, and then joining one of the above mentioned jobs/profession, does it make sense for the public to fund an enterprise that increases the costs of all economic activity with money that it isn’t going to get back, and that is going to some pretty useless people?
Are they still making those representations even with the current economy?ReplyDelete
For the recent grads, obviously the numbers now are a lot different than when they started because the economy tanked. I thought in a previous post someone speculated the employment data was closer to 50% in better economic times?
It's also possible I'm not following the data presented that carefully and maybe this has already been answered.
As incredible as it may seem to those of us who see the sausage being made every day, it appears your average 20-year-old who is considering taking the LSAT in the next year or so actually expects law schools not to lie to him or her about this all-important issue.ReplyDelete
Precisely. And even if a prospective student becomes aware of the criticisms of law schools' jobs data, s/he will more often then not think (1) "well, the school says 90% have jobs, but since I know they're fudging the numbers, the real percentage is probably around 75%, which is still fine for me, because I won't be in the bottom 25% of the class" (in other words, students still have no idea of the tremendous extent to which the numbers are bad), and/or (2) "well, I know there was a scandal about jobs numbers, but the ABA or the government or somebody changed the rules, so the numbers have to be better now; no school could get away with continually lying, right? Who's more trustworthy, anyway, law schools connected with major universities or a bunch of bloggers who are mostly anonymous disgruntled 20 somethings?"
Well the easiest solution to ease the public burden is to kill IBR.
That raises the second question about how the loans are structured. This might be my own personal ignorance of how it all works, but is the principal only guaranteed or is the interest, fees, surcharges, etc. also guaranteed?
IBR is itself shadow deafault. The public is going to pay for these loans, period. The question is how, and the next question is what will happen to the student loan slaves: do they get another shot or no?
This is why it is imperative that, at a bare mimimum, the student loan guarantee goes first. That is the most important thing. End the federal backed loans.
I feel bad for the student loan slaves because they are no more irresponsible than gamblers, recent home owners, etc. However, even if you leave the non-dischargeability on the table, if the feds pull the guarantee, the system will collapse because you cannot get blood from a stone, and these kids can never pay the debt back.
I hope that the public is not so malicious, evil, and envious that they will sentence the student loan slaves to a worse fate than every other irresponsible borrower in this country. Not saying there shouldn't be a consequence for borrowing those sums, put permanent indentured servitude? Harsh. Alot of home owners that were even more irresponsible got a better deal.
Nevertheless, even if you think debt slavery is an equitable punishment for these folks, the tax payer should not have to pay for it from this point out. End the guarantee.
You would think that practicing attorneys, particularly those outside of the elite biglawsphere, would not be happy about the dramatic overproduction of JDs. Doesn't the glut risk exerting downward pressure on fees? You'd think they'd put some pressure on the ABA and state bar assocs to raise this issue with the law schools.ReplyDelete
But never having practiced outside of the gov't/non-profit sector, what do I know.
@ 12:53: Agreed.ReplyDelete
IBR is not shadow default, IT IS DEFAULT. If you have a loan, and you have to reduce your scheduled payment because you can't afford them, that is a black and white default in finance. When someone goes on IBR, that loan is defaulted and since the interest keeps accruing, it's not clear to me how they will ever be able to pay it back.ReplyDelete
Meanwhile, the government continues to bail out zombie banks though forced mortgage restructuring disguised as homeowner friendly re-financing.ReplyDelete
This whole system is sick to the core. When the levee breaks, our standard of living will go back decades. Thanks Boomers.
Why don't you give the names of who you are talking about?ReplyDelete
Paul- love the work going on here and at LGM. It seems the comment section gets pretty lively on the topic of IBR and I think it deserves some more "front page" data and discussion if possible. In my opinion, it's the portion of the SCAM that is most universal in that it affects more than just law school, but also professional school, and even big ticket UG education ... And it is at the intersection of the schools and the public as the taxpayers bear the burden ultimately of the loan default. I think there is massive unawareness here and no one on the public/taxpayer side is asking about the return on investment of subsidizing unpaid law tuition!ReplyDelete
12:53 here. Whoa! Right on the money.
Can anyone answer this question about IBR?ReplyDelete
Here is what I know:
1. You borrow money from Citibank (risking CITIBANK's capital), under a GRAD Plus loan guaranteed by the government.
2. If you don't make enough (which I imagine is 90% of grads with $200k debt loads) you apply for IBR. Once in IBR, you do not even have to pay the interest, which gets rolled over.
3. At some point, I don't know when, but at some point Citibank says "this loan is a piece of shit that will never get paid off" and calls on the government guaranty. THAT IS THE MOMENT THE TAXPAYER'S GET SCREWED.
When is that point in #3? Does anyone know the mechanics of IBR?
*taxpayers (I was going to write taxpayer's loss)ReplyDelete
Regarding #3, what is the substance of the guarantee? I asked this earlier and I'm not sure the answer was clear. Is all of the outstanding interest (which is not recapitalized into the loan during IBR I believe) also guaranteed or only the principal amount? To the extent there are fees/surcharges for late payments or defaults are those guaranteed as well?ReplyDelete
I'm pretty sure it's 100% fully guaranteed including all missed interest (but probably not penalties. Actually I don't think penalties exist on GRAD plus loans). If it was anything less I doubt Citibank would have made the loan.ReplyDelete
I'm not sure I agree it's that clear cut. The answer will in part depend at what point #3 above occurs. If it occurs fairly early on in the loan then an interest guarantee may not have been seen as important given the debt is non-dischargeable.
Also, the student loans are securitized correct? If so, a few defaults (with risk mitigated by guaranteed return of principal) might not be so bad against a number of non-defaulting student loans. Is there any data on how many loans are currently in default?ReplyDelete
I wasn't really looking for debate. I was asking a very simple question: when does money go from the government to Citibank to honor the guaranty?ReplyDelete
At some point, money gets wired from the government to Citibank. When is that?
Yes, student loans are securitized. Yes, that's a massive economic problem considering that we'll pass $1 trillion in student loans some point in the first half of 2012.ReplyDelete
As for IBR, 3:38, I think it's not a guarantee. I could be wrong, but my understanding is that the way this program operates is that when you apply the government goes and buys the loan, rather than waiting around for you to piss Citibank off and for Citibank then to come calling on the guarantee.
"Is there any data on how many loans are currently in default?"ReplyDelete
Are you one of those Thomas Cooley scammers who seeks to hide the poor quality of law school student loans by abusing the term "default?" ALL IBR IS A DEFAULT. IBR means the borrower was not able to pay the schedule principle and interest payments. Cooley wants you to think that a default is as it is defined by the BOE (something like not one dollar in payments in 12 months) but that's not a default in the real world. In the real world a default occurs when you miss scheduled interest and principal payments.
"I could be wrong, but my understanding is that the way this program operates is that when you apply the government goes and buys the loan, rather than waiting around for you to piss Citibank off and for Citibank then to come calling on the guarantee."ReplyDelete
Wow. So you mean the taxpayers get screwed at the moment the loan is taken out?! That's shocking.
You people are saying completely incoherent things. One of you said that (a) student loans are securitized and that (b) student loans are purchased by the government as soon as you take them out. Those two things can't happen. You can't sell a loan to the government AND securitize it.ReplyDelete
It's very simple. We know the loans are government guaranteed, so at some point the government has to hand over cash. This could be to buy the loan outright as soon as the student takes it out. This could be at the moment the student goes onto IBR. This could be a number of years after IBR, at which point Citibank decides the loan is garbage and calls on the guaranty.
Whenever that moment is. Whenever the government hands money over to cover the loans, that is the taxpayers getting screwed. My question was when does that occur?
My question was intended to cover both IBR and missed payments.
Yes, there is data. Until the healthcare bill, a 2-year cohort default rate was used, meaning that the government guarantee for each school depended on the percentage of students who were in default at two years from the beginning of repayment. It's now a three-year default rate, but with direct lending, there is no more "guarantee" on new originations. Under the previous regime, obviously the government guarantee was really important when securitizing these loans and making new instruments out of them. It was pretty much guaranteed money because the underlying asset could never really go bad. It would always be paid, and, therefore, the derivatives built on the back of those instruments also would never really become toxic. Now, considering that you could pretty much take deferments and forbearances for 2 years, and otherwise students' credit would be raped, this kept the default rate that schools reported to the government deceptively low. It wasn't anywhere near an accurate measure of students who really weren't paying on the debt. This scheme, though, had the effect of getting a high guarantee rate for the schools from the federal government for the next round of subprime student origination, and it allowed banks a great way to make sure their derivatives looked like very safe investments. So, in addition, this two-year cohort default fiction was a way of pricing these derivatives (SLABs) in the market. It was pretty much a fraud from top to bottom, as far as I can tell, and as I understand it. A three-year cohort default isn't much better, but even still some schools' default rates jumped by about 150% from, say 7% to 13%, or something along those lines. I suspect that the default rate for students is pretty high, but as to what it is, I have no idea, and obviously, it's beyond me to actually find out. I don't think anyone knows.
Now that is my understanding of how student lending worked. I would welcome others' comments and expertise. It's obviously complicated, and I'm sure I've not got it all right, but this is where the law school scam meets higher education more broadly, meets the economic disaster more broadly still and where some good might be done.
No, the loans are not guaranteed. New originations are direct from the government. Existing loans under the previous regime were privately issued with a government guarantee. When those loans enter IBR, the government buys them. I don't know what happens to the derivative instruments that might have been created in the past at that point.ReplyDelete
"Now I am quite certain that the law school's dean would have been shocked to the very core of his being if anyone had told him to his face..."ReplyDelete
How about the plain fact that these are lawyers, law professors - experts in law - who are committing fraud? Just let that sink-in in a bit.
Have we reached a point in our culture where corruption is just expected and no real social castration occurs to those involved?
And these law profs are often the first ones to point out the ethical and legal faults of everyone else. Geez, I think there's another story in the Bible that applies here.
You know, government loans are actually not so terrible for the taxpayer. I read the recent stimulus plan had to pay something like $100,000 to $300,000 per new job created.ReplyDelete
Thus, if you are a government and you want to keep your populace occupied, and you can:
(a) Give them $100,000 to $300,000 work for an uncertain period of time (the stimulus jobs are not guaranteed to last forever), or
(b) Loan them $200,000 to attend law school, for three years.
Why would you choose (a)? The citizen would choose (a) but the government would be better off with (b), no?
And Obama's new stimulus plan will cost something like $450 billion.ReplyDelete
$450 billion would cover three years of law school tuition for 2.25 MILLION people (divide 450 billion by 200 thousand). Do you think Obama's stimulus plan is going to create near that many jobs?
I don't think the "student loans are screwing taxpayers" argument will get you anywhere. Yeah, it's technically true, but taxpayers are being screwed far far worse by short lived stimulus jobs that cost $200,000 each.
Here's another thing I just read. Per capita, social security will cost $50,000 PER YEAR. In about 10 years it will take 3 to 4 trillion of the federal budget, EVERY YEAR!ReplyDelete
Did you hear that? 4 trillions per year to the nation's 80 million or so old people! Not as a loan, but as a handout.
Student loans are a damn bargain for the government in that world.
Wow this country is so f*cked.
(I should have written Social Security and Medicare).ReplyDelete
While you're right about the optics - no one takes students of any stripe as serious human beings - but if you really want to compare the math, you have to factor in all the liabilities that banks would have on the derivatives they created. So, while there might be close to $1 trillion in student debt in the U.S. (more than credit card debt), when you start creating derivatives, these are separate debts between the parties, and the actual liability balloons or can balloon by multiples of the underlying debt obligation. Think of it like an upside-down pyramid, with the bank's payment rights from students at the bottom, and the bank's payment rights from counterparties on the derivatives being the top-heavy part
Anyone? Have I got this right?
No, sorry. Derivatives are bets between private parties and implicate the government only when a bailout is required. Student loan derivatives are a miniscule part of that world and I would predict that you will never see a student loan derivative collapse requiring bailouts. As you said above, student loans are issued directly by the government now any way, so that whole world has left the private sector.ReplyDelete
In terms of magnitude (and being rational, we have to look at the most expensive things first), stimulus spending, entitlements to the olds (did you see what I wrote about THREE TO FOUR TRILLION PER YEAR to retirees?!) which are all HANDOUTS dwarf, absolutely dwarf, the loans made to students. The latter is not even on the radar of a serious government economist.
P.S. That doesn't mean what law schools do is not a fraud and a crime. Me stealing $10 from your purse is a crime that could put you in jail no matter how small the amount. I recall a recent article about a kid who went to jail for a violent mugging for $2.ReplyDelete
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I'm well aware of what a derivative is and who the parties are.ReplyDelete
I was speaking to the issue of student lending as a broader economic threat. You seem to have assumed that I was mixing in some kind of government liability on the derivatives. Not remotely. As for pretty much all the lending before the current scheme got up and running, those were indeed between private parties, albeit with one of them having the benefit of a very generous government guarantee.
I don't know how much more clearly I can explain to you that is not in any way on the radar of people looking for economic threats. It's a problem, but there are far far worse problems.ReplyDelete
(worse problems that I articulated in 4:22 - 4:25)ReplyDelete
I would drop the whole "student loans should be fixed because it will cause a finance/taxpayer problem." Student loans are a damn bargain to the government in comparison to the handouts they give for stimulus/entitlements.
So if the govt is issuing the loans directly, and those of us that are paying sticker price on our loans are paying 6.8% interest are absorbing some of the risk premium?ReplyDelete
Good point 4:45. I wonder if the government will raise that rate over the years as IBR deals a bigger and bigger hit. (They can't raise the rate on your particular loan though. That's locked in. I mean they might raise the rates on new loans).ReplyDelete
Possibly, or they might just say 6.8% is enough of the risk for individuals and taxpayers should shoulder the rest. Either way, it doesn't sound like there's any concrete data out there about default rates so it's hard to put a dollar value on the issue other than as compared to the other ways the govt. pisses away our money.
Did anyone see that Stephen King movie where a spaceship of very old aliens crash landed in a town, and psychically drained the town's young people of life, life that the old aliens needed to live a few years longer? I just googled it, the movie was called "The Tommyknockers."ReplyDelete
Does a world where poor taxpayers pay $3-$4 trillion per year to retired boomers remind you of that movie? Especially when many of the retirees are boomers who had relatively great lives in their 20s-60s?
4:52, you're right. 6.8% is a high interest rate for a 10 year loan.ReplyDelete
"I don't know how much more clearly I can explain to you that is not in any way on the radar of people looking for economic threats."ReplyDelete
I know that. We can agree on that.
I'll just say, though, that while your other points re: "worse" problems are valid, I'd encourage you to look at the numbers. If you're complaining about a $500 bn stimulus package that is (we can agree again) utterly pointless and won't ever happen, then why are you not concerned about derivatives that have been constructed on the back of nearly $1 trillion in student debt? That's not to mention that we actually don't and can't know what that might have ballooned to? Thankfully, this is coming to a close with the new direct lending program, which, I agree, is not enough money to become a problem, but I think you might be more concerned about bad legacy assets on the books of those who control credit, especially when the underlying debt (i.e., student loan debt) in the U.S. exceeds total credit card debt in the U.S.
This is actually a huge hole for banks.
Otherwise, we disagree. So be it. That's fine.ReplyDelete
I suppose it's the sign of the times that a trillion dollars in unsecured government-backed loans to debtors who in a significant percentage of cases are certain to default is considered a trivial problem.ReplyDelete
None, That's 1 trillion total as compared to trillions per year. Loaning a kid $60,000 per year that he may not pay back is far better than handing $50,000 to a retiree each year for as long as they are alive, or handing $100k to $300k to some unemployed uneducated loser so he can have a manual labor job for a few years. I stand by my statement that student loans, no matter how back the quality, are a damn bargain to the government. Students are dumb for taking them. You should be rioting and demanding stimulus jobs!ReplyDelete
*no matter how bad the qualityReplyDelete
What the size of the SLAB market? Because that's the figure you want. Not $1 trillion.ReplyDelete
None, apparently someone could explain something to you ten ways and you'll still come back with the same stubborn, inane and laughably wrong reply. Do you read the posts you reply to? Do you read your own posts? You wrote yourself that banks aren't even issuing student loans anymore. They come directly from the government.ReplyDelete
***You can't have derivatives on loans from the government because there is no public information on whether they are being prepaid.***
The size of the student loan derivatives market is infinitesimal in the world of finance. Your whole line of thought is wrong. As I explained above, student loans are a bargain for the government when compared to money they give other groups in entitlements and stimulus money. Students are dumb for taking them.
Its too bad you posted this on a day of mourning since a lot of people will miss it. One of your better posts. I read this quote (roughly paraphrased) a few weeks ago; "We used to have an economy based on production now its an economy based on having your hand in the pocket of the next guy."ReplyDelete
From education loans to law school fraudsters to the most "respected" investment bank, Goldman Sachs, creating financial instruments knowingly betting against their own customers - we are basically a sick society of corporations, banks, lobbyists, etc., who do anything that they can get away with and have bult a power structure through the courts and halls of congress that does their bidding. Your post paints a pretty picture of the law school part of this equation.
My question is that if law schools, the teachers of the law, can so openly and unquestionably commit fraud for so long and on such a large scale what keeps me and other students from finding every and any avenue to defraud the govt in return? Since you began with a biblical passage I'll end my comment with one: An eye for an eye, a tooth for a tooth.
@ 5:12 PM--There was a time when no one on terra firma would have said that students were "dumb" for taking out student loans for law school or any school of higher ed.ReplyDelete
You are really cute, and quite the sarcastic joker, but I would like to remind you of an issue that is far, far bigger than you and your jokes:
Human lives are at stake, and I would suggest that you grow up and become a serious adult, and reflect that in your writings, and in your cheap brain in general.
We are living in very dire and seruious times, and it is time you put away your childhood fun and games.
I am getting death threats on my blog, and I want no more jokes.
The ultimate question is: How to overthrow the shadow Financial Industry Lobby that seems to be able to control USA main stream media?
Speaking of stubborn and inane, you've posted a naked assertion several times: "The size of the student loan derivatives market is infinitesimal in the world of finance" only to then pivot to government debt on entitlements. Yes, it's a problem. Yes. O.K. They're big numbers. Congratulations. That wasn't the issue, and no consistency in assuming that it was will make it the issue.ReplyDelete
This is about the corrosive effects of $2tn or $5tn or $10tn in legacy derivatives on lending institutions, then the economy and on a consumer economy which has once again locked the productive members of the market (in our case, unfortunately, consumers) into a position in which they can't participate. Jesus.
And just to prove to you I read my own posts and you don't: "What the size of the SLAB market? Because that's the figure you want. Not $1 trillion."ReplyDelete
Come on then. What is it? If it's so infinitesimal and insignificant, then what is it? Come on, big boy.
None, you are autistic.ReplyDelete
"I am getting death threats on my blog, and I want no more jokes."ReplyDelete
Really? From who? What is your blog about?
RT: "None, you are autistic."ReplyDelete
By the way, I am not joking when I say students are "dumb" for taking out these loans. Look at these three groups:ReplyDelete
(a) unemployed, uneducated manual labor etc. types - They get large handouts from the government in the form of welfare (I don't know what this costs; $30k per year per family perhaps?), stimulus jobs (that supposedly cost $200k or so each for a few yers of work) . . .
(b) retirees, who in ten years will number 80 to 100 million and who will each collect about $50,000 per capita (probably more as estimates are always low). Multiply those numbers together to get the $3 to $4 trillion per year. PER YEAR.
(c) students, who BORROW, $60,000 per year for school. Borrow it in the form of nondischargeable debt.
Who is getting the better deal from the government between these three groups? We need more people joining (a). (a) is that group that has accepted poverty and demands handouts under, essentially, threats of riots and crimes. And they get what they demand.
"This is about the corrosive effects of $2tn or $5tn or $10tn in legacy derivatives on lending institutions"ReplyDelete
You think there are 10 trillion in NET student loan derivative positions outstanding? You are a damn idiot. Why are you so intellectually dishonest? What kind of person even pulls such laughable numbers out of their ass without a shred of research? You clearly don't know what the f*ck you are talking about. Rather than admit this, and even when I repeatedly showed you that ANNUAL HANDOUTS TO RETIREES WILL BE FOUR TIMES THE TOTAL STUDENT LOAN DEBT, you persist with the same rhetorical lies.
If you're not doing this, none, you're criticizing poor LawProf for his posts, or you're telling him to link to scamblogs. Something is wrong with you.
Here, Wikipedia says Sallie Mae's entire student loan debt is $180billion. That's chump change in finance. Further, starting in 2010 there's no longer any need for SM since loans come directly from the government.ReplyDelete
No one ever disputed whether "ANNUAL HANDOUTS TO RETIREES" were bigger. Mostly because it has nothing to do with the argument we've been having. You responded to me. That is, yes, a bigger figure but that was never relevant. I don't know where it came from. You assumed there was some sort of bailout argument happening. Don't know why.ReplyDelete
So . . . yes, intellectual dishonesty. I've asked you, what, 4 times now what the figure is for outstanding SLAB debt, and you've responded several times with some shit about Social Security and Medicare for some reason, and then called me autistic. Stay right on top of things, will you?
I think this statement from earlier (anon at 5:11) is basically true: "...student loans, no matter how bad the quality, are a damn bargain to the government."ReplyDelete
It seems to me a slightly more efficient (less corrupt?) model would be to fund the schools directly and let student admissions be a little more merit based at a lower tuition rate, as opposed to finding a pool of suckers with a pile of cash in hand (via loans etc). Gov't invests in schools... schools invest in the students, instead of the student being a cash-transfer pawn. At the very least, we partially solve the "caveat emptor" guilt associated with loaning adult college graduates large sums of non-dischargable debt (please read the last sentence with mild sarcasm).
"So . . . yes, intellectual dishonesty. I've asked you, what, 4 times now what the figure is for outstanding SLAB debt"ReplyDelete
Rather than repeatedly asking a question so that you can get people to imagine an ominous answer to that question (a pathetic form of intellectually dishonest rhetoric) - rather than throwing out laughable numbers like $10 trillion in student loan derivatives (which even if it was true wouldn't be a problem, and it's not true as any one who isn't a moron could infer from the Sallie Mae information I provided) - rather than doing all that, why don't you go find the answer yourself?. You're an asshole. Something is deeply wrong with you and it has nothing to do with law school. You would have problems with or without law school.
I agree with you Dr. J., but that would be like acting like Ned Flanders in a world of Homer Simpsons. My only point is that students who take out loans to get educations are exceptionally responsible citizens, perhaps even "dumb" for being so responsible.ReplyDelete
"Buyer beware" does not give an individual, agent or institution a license to lie.ReplyDelete
RT: "Something is deeply wrong with you and it has nothing to do with law school. You would have problems with or without law school."ReplyDelete
As for the $10 tn figure you've so gleefully rested everything on, nice one. If you're going to launch attacks on people for being intellectually dishonest, why don't you be honest yourself and admit that what you got was a range of $2 to $10 to allow you to follow along. Only so much I can do to grease the wheels before I get myself into trouble. I should have known.
As it stands, there are is between about $2.5 and $3.5 tn in SLABS, on top of $1 tn in student debt. I would also encourage you to research your claim that $10 tn in derivatives on underlying assets wouldn't really be a problem for the banking sector. That's just not true.
That doesn't even mention the fact that credit card issuers went apeshit when they thought they were next and there is more student loan debt than credit card debt in the U.S.
Yeah, I think we're circling around the same ideas. To expand beyond just law school Ed., right now we are telling a generation of unemployed folks to get new skills, retraining, more education etc... and there are a lot of people playing by the rules, being responsible and essentially taking on a lot of debt/risk to build (or rebuild) a career based on what is all to often "empty marketing". Currently there is a little muscle to make sure the for-profit schools are in shape (i.e. not blatantly abusing their students)... but that's only because their ivory towers aren't so protected. Even so, that's an uphill battle. Bottom line, I'd like to see a few more checks and balances from the people loaning the money out with respect to long term institutional outcomes. (Naive, I know)ReplyDelete
Oh, damn, I didn't get it all. RT "You're an asshole."ReplyDelete
That's the second time today I've been called an asshole. Now I'm an autistic asshole. You know, at some point, I'll start wondering whether I really am, or whether, perhaps, it's the people I'm associating with here that are more likely exhibiting asshole-type behavior, personal attacks, etc.
To add to that, I think it should be the responsibility of schools to use those loan proceeds responsibly and to train students in skills that are in demand. This requires schools to measure the economy every five years. Legal services in oversupply? OK fewer law students. Occupational therapy services in demand? OK more of those students.
However, the government has so many other more serious problems to focus on that I don't think you'll get them to do anything. The courts have to do it, but holding the schools liable for career placement statistic fraud.
Don't you all have your own blogs where you can carry on your circular arguments? Stop hijacking this one...ReplyDelete
At the very least could y'all choose a damn name other than "none/anon".ReplyDelete
I like the anon feature. It's fun having no clue who you are talking to.ReplyDelete
If you want...right above the "anon" choice is "name/URL". Type whatever you want. nothing to sign into, nothing to trace.ReplyDelete
Blaming prospective students for believing the misleading statistics put out by the law schools is like blaming the rape victim for the rape: she should have known better than to be alone with him, she shouldn't have been so sexy, etc.ReplyDelete
It's allowing the person committing the crime - and yes, it's a crime - to escape having to take responsibility because the blame is placed on the victim. It doesn't work with rape and it doesn't work in this situation either.
No I mean I would like everyone to post as anonymous. No monikers at all. It adds a sense of mystery.ReplyDelete
Now it's a complete nullity. Triple redundancy.ReplyDelete
U of IIinois Law Dean Suspended for reporting inaccurate admissions data:ReplyDelete
A similar thing happened at a NJ law school. I forget which. Why are the schools so worried about getting their incoming LSAT data right, but they're not worried about getting their career placement data right?ReplyDelete
Speaking of NJ, GO COWBOYS!!!ReplyDelete
"Why are the schools so worried about getting their incoming LSAT data right"ReplyDelete
Because that's what gets reported to USNWR and that's what affects their rank.
I think he means why is there a crackdown on inaccurate LSAT scores when they run wild with employment stats.ReplyDelete
^Again, b/c that's what drives USNWR rankings.ReplyDelete
Huge news in the Cooley lawsuits.
This is just pathetic:ReplyDelete
Check out chicagotribune.com. Assistant dean on placed on leave due to allegedly manipulating LSAT scores.ReplyDelete
Rather the suntimes via the ap. Shows how dishonest they are.ReplyDelete
Could it be his comment was too long?ReplyDelete
And now comes news from one of the biggest douche bags the legal academy has to offer (yes, Leiter)that Illinois is committing fraud:ReplyDelete
With all due respect, Prof. Campos, this endeavor of exposing the outright consumer fraud perpetrated by law schools needs to move from the "scam blogosphere" to the a criminal investigation by those that prosecuted Madoff.
Ms. Hurd, Ms. Hurt, Mr. Seto, any thoughts?
Anyone else watch the Cowboys game? Tony Romo is just good enough to lose.ReplyDelete
If you want to see some absolutely reprehensible "public relations" abuses by law schools, keep a close eye on UC Irvine.ReplyDelete
Irwin Chemerinsky has allowed some of the most ridiculous law school hyperbole to be released I've ever seen.
Star power cannot overcome that realities that this and other blogs seek to expose, and you are not immune nor are you special.
Sorry Chemerinsky, sorry UC Irvine faculty. At least the weather is nice.
This blog has not focused enough on the culpability of the ABA.ReplyDelete
At some point, the accrediting institution should step in and say "enough is enough" we don't need any more law schools. Why this hasn't happened is a complete mystery. Is it because the ABA is run by the law schools or the large law firms?
The initial solution is obvious: There are too many law schools. Note all you want the accuracy of the employment data of a particular TTT or TT or T school, but the truth is that supply is crushing demand, and this trend is here to stay: Since the ABA permitted doc review to be done in foreign countries, a US attorney will never be able to compete with the salary of somebody in a second or third world country. Let alone a computer that can more quickly and thoroughly analyze documents than a human being.
Here is a model for professional responsibility: In the 1990s the Dental Profession responsibly shuttered dental schools at Northwestern, Emory, and Georgetown in order to ensure that every dental student could find dental work. Until every law graduate can find legal work, there will be too many law schools.
There is a promise, implicit in every law school admission acceptance, that you the prospective student will be able to find work after completing the course of study. The ABA, as the professional association charged with accreditation, has a duty to fulfill this promise and this problem must be addressed directly: lower the number of graduates until it meets demand. As described above, this may require some serious leaning of the number of legal institutions. At $180k per law school graduate, the profound consequences demand this response.
The profession itself, through the ABA, must clean house itself, or risk a foreign institution like the US Government cleaning house instead.
re the ABA; Everyone with any power is culpable. There aren't too many innocent parties in this mess.ReplyDelete
Currently there is a little muscle to make sure the for-profit schools are in shape (i.e. not blatantly abusing their students)ReplyDelete
The world of for-profit "colleges" is absolutely disgusting. The NY Times did an excellent multi-part expose on this maybe two years ago. Believe it or not, they engage in behavior that would make law school stat-massaging seem downright angelic.
One of the schools front and center was "Kaplan University". It was disgusting to see the name of my company being dragged through the mud because of the assholes in one tiny division [sort of a much smaller version of how everyone who worked for Enron has now been smeared due to the antics at Enron Energy Trading]. Unlike most law professors, however, once I finally became convinced of how ethically and intellectually bankrupt the corporation was, I left.
Blaming prospective students for believing the misleading statistics put out by the law schools is like blaming the rape victim for the rape: she should have known better than to be alone with him, she shouldn't have been so sexy, etc.
A classmate of mine (I'm a 3L at a tier 2 state school) who is one of the brightest people I've ever met has been complaining, loudly, about how screwed he feels. When I said, "oh c'mon you didn't just google around a bit to find out what the deal was?" he replied, "Stupid me, I researched about a dozen different schools and when I saw at all of them employment numbers roughly similar, at or over 90%, I assumed they were telling me the truth. And since this school was basically half-price, I decided to come here."
Mind you this isn't a naive 22 year old undergrad. This was a guy with an ivy league pedigree and nearly a decade of academic work experience who was already making at the very top end of a five-figure (comfortably middle class if not rich) salary.
A similar thing happened at a NJ law school. I forget which.
The private one.
Even in the era of scamblogs, it is reasonable for prospective students to trust the data presented by the law schools. This is because scambloggers have no credibility, they are just bitter losers exagerating the problem to excuse their own failure. That's why this blog is so extraordinary. Anybody who stumbles across this blog is going to hear the case made by a law professor and that can't be easily dismissed.ReplyDelete
Don't even get me started on UC Irvine. There are just so many things wrong with that school I wouldn't know where to begin.
I'm just guessing this but it wouldn't surprise me if the powers that be at UCI law has already set up the first year's small graduating class into prestigious positions.