Monday, August 13, 2012

Memo to the faculty

A very interesting document has come my way, authored by a faculty member and former interim dean of Tulane Law School.  It was apparently drafted for a law school committee, and it features a fairly straightforward, although understated, description of the employment and salary crisis facing law school graduates in general and Tulane graduates in particular.  Here is the most notable passage: 

A rule of thumb in assessing student loan debt is that debt should not exceed starting salary.  This means that an average student graduating from TLS needs a job paying around $117,000 to manage their debt load.  Of graduates reporting their salaries for the 2010 class, one-third had such jobs, two-thirds did not. [Elsewhere the memo notes that salaries were reported for only 38% of the class, so in fact barely more than 10% of TLS graduates obtained salaries equal to the putative average student debt load, which as we have seen is understated by about 15%].  A loan calculator available online from FinAid spells out that to repay a loan of $117,000 and avoid financial difficulty means that our graduates need a job that pays around $161,000.  That is above the top salary paid in the nation by law firms to entry level hires. Consider also that the top salary available for law graduates in Nola is roughly $100,000.

Thus, the sort of job needed to comfortably pay off our average loan is currently out of reach of most of our graduates. [Emphasis added]  The highest starting salaries are offered by the top 250 firms in the U.S. as measured by the National Law Journal – the “NLJ 250.”  As Brian Tamanaha comments in a soon to be published book, Failing Law Schools:  “To offer a few examples, Tulane University Law School, Temple University James E. Beasley School of Law, North Carolina, University of Minnesota Law School, Ohio State University Michael E. Moritz College of Law—all well regarded law schools—placed 10-12 percent of their graduates in NLJ 250 firms in 2010.”  This is obviously not a large percentage of the class, yet these jobs are the only ones that offer the security of loan repayment without financial hardship.

Again, while understated, this is at least a fairly straightforward admission of the fact that a Tulane law degree -- like almost all law degrees these days -- doesn't come close to being worth what it costs to acquire. Now on one level there's every reason for recent grads, current students, and incoming students at TLS to be upset about the fact that it would be completely impossible to deduce this rather significant piece of information from anything the school has to say about itself.  And they should get upset about the extent (i.e., total) of the denial in which the law school engages as a matter of institutional self-presentation and -- just as significant -- policy.

In other words it's not just that Tulane gives no hint to the outside world that it has any awareness that its cost structure makes no sense -- it's that there's no real evidence that it's doing anything about this, besides indulging in the usual hand-waving about trying to make its graduates more "practice-ready" (How many times does it have to be pointed out that making people marginally more prepared for jobs that don't exist doesn't actually help matters?).

Still, it's a sign of progress that someone at Tulane in a position of some administrative responsibility is actually grappling with the real problem, even if only at the level of acknowledging it exists.  Indeed none of this should be taken as a criticism of Tulane in particular -- it's not as if Tulane is offering a worse return on investment than the typical law school.  If anything, it's offering a better one -- it doesn't cost more than the average law school to attend, and around  13% of its graduates are currently getting jobs that at least arguably justify the cost of attendance, which is a higher percentage than at the majority of law schools.

At this moment, as law school faculties gather for their beginning of the year meetings to discuss strategic planning in a hyper-networked kinetic professional environment or what have you, it's especially important for people to stay focused on the fact that (Yale, Stanford, and Harvard, please leave the room) law degrees cost more than they're worth, instead of wandering off into pointless arguments about the purported value of legal scholarship and its relation to good teaching (as somebody at JDU pointed out law professors could stand on their heads while reading Fifty Shades of Gray and that would be fine with everyone as long as their students actually got jobs), or curricular reform, or whether we should have Starbucks or Peaberry in the faculty lounge, etc. etc.

Entire memo posted below the fold:

Accountability Problems for Law Schools
General employment/financial situation facing legal profession and law schools, 2012
·         Legal field lost 50,000 jobs from January 2008 to Sept. 2011 (including paralegals and other legal professionals) according to BLS
·         Law schools graduate around 44,000 new lawyers every year
·         BLS projects roughly 25,000 new attorney positions per year for next ten years, a gap of roughly 20,000 extra lawyers per year
·         Hiring by large firms still down as of January 2012 relative prior to the financial crisis
·         Law school applications dropped 11% in 2010-11 and a further 15% in  2011-12
·         Median salary in 2010 was $63,000 according to NALP, although salary distribution is bi-modal, with clusters around $160,000 and $40,000 to $65,000
·         Average debt load of a law graduate was $98,500 in 2010; at 29 schools, that amount exceeded $120,000
·         In 2010, 68% of graduates had a job that required a JD nine months after graduation; less than 51% found work in private firms, the jobs that pay the best
·         Most student loans funded through DOE direct lending program

Tulane Law School situation
o   Drop in applications for 2011-12 is 20% so far, was down 2% for 2010-11
o   For class of 2011, 84% were employed nine months after graduation, 77% of total class employed in legal professional jobs (but only 42.9% employed at graduation in 2010 according to US News)
o   Average law school debt load of TLS graduates who borrowed is $117,000 (82% of 2011 graduates borrowed)
o   Median salary is $71,000 and mean is $81,000 for 2010 graduating class (38% of class reporting)
§  Top salary range is between $92,000 and $160,000
§  Top salary in Nola is $100,000
§  Salaries of TLS graduates have same bi-modal distribution as national (US News 25-50-75 percentile figures are $75,000, $92,000 and $145,000 medians for private employment, $45,500 for public)
o   LSAT medians for entering class were 158-163 for class of 2014 as compared to 160-164 for class of 2013
o   Increase in tuition is substantial, from $29,810 in 2003 to $43,684 in 2012
o   GPA of entering classes is at 3.4 – 3.75 for 2011, 3.31-3.68 for 2012 US News
o   US News rank for 2011 was 47, for 2012 is 51 (tied with Baylor, Florida State, Loyola-LA, SMU)
Legal education has arguably entered a period of transition.  The significance of this transition for individual law schools will become more apparent in the next 10 years.  Law schools are being affected by a variety of changing circumstances.  Even prior to the 2008 financial collapse, there was evidence of an imbalance between the number of jobs available each year and the number of students graduating.  One recent report cited by the New York Times, March 15, 2012 stated: “’Since it is unlikely, based on overall economic conditions, that the demand for legal services will grow robustly for the foreseeable future, the legal industry will be forced to live with uncertainty for some time to come,’ said the report, from Citi Private Bank and the Hildebrandt Institute.”
There may be a long-term drop in the number of students wanting to go to law school given greater awareness of the more limited legal market.  This is indicated by the recent drop in the number of LSAT tests taken for this year.  In addition, consistent tuition increases funded by student loans combined with more limited job prospects at the salaries necessary to pay back the loans may lead to a generation permanently hobbled by excessive debt.  This last phenomenon could produce a variety of unexpected consequences.
A rule of thumb in assessing student loan debt is that debt should not exceed starting salary.  This means that an average student graduating from TLS needs a job paying around $117,000 to manage their debt load.  Of graduates reporting their salaries for the 2010 class, one-third had such jobs, two-thirds did not.  A loan calculator available online from FinAid spells out that to repay a loan of $117,000 and avoid financial difficulty means that our graduates need a job that pays around $161,000.  That is above the top salary paid in the nation by law firms to entry level hires. Consider also that the top salary available for law graduates in Nola is roughly $100,000.
Thus, the sort of job needed to comfortably pay off our average loan is currently out of reach of most of our graduates.  The highest starting salaries are offered by the top 250 firms in the U.S. as measured by the National Law Journal – the “NLJ 250.”  As Brian Tamanaha comments in a soon to be published book, Failing Law Schools:  “To offer a few examples, Tulane University Law School, Temple University James E. Beasley School of Law, North Carolina, University of Minnesota Law School, Ohio State University Michael E. Moritz College of Law—all well regarded law schools—placed 10-12 percent of their graduates in NLJ 250 firms in 2010.”  This is obviously not a large percentage of the class, yet these jobs are the only ones that offer the security of loan repayment without financial hardship.
There are other ways to cope with large loans other than well-paying jobs, but they have downsides.  The financial hardship can be mitigated by extended loan repayment plans.  These plans involve paying off a loan over 30 years, which reduces the monthly payment at the cost of greatly increasing the total money paid over the life of the loan.  There is also the government’s “IBR” or Income-Based Repayment plan.  These plans reduce monthly loan payments and forgive the loan after a set period.  It is possible that IBR plans may become more controversial if most law students start using them due to hardship and the government loses money it was counting on as a result.  Students can also have their loans forgiven if they work in a public service job, such as a public defender, for ten years.
Because the period of transition has just begun, outcomes for TLS are difficult to foresee. TLS has slipped in the US News rankings from 47 to 51.  Factors which may help explain this drop are decreases in the quality of the entering class, placement rates, and bar passage rates.  The quality of the entering class may be the most important factor.  This is affected by the size of the pool.  To maintain quality and especially if we want to increase our ranking, it may become necessary to reduce the size of the entering class.  This would have significant budget implications.  Depending on the effect of our ranking on applications and acceptances, however, we may be forced into this position.


  1. Was the emphasis in the original? Just wondering.

  2. Jobs are no doubt the most important thing, but I refuse to believe that students would tolerate bad scholarship even if they were getting jobs.

    If that were true, then why do people learn anything at HYS?

    Again, yes, by all means, focus on jobs because it's obviously important, but don't DISMISS scholarship as completely worthless.

  3. Also--you should mention that the people at TLS most likely to get the high laying jobs are the ones that probably took out the fewest loans (because of merit scholarships). So the number of Tulane grads whose salaries match their debt is substantially lower than 13%

  4. Comment at 6:39 a.m. makes a disturbing point - that the math is actually WORSE than Tulane admits, because the students most likely to get the highest-paying jobs likely have the lowest debt load.

  5. I thought all the cool intellectuals went for La Colombe?

  6. So if the debt is greater than the salary by, say 50%, one will be in financial difficulty?

    But one can defer the loan and work up to a higher salary in a few years, and THEN deal with the loan payments.

    So you see, everybody wins :)

    I hope people realize I'm joking, but I wish I had heard that rule of thumb when I was in school. My annual salary has never been equal to or even close to my loan debt.

  7. This excerpt is important because it implies schools are starting to recognize the game of jacking up tuition every year is coming to an end. The next step is to see if any schools do anything about it.

  8. The obvious answer is that Tulane needs to start more aggressively marketing IBR.

  9. What about Peet's?

  10. Peet's is so nineties.

  11. Thank you for posting this. It may be wishful thinking, but if Tulane has this memo floating amongst the faculty, perhaps many other schools do as well. Either way, it really does seem like a sign of progress.

    The past few posts have given me a bit of an identity crisis about the scamblog movement (do we call it a "movement"?). As a 2010 grad who was not prudent or inquisitive enough to analyze what I was getting myself into in 2006, I am beginning to doubt what part I can play in this, besides increasing the traffic to the blogs and posting a link on Facebook every now and then. When I read a simple explanatory post like this one, I want to high-five someone because the Truth is so satisfying, but then I am reminded of my role in this farce: 150K debt and a 60K job in Boston. Reading this blog and following the stories do not make me feel empowered, nor do they make me feel like a victim. If anything, they point out time and again how ignorant I was and how objectively screwed I really am. Great, so NOW I know, but what can I do to proactively address the problem?

    Of course I count my blessings. I know you are just trying to get real information out there and hopefully change the system. And, of course I don't want anyone to make the mistake that I was stupid enough to make. But, what should we (grads) do with this Truth? (Am I being 100% selfish here? And is that okay?) People say "inflation will take care of your debt" and "Obama will forgive your loans", but these just seem like magic words that protect viewers with a very effective denial and ultimately belittle the real anxiety that we feel. Maybe I am weak, but recent posts have made me believe that this is not my battle to fight or even to tag along with. Is it selfish to ask, what can the Truth do for me?

    Ok, back to intelligent commentary.
    Is there a full version of the memo available?

  12. Perhaps the bankruptcy code is changing...

    There is a link to the actual opinion in the article.

  13. 7:56 You may be able to make more money going forward in private practice. In the meantime, you should look into whether you can refinance some of the debt at lower rates now that you have a job. If you have any securities, you can borrow against those at a very low rate. If your parents or close relatives have a home with any equit, maybe they can get a line of credit and lend to you from there with an actual loan agreement. Similarly, a relative with securities to borrow against may be able to help you lower the interest rate with a pass through loan to you.

  14. The tide is turning against these august "in$titution$ of higher learning." People are starting to catch onto the fact that "higher education" is a mere commodity, in this nation.

  15. This comment has been removed by the author.

  16. Dig through the last few Doonesburys (available at for a pretty entertaining series on the other direction university administrators can go. They're talking about taking Walden private...

  17. Any chance you could post the whole memo?

  18. @6:47 a.m.:

    "Jobs are no doubt the most important thing, but I refuse to believe that students would tolerate bad scholarship even if they were getting jobs."

    If there was good scholarship afoot at my law school, it wasn't apparent from what was going on inside the classrooms for all of 1L and a substantial part of 2L and 3L.

    Every year this past decade, American law schools have produced 40,000+ new hungry mouths into a legal marketplace that could reasonably absorb only half of them, and almost none of them can litigate a case from beginning to end despite three years of law school and a bar exam. But thank God this hidden mass of good scholarship continues to expand out of the view of the general public, judges and most practitioners of law.

  19. 7:56 asks, "... about the scamblog movement (do we call it a "movement"?)."

    Well, over at TTR it's certainly some kind of a "movement".


  20. 8:24.

    I couldn't agree more. Legal "scholarship" is mostly useless. This country could use about 25 to 50 solid Law Reviews, which could and do provide some good analysis and summary of whats what in law. We now easily have 20 times that number which do God knows what.

    The law factory keeps grinding out useless papers and useless students despite the lack of demand. And it does so because Uncle Sam will pay the money up front, no questions asked. What a horrible system!

  21. 7:56 also asks, "... Is it selfish to ask, what can the Truth do for me?)."

    Not selfish in my mind. Other than what you've already mentioned - directing traffic and information, what else can you do? And whether it will end up helping newgrads, guess we'll have to wait and see. Given the number of years of over-supply, it would take considerable reduction in student numbers, year-on-year, to really start helping.

    Also note the advice above about lowering the loan interest if you're paying the usurious* rates of most students. Knocking several percentage points off (e.g., if you could possibly exchange your SL rate with your parents' HELOC rate) can have a very large impact long term.

    * I say "usurious" even though 7-8% isn't high compared to the 70's or 80's rates, it's high when you can mortgage a house now at under 3%.

  22. @8:12,

    What, are you Mitt Romney or something? Refinance your student loans? Good luck with that. Channel your equity or investments? Sheesh.

    In regards to the statement in the TLS memo that "It is possible that IBR plans may become more controversial if most law students start using them due to hardship and the government loses money it was counting on as a result," Barclays estimates that the government will lose at least $225 billion because of IBR and defaults over the next eight years.

  23. 6:47: In my experience, most students appreciate that scholarship is not much use to them or practitioners. This has apparently been the state of affairs in the legal profession for decades now, as I've heard the same from generations of lawyers from recent grads to Gen X partners to wizened scions of practice areas.

    But there has never been this much negative attention and press paid to law schools. While changes to the curriculum, pedagogical model, or scholarship and the Law Review system would be welcome, they are not the primary driver of the current crisis. Any effort to focus on them to the exclusion of more pressing issues reeks of avoidance of the larger problems.

  24. @8:07 Thanks for the link. For other who may be interested, that opinion is from March.

  25. Good luck getting that 1:1 debt to income ratio. They should shoot for a max of 2:1. If no one graduated law school with a greater burden, we'd be miles from the present state of affairs.

  26. Haha, I agree with 8:43. Most people whose parents have all kinds of equity and investments don't end up having to take out massive student loans. Or are, you know, adults, who can't just go knocking on Mom and Dad's door every time they need money. And, federal student loans can't be refinanced, especially if you've already consolidated them at an usurious interest rate, as most of us were persuaded to do, pre-crash. When I graduated in 2001, the overwhelming advice from "experts" was that rates were never going to go below 6 percent, 6 percent is an unbelievable deal, better consolidate NOW!!

  27. If Law School and Higher Ed. is a commodity and commercial enterprise, can the students be released from their student loan contracts on the grounds of commercial impracticability?

    Taking into account income and employment history and realistic income expectations?

  28. "The obvious answer is that Tulane needs to start more aggressively marketing IBR."

    No, not another GW copycat!!!

  29. Thanks for posting the whole memo. The entire thing is worth reading.

  30. off topic question, for someone who is attending NYU/Columbia, is it wise to be a visiting law student @ CUNY LS in their 3L year (for the lower tuition costs)?

  31. The memo is reassuring. Regular readers here will spot how it underestimates the problem but a couple years ago memos such of this would not be circulating. It's simply good to see that at least one school sees that the writing is on the wall re: law school admissions for the next decade and the oversupply of jobs.

  32. @10:30 Do you already have a full-time job lined up for post-graduation?

  33. I"m sure 10:30 meant undersupply.

  34. It seems to me that some smart person could do a FOIA on all the public law schools asking for memos and emails on the affordability of their degrees, fake loan reporting, etc.

  35. 10:44, that's a great idea. but can't we just subpoena all of that stuff, by means of the lawsuits in discovery against law schools?

    1. FOIAs are EZ. Get it and post it. For every single public school.

  36. Now that there is greater transparency which is resulting in declining enrollment it will be even more difficult to cut tuition. It will be interesting to see how law schools adapt.

  37. What is truely depressing is that, as you say, the writer really seems to have a pretty good idea of how bad the situation is but the only action step his mind can conceive is to cut class size in order to maintain TLS's USNWR ranking. This system is intellectually and morally bankrupt.


  38. Hey you know.........a lot of law school academics and personnel are like Sturgess Bowers from the movie Gaslight (played by Charles Boyer).

    Cunning, suave and charming, abusive and with larceny in their hearts.

  39. Suave and charming? Law professors?

  40. Yes, LP, it cannot be a specific charge against Tulane because your institution is as guilty as they. What law school's own materials don't still sound as though, all in all, law school is a great decision, the school is healthy financially, and the law as a profession still holds the moral high ground? Or cite the ethical mandates of law school or of being a professional?

    It is depressing to see such a memo still completely underestimate the dire situation TLS recent graduates face. Salary averages and debt averages continue to be somewhere between 20-40% too rosy.

    However, Syrians are still getting slaughtered and BP is right back at it.

    C'est la vie.

  41. I want to watch it go down in flames. My school's 2012 tuition is up almost 40 percent since 2005 when I was a 1L. I don't know how they live with themselves and it infuriates me when they ask me to donate money.

    At least the law schools are starting to recognize there's a problem. Let's see if they change anything before the number of enrollments drop off a cliff.

  42. Same thing for state open records act inquiries. Should easily be able to get handle on amounts going from law school to central university.

    1. Exactly. FOIA they have to comply. Lawsuit they will fight discovery tooth and nail.

  43. @11:50AM

    Yes, compared to innocent young trusting students that trust Higher Educational Institutions, they are. They are suave, charming, manipulative, clever, mendacious, and reprehensible in their hypocrisy.

    For they all talk about: "noble" this and "esteemed" that, and "honorable" other things, no other profession fawns upon itself so hypocritically, and the lemmings will suck it all up and take it to heart. Why wouldn't they?

    They are just kids.

    Sturgess Bowers kept telling his wife that she was the one that was in error, and so the abused wife came to believe it after a while.

    And the Law School cartel (Old Quist and old Schweitzer) in a manner of which Sturgess Bowers would have been proud, tell the ripped off for life young adults that they have to be wary buyers and are oh so sophisticated consumers.

    They have been gaslighted, so to speak.

  44. LOL!

    It's: Sergius Bauer

  45. Sergius Bauer, Alias Gregory Anton

  46. Charles Laughton directed "Night of The Hunter" (1955)

    In it, Robert Mitchum plays the Reverend Harry Powell, a diabolical villan and law school dean that trys to sweet talk two young children into giving up their money.

    The Dean has the words: "Love" and "Hate" tattooed across the knuckles of each hand.

  47. The world is a stage upon which good and evil will come to play at various times.

    Unfortunately, those of us that were caught up in, and now suffer from this great American historical debacle known as the law school scam will never realize the happy and relatively quiet lives we had once hoped for.

    Our 6 figure debts are carried to old age and death, and we will be forever tagged by the larger society as something less than 1st class citizenry.

    These are the times we live in and they are not of our choosing.

    1. Lawyers of the world unite! You have nothing to lose but your student loan shackles!

  48. 7:56 still here, still on board. If acceptance is the answer to my Prufrockian dilemma (as 1:49 suggests), then the result is apparently that the Truth cannot do anything for me and people in my (our) position—why even bother participating in this dialogue? I want the system to change. I want fewer people to end up in this situation. I want schools to just be honest; I really do. But none of that is going to help me. Man, I really do want to see change, but I think I’d rather have a time machine. [Insert something about a “ragged pair of claws” and Hamlet.]

  49. "A rule of thumb in assessing student loan debt is that debt should not exceed starting salary."

    a back of the envelope guess, but most biglaw lawyers are not able to repay their entire loan within 2 years...

  50. 3:20,
    And you picked two years why?

    1. Two years? It's the Romney Rule.

  51. Pop Culturally speaking, and viewed from a historical perspective, wasn't the movie "Animal House" an expression of absolute contempt of Higher Education by the Left wing Liberal countercultural Baby Boomers?

    And then, after the horrible summer of 69, did not the boomers set about to destroy the meaning and purpose of higher ed and also the lives of all that pursued it in the chains of hopeless life and soul destroying debt?

    And is not the faculty lounge of any institution of higher learning in America today a pig sty and amimal house for greedy boomer hypocrites?

    Ha HA! I LOVE bashing the boomers!

    ALLLLLLLL satire. ALLLLLLL satire ;)

  52. To somebody whose life is forever destroyed by student loan debt, the following baby boomer creation and bullshit is not funny.

    The boomers, especially the liberal boomers, hated America and mocked all of its institutions, including higher education. Look at the one trillion dollar mess the boomers have made, and with no end in sight.

    Look, John Belushi had no talent, was not funny at all, and died of a drug overdose thru his own folly. He is no icon and example for anyone, and a pitiful result of the shit that feeds the corrupt, mean spirited souls and minds of the now gross and old boomers :)

  53. @ 9:09 - you wrote:

    ***And, federal student loans can't be refinanced, especially if you've already consolidated them at an usurious interest rate, as most of us were persuaded to do, pre-crash.***

    But can one pay off a portion of one's indebtedness utilizing funds borrowed elsewhere [even if that "elsewhere" is only available to a limited number of students]?

    Then you'd only have a portion of your original student loan outstanding at the original rate, and racking up interest at that higher rate . You could perhaps handle the now-lower payments on it, plus the payments on the lower rate "new" loan you took out [or got your parents to take out].

    Frankly, I wish some rich "do-gooder" would set up a system whereby students COULD borrow at a lower rate, use the borrowing to pay off the higher rate original loan, and then be able to handle payments at the new lower rate. In the current low/non-existent interest rate climate, getting 2% or 3% on money you'd "invested" to get kids out of trouble would be a pretty good return. Of course this new debt WOULD be dischargeable by your borrower in bankruptcy, so I guess the fear would be that all these kids would take your money and run, but I think there should be SOME way to set something up that would be better than the current system.

    PS - to you boomer-haters, this suggestion is coming from a boomer.

  54. Not to take this debate in another direction, but it's also worth noting that this memo got sent to Campos, and not any of the other scamblogs. I guess this blog has reached not just maturity, but also a level of trust and authority that currently sets the standard for the movement.

    To anyone sitting in an admissions office with access to files of stats that would destroy a law school, access to incriminating emails, or other docs that are pertinent to this issue, I would strongly suggest that this blog is a safe, reliable, confidential, and trustworthy blog to use as a vehicle for leaks.

  55. @ AUGUST 13, 2012 3:26 PM

    b/c it is an very optimistic repayment term number above 1 years

  56. I love the "practice ready" argument perpetrated by law school faculty as a way to "solve" the problem. In fact I recently saw a video of Law Prof and some woman law professor from Stanford, the latter spouting off about how the answer to all the unemployed graduates is to offer more clinics in xyz. That's a bogus, self-serving argument. At least Law Prof was forthcoming, truthful and not engaging in proverbial "hand-waving." Let's be honest, the pigs will say and do just about anything to keep the money truck flowing. Self-regulation rarely works and this mad money grab is no different. Here is the end game: The economy tanks, federal loans are vastly curtailed, schools close down or start accepting just about any warm body to fill the seats (actually this is happening now at some schools). Standards go down, the market continues to be flooded with attorneys and all but the top students from the top law schools actually make an honest living. The rest of us are left to rot in our cardboard refrigerator box...

  57. To follow up on my prior point - if I had just taken that damn clinic in immigration law, EVERYTHING would be great!!! That big law job would be mine, all mine!!!

  58. "Frankly, I wish some rich "do-gooder" would set up a system whereby students COULD borrow at a lower rate, use the borrowing to pay off the higher rate original loan, and then be able to handle payments at the new lower rate."

    The Rich, Do-Gooder you refer to is actually my Boomer parents, but they're too busy buying new cars and other frivolous crap to maintain their happy little life. If they loaned me money at 2%, they'd still make more money than if it was sitting in their bank account or even in bonds. But that's the selfish Boomer mentality for ya. I GOT Mine!

  59. Fuck double yeah to 6.04 above! My boomer parents could easily lend me 100K at 3% and I would pay them far more than their retirement account. Their excuse? "Our money is tied up right now." How about you tie that coin up in my future, assholes? How about you tie us up in a deal that saves me money and makes you money?

    Oh yeah that's right. You don't give a fuck out this generation, and you're more interested in keeping your cunt of an investment adviser happy by giving him a huge fucking commission. Give that money to Lexus for that new fucking SUV you need. "You earned it!"

    Never thought Id say this but I hope my parents fuckign die in a car crash. Or choke on their fucking stash of money.

    1. Do you have siblings?

      I doubt your parents understand.

  60. Yes, 5:32, those who have rich parents can borrow money from them and pay of their loans. Great! What about the rest of us, who don't have that option? I agree that someone should get into loaning money to indebted grads at low rates, and I'm not sure why no banks have tried to get in on that, actually. Personally I would be an excellent risk, as I have a steady job with a good income, I just can't get ahead of the interest on my massive student loans.

  61. One thing about these educational loans is that the interest rate is fixed. In the current environment, interest rates are low. That does not mean that they will not go up though and that 6.8% will not look good 4 or 5 years from now. If your parents have to borrow variable rate, there is a risk that interest rates will go way up. The other point is that a lot of older people have limited money for retirement and in fact cannot afford to lend or give money to their kids for law school. It would mean for example losing their home. Of course, if one's child is suffering under massive debt, it is not a good idea for a parent to go out and buy a Lexus unless it is a used one at a reasonable price.

  62. 5:32 If you have a steady job with a good income, you should start shopping for a better rate. Some people have grandparents, siblings or aunts and uncles who might help them out by way of a guarantee of a loan. Chase offers educational loans based on LIBOR. It may be risky because it is variable and not capped. On the other hand, you may be able to use it for a portion of the loan that you could pay back in 3-5 years.

    1. It's risky because LIBOR is fixed!

  63. Another possibility is looking at two family homes. At the beginning you will have little equity. Going forward, you may be able to refinance some of your educational loans that way because the mortgage stays fixed while rents and the rest of the costs go up in tandem. If the mortgage is half your cost, in a few years you may have some money to actually pay towards the loan.

  64. In Boston, for example, there is a program where first time buyers can buy with very little down. Also you do not have to go to the best neighborhood. A lot of people I have heard of who started out with nothing made lots of money that way by keeping on using the inflation to buy new multifamily homes. It would at least be a plan for getting rid of some of that debt because the home should appreciate a few percent a year and if the home is worth twice your loan, the appreciation ought to equal the interest. Just a thought. Practising law will not get you there even at BigLaw because most of the places you can earn a lot are very expensive and you need to live close enough to work to work long hours. Only thinking out of the box will get those loans paid.

  65. 6:39 ==> maybe your parents rightly think you aren't a worthy credit risk, or a worthy person in any sense. Perhaps they realize what a complete scumbag they raised. With any luck, they will spend their last nickel on themselves moments before they expire - leaving the ungrateful snot they spawned to fend for him or her self.

    So why don't you just pay back the money you borrowed and squandered on your sorry self? And please don't ever forget to keep blaming everyone else for your failings.

  66. To 6:04 and 6:09, this is 5:32, the wishful do-gooder:

    Wow, you've got some crappy parents, but don't tar all of us with that brush.

    I'm a boomer -- a pre-boomer, actually -- born in 1944. After law school and a few years of practice, I "retired" to raise my kids, who were born when I was 42 & 44.

    They graduated from college in 2008 & 2010, DEBT FREE, because we saved like crazy for their education(s), DIDN'T buy new cars, bigger house, fancy vacations, etc. Both went to "top 20" undergraduate schools; thankfully neither wants to go to law school.

    As a result of this financial picture, our "retirement fund" is $320K smaller than it would be had we not done this, and my husband continues to work. Luckily, he loves his non-law job, although he too has a law degree. Nonetheless, all his rather modest income does is delay the time at which we have to start drawing down from the 401{k], and we'd NEVER think of splurging on a Lexus, luxury cruise, etc.

    We care deeply about our own kids and worry for their future. We also care about all the kids out there who've been so royally screwed by law schools and the legal profession.

    But again, we're those "boomers" some of you keep cursing and blaming. We're NOT all selfish toads. Give those of us who aren't -- and who support your efforts -- a little respect and less hate. Your hating and cursing us makes it hard for us to continue to support you.

  67. @ 8:22 - (this is 5:32 and 9:02) - despite what I wrote above, I agree with you that the hate-filled screeds written by 6:04 and 6:09 are pretty good indicators of why, however selfish those parents may be, they were disinclined to assist their kids.

    This attitude is an indication of how greatly the "social contract" that I grew up with, the idea that "we're all in this together" has been completely destroyed, starting with that idiot Reagan and his "government is the enemy" crap.

    I'd prefer a world in which I could support and care for my fellow inhabitants, not constantly glare at them over the chance that they might be getting "more" than me.

    Very, very sad.

  68. Homes may appreciate but its government actions that are feuling home sales now. Most of the low down payments come with federal dollars and the artificially low interest rates--yep thats due to government intereference too. When interest rates go up, most home prices go down.Also how does a poor person deal with house maintenance costs (increases in taxes) do they just take on more debt. I agree thinking outside of the box helps, but also examine living expenses. Exactly why can't someone making $60 to $70K per year pay down $117K in debt in 5-6 years. Yes $161K salary is nice for someone to have, but given others on this board aren't cutting that, I think its time for some more realistic salaries addressing debt repayment.

  69. Historically buying a home has at least kept up with inflation. If you have a job but debt, I think the two family route may work because you have a second business to pay your debt outside of law.

  70. Ah the baby boomer bashing is just a joke, or at least I'm just poking fun.

    But how to get a mortage when the credit is ruined by SL debt?

    And even if one could buy investment property, who is to say how stable that investment will be, or how long it will take for property values to rebound?

    I well remember the 5 or 6 years leading up to the bursting of the real estate/housing bubble here on Long Island.

    The local town halls were jammed with applications for building and rennovation permits.

    Everywhere one looked there were homes being built, and a lot of McMansions.

    Dirt was being pushed around, and one saw cleared lots everywhere, and basement foundations being poured and wood frames going up almost overnight.

    Dumpsters everywhere and port a john's for the workers.

    That was Eastern Long Island, and I used to marvel at how jammed the highways of South fork of Long Island (The Manhattan bedroom community known as "The Hamptons") was with large trucks towing trailers with earth moving equipment, such as bulldozers and backhoes.

    And there were building supply delivery trucks, cement trucks, pickups, vans, and all sorts of tradespeople known to the locals as the "Trade parade" that made traffic crawl early in the morning.

    Undocumented workers on many a street corner looking for work as well.

    Today, when I revisit those old haunts an drive around, there are very few construction sites to see. Very few cleared lots. Few dumpsters. No port a john's sitting in two's or threes.

    The McMansions that were built close to 10 years ago or even less are looking somewhat shabby, and some have never sold, and are listed for a lot less money on a dilapidated sign out front. The town hall workers are back to their usual slow plod.

    Some planned developments never did sell off all the parcels, and so one or two model homes sit forlornely on large, cleared tracts of land overgrown by weeds that used to be either farm fields or wooded areas.

    And so the moral of all of this is that during the pre real estate bubble building boom I thought things would go on forever as they were, and that Henry David Thoreau would forever spin his grave as real estate values would keep going up and up, and speculators would keep on flippin'.

    During that time, I cannot recall ever hearing much talk about a coming crash, but a crash did come around 2008.

    And maybe the same sort of thing will happen with student lending, and all the kids in the neighborhood that went to law school and are working at Starbucks or not working at all will see their loans settled or forgiven.

    And maybe what all seems so permanent now will not be so in time and government SL lending will become limited, and tuition will have to come down, and many law schools will indeed be shuttered or have to significantly curtail enrollment get what I am driving at.

    1. So the moral of the story is ride the bubble and you might earn enough to pay down your loans.

  71. "And maybe the same sort of thing will happen with student lending, and all the kids in the neighborhood that went to law school and are working at Starbucks or not working at all will see their loans settled or forgiven."

    Don't count on it. The student loan bubble, despite it being sizable ($1 Trillion) is still small compared to the real estate market. What incentive will the bankers have to refinance/forgive student loan debt, particularly in view of the fact that they are non-dischargeable in bankruptcy?

    Finally, I'm hoping that Law Prof can do a write up on IBR. I'm thankfully not on IBR, but I've heard so many people talking about what a godsend it is (or will be). Of particular concern, and something that should be reported with more frequency, is that after 10 years of repayment, your loans will be forgiven, but you will nevertheless OWE money in taxes for the forgiven amount. Putting this in practical terms, if you borrowed $200,000 for law school (not even including undergraduate) and over 10 years you barely managed to make a dent beyond interest (certainly feasible, maybe even common), then presumably your $200,000 remaining loan balance would be forgiven ... EXCEPT from what I've read, you will now owe taxes on the forgiven amount of $200,000. I cringe at the thought of what amount that might be at the $200,000 loan amount. People need to quit touting IBR as an "ideal" outcome. Thanks. Vent over.

  72. 6:39 pm says, "... I hope my parents... die in a car crash. "

    Don't worry, they're fully aware of your feelings.

    That's why their wills pour over into a trust to take care of Duke the dog and Muffins the kitty.

    You'll get a big fat zero.

  73. @9:10 - How on earth can you blame Reagan? Mindboggling. The current higher education debacle is 100% the result of cheap federal student loans, ie government intervention into the marketplace. Take away the "free" loans and the entire bubble will crash, as it should, and with far less impact on the overall economy than the housing bubble.

    I'll never understand this logic:
    Step 1 : Create a govt program that causes negative unforeseen consequences.
    Step 2 : Blame private sector and enact ANOTHER govt program to correct the perceived ills of the first program.
    Step 3 : Repeat steps 1 & 2 until you have the housing debacle, education debace, etc...

  74. 6:47 "EXCEPT from what I've read, you will now owe taxes on the forgiven amount of $200,000. I cringe at the thought of what amount that might be at the $200,000 loan amount. "

    Yes. This is correct - my understanding is that under the IRC, any debt that is either forgiven or paid by another counts as income to you. Not just IBR.

    So let's say you're making (in today's dollars) about $100K taxable (after pre-tax benes come off, e.g.) when you finally get that $200K forgiven, at 10 years (if you do public service/gummint work) or at 25 years (if otherwise).

    It counts as if you made the entire $300K that year. A significant chunk of that money is taxed at the next-to-top marginal rate (looking at 2012 rates).

    Here's the breakdown, using $300K as taxable for 2012:

    10% on first 8.7K for $870
    15% on next 26.65K for $3998
    25% on next 50.3K for $12,575
    28% on next 93K for $26040
    and 33% on next for $40,045

    Grand total just over $60K federal income taxes.

    Fun, eh?

    Of course this ignores deductions and personal exemptions and the like. But that probably won't matter, because the Congress will never fix the AMT problem. At an imputed income over $300K, AMT would kick in and wipe out deductions and personal exemptions anyway, so you'll pay very close to a calculation using just the tax marginal rate tables.

    Fun indeed.

  75. But the housing bubble did not destroy individual lives and the family, or at least to the extent student lending does. Hence much more outrage.

    There is no liberty and pursuit of happiness when a government creates a strong deterrent to marriage and forces its citizens into a financial corner with no way out.

    People can walk away from a mortgage. They cannot walk away from student loan debt, and the human capital justification just isn't cutting it by now.

    Something has to give, and Kantrowitz calling 6 figure debtors a minor aberration does not make the 6 figure debtors go away.

  76. 7:13, "But the housing bubble did not destroy individual lives and the family, or at least to the extent student lending does. "

    Um, say what?!?

  77. As negative as some of this information appears, it looks like this memo could be positive publicity for Tulane, right? Smart move on their part leaking this memo.

  78. 7:20 AM--if you walk away from a mortgage in a non recourse state, the worst that can happen is your credit rating takes a hit, from which you will recover in a few years. Even in a recourse state, you have the option of bankruptcy if the lender pursues you for the deficiency (few do) and 7-10 years later it is off your record.

    Contrast that with 200-300K+ (don't forget compounding interest--it can be your best friend or worst enemy) of debt that you can never escape.

  79. To the "do-gooder," some of us come from families where no one has any money! There isn't an uncle, aunt, mystery grandparent, or parent who can lend us any substantial amount of money. That is the situation I am in. No one in my family could plausibly lend me more than say 5000 dollars. And that would be a hardship. My parents draw social security, rent their apartment, and have never had money. That is how I took out loans to go to school in the first place. There was no "college fund" for me. That's reality. And there's no access to "educational loans" for those who aren't in school any more. Check your privilege, dude, not everyone who goes to law school comes from the "upper middle class" or above. I'm not complaining, I have a job and can make the payments on my debt, it's just that I can't pay it off because of the high interest. That's life. I know a lot of people have it much worse. But this debt isn't going to be "refinanced" through family generosity for me, and I'm guessing for many others.

    1. Law school is unique in that one does not have to be wealthy to get in.

      Medical and dental school requires a person to have significant finicial support in apply to get into a school. I know this because I recently graduated from law school and my wife has applied to dental school. And I was shocked how much more tedious and expensive just applying to dental school was.

  80. Bam-Bam, 07:20 here. Thanks for the reply. Guess I was not reading the comment to which I replied carefully enough. I was thinking total/mass scale of the two phenomena, whereas the comment was pretty clearly talking about the level of damage to individuals. So I formally withdraw my comment, even though I can't literally remove it here.

    Thanks again.

  81. romavictor2012 - read carefully: I'm not blaming Reagan for the student loan bubble, I'm blaming him for establishing and validating the selfish attitude of "I've got mine; anyone else who wants anything [especially anything GOVERNMENT might do] is stealing from me, and is an undeserving, lazy bum" plus the whole "government is evil, it does no good, therefore we should pay no taxes" attitude.

    I grew up in CA and went to college/law school there, and I watched Prop. 13 get passed ["don't tax my house"] and the effect it had on local school districts and the university system.

    The selfish attitude nourished under Reagan had/has far-reaching effects that are even today still affecting our society. It's the complete opposite of the "social contract" promoted by FDR.

    1. Most of the problems that California has to do is the result of an inappropriate tax structure. But that is outside of the scope of the law school scam. California has its own law school scam. It allows unaccredited universities to charge thousands upon thousands of dollars to law students who have a minimual chance of passing the bar.

      If you go to an unaccredited school or ca accredited school your chances of passing the bar are around 30 percent. If you go to an aba accredited school your chances are around 70 percent of passing on your first try.

  82. SL debt can nip the creation of the family in the bud. Sure some people will marry the debtor, but a lot of people will probably not.

    So maybe if a family therefore never gets created it can never be harmed by SL debt?

    Deep thoughts.

    Oh and RE: the Human Capital justification for the removal of bankruptcy for student loans, I'm a little confused.

    If two judges so far at least agree that law school is a risk, then they also implicitly agree that the JD will not necessarily be adequate "human capital" for a student loan?

  83. 8:30--no prob, there are a few different ways to look at this.

    9:27--I understand one justification for removing the bankruptcy options for student loans was that a degree, unlike say a house or a car, cannot be recouped by the lender in the event of default. Im not sure I buy this; maybe it is possible for a school to "revoke" a degree for some reason, including loan default. And there are a lot of JD's out there who would love the opportunity to hit the resent button, forfeit their JD, and be rid of student loan debt.

  84. That should read "hit the reset button."

  85. If Prop 13 only applies to California, how do you explain the poor performing local school districts in all other parts of the U.S.?

    And, how would you explain the outrageous tuition increases happening at other public universities besides the University of California and Cal State systems?

    FDR entitlement programs didn't result in selfish "I got mine" attitudes?

  86. 8:16

    Some people from families that do not have any money have relatives of their own generation - siblings, brothers or sisters-in-law or even first cousins that are working and might be able to help them out. Many years ago, my spouse and I paid half the college tuition of my spouse's younger sibling for a total of two years, and we never got it back or asked for it back. It was a gift because we both had started our careers, had good jobs and but for the gift that sibling would have attended a lower ranked school on full scholarship.

    If it were me, and I had a good job and too much law school debt, and no one to help out, I would explore the real estate route and look for two or three family homes in a low-cost area, look at programs for first-time homebuyers with low down payments, if I could afford to carry it, buy and live in that home living with all of the work involved in maintenance and being a landlord, and use that investment to try to hedge against my high interest law school loan with the hope that over time will appreciate at the same rate or almost the same rate as the loan carries interest.

    Unless you have a BigLaw salary for a substantial period of time, I do not see other options open to you.

  87. If you are on PSLF, the debt forgiven under IBR after 10 years of service is not taxable. Only on the 25 year plan is the forgiveness amount currently considered taxable.

    LIBOR is indeed fake. As is most of this "advanced" business world. GET YOURS. For me, hopefully it will be through PSLF. It might be risky, but it's the best plan I got (imaginary rich parents or real estate deals notwithstanding).

  88. 7:13-- But the housing bubble did not destroy individual lives and the family, or at least to the extent student lending does.
    7:20-- Um, say what?!?

    Mortgage debt is dischargeable in bankruptcy. Many states limit the recovery in in foreclosure to the amount made at auction. There are existing federal and state consumer protection laws that cover collection efforts by banks.

    Student loan debt is not dischargeable. Penalty fees can be added to the principle. Collection efforts are performed or supported by the Federal Government. Finally, in some (extreme) cases, you cannot pass character & fitness reviews if you are in default of your loans. Further, student loans that you CO-SIGN for are not dischargeable, and your social security benefits can be garnished to pay student loans.

    Defaulting on your mortgage vs. defaulting on your student loans is like the difference of serverity in punishment for a misdemeanor vs. a felony. Sure, with a misdemeanor you have a record and some negative consequences, but it's not life altering. Defaulting on your student loans definitely can be.

  89. Yes, but people weren't expecting to retire using their student loan equity. Anyway, who cares? Law schools suck.

  90. All this talk about getting the family to help out or buying investment real estate presumes that bankruptcy protections will never be restored and that the status quo- with IBR as the only worst case remedy- will go on in perpetuity.

    Maybe so, but as commented above, IBR will most likely place many into the IRS fire after the student loan frying pan, and I am glad to see that people are finally starting to realize that fact.

    That is, taxed after the 10 or 20 year IBR term which may well bring about an inflated loan due to the compounding of interest, in which case the tax bill cold be enormous.

    From what I understand the term of art used for when a loan is discharged under IBR is "abatement". How to define abatement I am not sure and not sure where to find the definition. It may be in a statute.

    @9:51AM I would surrender my JD in a heartbeat if I had even half my SL debt discharged. But wishful thinking, since a debtor is powerless to propose any deals.

  91. Once again, the 10 year term on IBR is only available for those within the PSLF program. And that amount is NOT TAXABLE at the point of forgiveness. Otherwise, the term is 25 years, not 20, if you graduated anytime further in the past than within the last year. That amount will be taxable. But when talking about the year 2035 or so, I wouldn't concentrate on an upcoming tax bill. Life would be too sour and those lemons should be made into lemonade. Again though, law schools suck.

  92. 2035 seems frightening.

    All the Boomers and all of their corporate cultural icons, including their music, will be gone most likely, and the Human Race will be better off.

    So that is a good thing and maybe worth staying alive long enough to see :)

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