Starting with the incoming class of 2013, [edit: Actually people who took their first federal loan no earlier than 2007 and have taken at least one loan since September 2011 are eligible for PAYE. This means many current law students and even some people who graduated from law school this past spring are eligible for the program] almost all educational debt incurred subsequently by law students will be eligible for payment through, and eventual discharge by, Pay As You Earn (PAYE), the new version of IBR. Will PAYE be a good thing for law graduates?
The answer, I think, is it may well end up being a good thing for a discrete and insular minority of law graduates, but the overall effect of the program on law graduates as a class will be bad. Here's who in this class the program may benefit:
Moderately to highly financially successful lawyers, especially those with high-earning spouses, who incur high (which is to say typical) levels of law school debt.
Here's who in this class the program is likely to hurt on net:
For the purposes of this analysis, I'm going to assume that PAYE will remain in its present form for the foreseeable future, and will not be pared back or eliminated. This is an optimistic assumption. Higher education debt in America is spiraling out of control (outstanding educational debt, not counting accrued interest, has gone from $220 billion in 2000 to around one trillion dollars today, and is growing by 15% per year), default rates are rising rapidly, and a very large percentage, possibly one half, of student loans are not currently in repayment. In regard to student debt law graduate debt is merely the canary in a coal mine that seems headed for a catastrophic cave-in.
I'm also going to assume that law graduates will end up enrolling in PAYE in large numbers. (This is in fact inevitable unless either the price of law school declines drastically, or big law firms start hiring 15,000 people per year rather than 5,000, or law school becomes an enclave almost exclusively for rich kids.)
But let's assume our overlords continue to conclude that back-end quasi-bankruptcy and soft default for a series of lost generations is an acceptable price to pay for keeping the 99% reasonably quiescent. If you're willing to gamble on this, and you can get and keep a real job as a lawyer that pays decently, and you have a high tolerance for uncertainty, and a spouse who has a similar attitude toward the fact that you have an enormous unsecured debt that you're never really going to pay off, you may do just fine.
PAYE is remarkably generous to people in such a position (By contrast it provides little benefit to low earners with relatively low levels of debt. A college graduate who has $30,000 of educational debt, who gets a job that pays $30,000, and who is earning $65,000 per year 20 years later in nominal dollars, will get a total of about $7,500 of benefit from PAYE in terms of net present value).
The problem, of course, is that most people going to law school today either won't have real legal careers at all, or will wash out of the profession sometime over the next decade or two, after enduring a series of financially and psychologically undesirable jobs. For these people, PAYE will end up being a bad thing, to the extent it enticed them to go down a path they otherwise would have avoided.
The defenders of PAYE underestimate, in my view, the following factors:
(1) The effect of PAYE on the cost of law school. If PAYE is employed widely by law graduates, this will encourage law schools to keep raising tuition, since the debt incurred by law students will come to be viewed by both them and law schools as essentially a form of monopoly money. (The tuition paid by these students will, however, remain delightfully real). This will destroy any possibility of law schools reforming their cost structures in such a way as to bring the value of a law degree in line with its social cost. Of course to the sufficiently cynical and shameless within legal academia this is a feature not a bug.
(2) The effect of (1) on graduate debt. If PAYE remains in place average educational debt for law graduates will within five years top $200,000, while at private schools it will be more along the lines of $250,000.
(3) The psychological effect of (2) on the very large percentage of law graduates who will find themselves carrying fantastic debt loads while being unable to earn a reasonable middle class living as lawyers, or who indeed will never be lawyers at all. Keep in mind that PAYE doesn't create a single new legal job, or add a dollar to anyone's salary. The graduate toiling away in a $50,000 per year cut and paste office will be paying an 7% or so surcharge on top of an effective tax rate of around 25%. As DJM points out this is both a significant individual and social cost. Does the "prestige" of calling yourself a lawyer compensate adequately for a take home pay of $2,800 a month, while watching your $200,000 debt balloon ever-higher, and hoping that the political process doesn't ever decide that you actually have to start paying it back?
And what about the large percentage of graduates who won't have even that compensation, because they won't be lawyers? I suspect that for these people, their debt is going to feel very real, even if they're allowed to remain on what they will understand is a straight-up welfare program for a generation of over-educated and under-employed young pseudo-professionals.
In short, PAYE, to the extent it lasts, is just delaying the day of reckoning for higher education in America in general, and law schools in particular. It's just another classic example of how we're managing to shuffle off social costs from the present to the future. But, as the economists like to say, "no costs are external to the world." Unpaid bills eventually become due, one way or another -- even for law schools.
Monday, December 3, 2012
Will IBR/PAYE be good for future law school graduates?
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I like your style!Delete
What exactly is PAYE? A quick summary would have been nice.ReplyDelete
It's new and improved IBR.Delete
Now, only 10 percent of your income, not 15. Only 20 year indenture, not 25.
10% of your AGI above the poverty line actually, which is lower than 10% of your income.Delete
But is there an actual, real life link so we can see the actual, real life details for ourselves, and not someone's back-of-an-envelope calculation and assumptions?Delete
The PAYE link above just links to a prior ITLSS post.
We shouldn't have to work for this info. It's like the trick law schools play with making access to the raw, original data difficult because it doesn't serve their purposes.
There's a link to a PAYE calculator in the linked post.Delete
So the only difference between PAYE and the new (10%) IBR is the 20 year discharge instead of 25?Delete
PAYE is the new IBR.Delete
LawProf, let me fix that for you:Delete
That's the link for the official government site, with all its info, calculators etc. You're linking to a third party site that has no relationship to the actual agency administering the program. God knows why...
"We shouldn't have to work for this info". Is typing PAYE in to a Google search bar too much for you jackass?Delete
12:28 - I'm not the guy you're cussing at, and don't have any problem finding it myself, but your advice leads to 49,200,000 hits.Delete
I paged through just due to curiosity. After the 5th page with no hit actually relevant to this particular PAYE, I quit.
Btw, a 20-year "forgiveness" target is NO GIFT. Also, a 5% hack off the payment rate probably translates into buttkiss in terms of actual dollars collected, because 15% of currently of "discretionary income" can be a very low number. BUT it sure do pack a political punch: LOOK WHAT JESUS HAS DONE FOR YOU, IT SAID 15 BEFORE NOW IT SAYS 10!!! Yay!!! Nevermind that it might be a $5.00/month reduction, paid for by earlier "discharge". Realize that there are no good guys in politics...who win at it anyways.Delete
PAYE: Professors Ate the Young and Educated.ReplyDelete
The plethora of alphabet-soup programs (IBR, ICR, ISR, ERP, GRP, PAYE, etc.) designed to make student debt manageable shows how out of control this situation has gotten.ReplyDelete
The student loan program is starting to resemble the Internal Revenue Code. These programs are a form of long-term, bankruptcy repayment plans that remind me of the '16 Tons,' Deep South, Company Towns. "Another day older and deeper in debt."
Eventually, former students will get sufficient political clout to force Congress to change the bankruptcy laws (yet again) and these debts will become dischargeable for a while until the pendulum swings back (yet again).
I see no chance that tuition will ever decrease significantly, just as there is no chance that the cost of living will go down.
Seriously, why can't the message get out that these programs are simply another version of a structed bankruptcy schedule, without the "fresh start" or discharge of the loan.Delete
First and foremost, if have to go on IBR because you can't make the monthly nut (whether it's on a 10 or 25 year repayment plan), there's a very simple description for your situation-- DEFAULT.
This is not "pay as you earn." This is "We'll take what we can get while we kick the can down the road." These programs are just as much window dressing as the Obama mortgage refinance plans.
Now, to be clear, I don't dispute that these programs are lifesavers to students with six figures in debt and five figures in income. But you know what would be even better? Bankruptcy protection from these loans. It's already quasi-bankruptcy already.
I agree. The idea that this debt is not just discharged is really foolish and ultimately an extended lie.Delete
I dont know what the objection honestly is to allowing bankruptcy discharge of this debt.
The government is going to end up eating it anyway.
Sorry-- "structured bankruptcy schedule," and "if you have to go on IBR."Delete
Also, just to make clear-- I am absolutely sympathetic to what it's like to stare down the barrel of an $1,100 or more monthly loan payment. I've been doing it for almost 15 years for the loans my wife and I accumulated in LS. But let's call IBR what is really is-- quasi bankruptcy.
When used irresponsibly, as described above, debt is simply theft from the future.ReplyDelete
Don't be too surprised when the future sucks. The money's all been spent.
"Don't be too surprised when the future sucks."Delete
After decades of societal and governmental decay, the future is now.
Tomorrow is the war.
So the costs of this program are going to be borne by taxpayers 20 years down the road...when the people graduating at this moment are going to be at their peak earning potential. Of course, this money is going to pay the salaries of Baby Boomer law professors and administrators now, as well as provide a three-year vacation from the real world for a number of graduates. What a shell game.ReplyDelete
Yes, this is a terrible idea. Most baby boomers have no souls and have been only too happy to sacrifice this country for their immediate gratification and leisure. What a spoiled, coddled bunch of infants! I'm tired of paying for them, and will use my vote to send them all to impecunious early graves.Delete
Exactly, that's the assumption. I think the underlying assumption for the government is that they'll try to inflate the debt away, so in 20 years, when everyone's making 350k, 220 in student loans doesn't sound that bad.Delete
In my mind, there's a 50/50 that this program gets cratered. It's certainly more politically attractive than say, letting Social Security tank.
The shifting acronyms and unwillingness of the political classes to discuss this should also tip people off that there's some can-kicking going on.
Inflate the debt away? We should be so lucky. Getting actual inflation would require way more in federal spending than seems likely over the next decade.Delete
MORE federal spending than we have now?! How many octillion did you have in mind?Delete
"Getting actual inflation would require way more in federal spending than seems likely over the next decade."Delete
Nope - all it will take is the Chinese getting sick of sending us 50% of all our physical goods in exchange for pieces of paper we immediately dilute through the government printing press.
The Chinese have not caught and surpassed us in 20 years because they are *stupid*.
Imagine Walmart or Amazon with half the current supply of goods (in depth as well as scope).
But with the same number of green pieces of paper chasing them. Or ever more green pieces of paper chasing them.
As time progresses, the Chinese can redirect their exports to Brazil, Russia, African nations, etc. in exchange for their raw materials.
Or they can redirect their export machine towards internal consumption.
America will more fully become what it already is - a rotting sideshow.
But law professors will get to have their six "hour" work weeks for a little longer - and isn't that all that *really* matters?
Indeed, the US is a big, fat parasite waiting to die. Cut off the flow of stuff from the Third World, and the US will be royally fucked.Delete
I posted this on another thread, but it appears to have gone dead; sorry for the duplication. And sorry if I don't understand the eligibility requirements. All I know about IBR I learned on this blog. But: is it me, or does this mean IBR is the best alternative for even the luckiest grads, for at least the first several years? I'm assuming a 2016 grad comes out with debt at $200,000 and gets a BigLaw job for, say, $180,000 (hard to imagine huge raises for starting salaries in the next couple years). My back of the envelope calculation puts the conventional payment at about $2,300 a month and the IBR payment as about $1,300 a month.ReplyDelete
Granted, if you make partner in seven years that changes things. Are those (i.e. people who make partner at biglaw) the only people who will actually repay their law school loans?
The assumption is that most people are paying off around 50K of debt a year while in biglaw, so with bonuses and salary increases they are hoping to have the debt paid off by year 5 if they are lucky to last that long. I've always questioned whether this is reasonable for people with a lot of money to burn, living in high COL areas, in their mid to late 20s, but many of my friends seem to be doubling or tripling up on apartments and throwing 4K a month or more at their loans.Delete
I'll add that living like this pushes their "money paid to the government" (fed/state/NYC taxes + loans) rate to around 75% of their gross salary.Delete
So what? They're accelerating the payment of their debts. I did just the same with my student loans—on a hell of a lot less than $180k.Delete
The point is that IBR is not the plan that most people with the "best" outcome (160K biglaw) with high debt are using. Instead they are trying to repay the debt in less than even the 10 years they would get forgoing biglaw and shooting for PSLF qualifying employment. It is probably a good plan for someone in the private sector who makes 70K with 225K in debt- so what is the salary level at which does not make sense to accelerate?Delete
Yeah, I don't see how this arrangement favors the most financially successful. It seems better for those with moderate salaries.Delete
Of course, it's being sold primarily to those who will end up working at Wal-Fart or similar (and I don't mean in the legal department). Trust me, everyone: you do not want to spend twenty years with hundreds of thousands of dollars' worth of non-dischargeable, unsecured debt hanging over you. The psychological effects alone would be devastating.
A little editing is in order:Delete
"Trust me everyone: you do not want to spend [even five] years with hundreds of thousands of dollars worth of non-dischargeable, unsecured debt handing over you [right at the time you are trying to establish your career, get married, and start a family. The psychological effects [ARE] devastating, [as explained by plenty of the commentors on this board and others relating to the law school scam].
Lawprof: please do a post looking into the number of PSLF jobs there actually are available to new grads. While it seems like a lot of jobs might potentially qualify, in reality, those jobs are not available to new grads.Delete
Almost everyone on TLS feels that if you don't go to HYS you will not find a PSLF job. (with slight exaggeration - you can't rely on finding one anyway.)
The Great Depression made an entire generation debt averse. We have not yet learned a similar lesson. We will.ReplyDelete
Our collective debt lesson will be harsh and horrible. Everyone acknowledges that $1 trillion annual federal deficits, multibillion dollar state and municipal deficits, and lots of private debt cannot go on forever. That which cannot go on forever will not go on forever.
What happens when the music stops? (i.e., what happens when the interest charge on the debt exceeds annual revenue?).
Answer: Everything old is new again. Barter economy, Part II. The New Third World -- for a while.
"what happens when the interest charge on the debt exceeds annual revenue?"Delete
The $16 Trillion Question.
Actually, we may get to see what happens in Japan first (although a subsequent worldwide collapse could then follow almost immediately).
With an insanely quiescent populace and a 24/7 printing press, Japan is paying less than 1% to service a 200%+ government debt-to-GDP ratio.
Here is the "kicker"/shotgun to the skull:
If Japan's required annual interest rate went up a mere 1% - to a still absurdly laughable 2%...**every single yen in current Japanese tax revenue would be consumed by the required interest payments.**
*Every single yen*
No welfare state.
No f*cking nothing.
Except the End.
This isn't a f*cking monetary policy - it is a god-damned Masque of the Red Death.
Of course, Japan has no actual military, per their surrender during WWII. They have a small standing force to stop invasions. Their tourism propoganda videos explain how they use the money to support education and what not. We all know what happened.Delete
Except the Japanese government borrows in Yen, Yen which would come from government spending which inevitably gets re-invested in Japanese government bonds. It's not for nothing that shorting Japanese government bonds based on the public debt-to-GDP ratio has become known as a "Widowmaker" amongst investors - there's just no correlation between public debt-to-GDP and yield on sovereign debt and investing as if there were is just senseless.Delete
Same goes for the US - so long as the Chinese and others who export to the US accept payment for their products in US dollars (and why wouldn't they?) this money still needs to be re-invested. Whilst this does mean that the Chinese (or whoever) may theoretically end up owning more and more of America Inc., it is a long way from meaning the US will go broke.
Countries like Spain and Greece, on the other hand, don't have their own currencies, so governmental spending doesn't inevitably get re-invested in buying sovereign debt - instead it can be used to buy e.g., German debt. However, for Japan and the USA, there is no reason to believe that sovereign debt can't simply increase for a good few years more - 100% or 200% public debt-to-GDP is no hard barrier to this.
This is yet another example of crony capitalism (even "public" law schools are run for the profit of the professors and admins)--government picking the winners and losers, without regard to fairness or what is best for the majority of the country. As others have noted, it keeps shoveling money to the law schools and kicks the can down the road, when future generations will have to pay the bill.ReplyDelete
I was watching Rick Steve's Europe on PBS this weekend. Hardly a conservative show. Yet Rick Steve spoke plainly about the riots and disruptions in certain parts of Europe--he matter of factly said that governments there had spent too much money on promises that can't be kept; there are too many old retired people and not enough young workers to support them; and the young workers who are actually working and paying taxes know that the benefits they are providing current retirees just will not be there when they retire. In other words, folks, the near term future of America.
You can call in "crony capitalism".Delete
You can also call it "socialism in practice."
The biggest issue here is the blank check being written to law schools and other graduate institutions. With PAYE they have no incentive to hold down costs. This is a huge cash machine for LS's.ReplyDelete
The only sensible reform I've heard is MacK's idea to cap the number of federal loans each institution is allotted and to reduce those one-for-one for every graduate who goes into PAYE. This will simultaneously limit the government's financial exposure and put downward pressure on tuition.
"This is in fact inevitable unless either the price of law school declines drastically, or big law firms start hiring 15,000 people per year rather than 5,000, or law school becomes an enclave almost exclusively for rich kids."ReplyDelete
That huge increase in hiring is unrealistic; the other two possibilities, however, are not. Already rich kids make up the bulk of my class. As for lowering the cost, knocking about $30k off the annual bill is precisely what I'd do if I held power at, say, a Northwestern, a Vanderbilt, or a Notre Dame.
And still most law grads would have no real jobs at the end of the day.Delete
The oversupply problem must be addressed.
Whats more likely:ReplyDelete
1) Laws will be changed to rein in federal spending, including on educational debt. Or,
2) Or Federal debt will be paid with printed dollars.
A 6% interest rate on the current debt ($16.3 trillion) would be $978 billion per year. Currently, tax receipts are running at about 2.46 trillion and interest on the debt is about $360 Billion per year -- about 15% of federal tax intake goes straight to debt service. The percentage of federal tax revenue going to debt will just keep rising.
So the cost of the Federal govt forgiving law student debt whether through PAYE or discharge or whatever is just goig to be a couple billion per year, no biggie. But these debt giveaways add up and a breaking point will come.
I have repeatedly said that the only way to make IBR sensible is to penalise any school for having students on IBR (except those with a disability that places them there.) So if the class of say 2012 at Law School X has 10 students on IBR, the number of seats in incoming classes that can be given federally backed student loans - or loans non-dischargeable in bankruptcy should be decreased by 10 from the number written for the class of 2012 - or the lower of 2012 and the current number.ReplyDelete
This would act as a de facto underwriting standard and at the same time put massive pressure on a law school to place its graduates in good jobs - and perhaps ensure that more effort was also made to train law students to be able to be effective in alternative careers, while also pushing tuition downwards to reduce the risk that a graduate would end up on IBR.
In addition, new schools such as the Indiana Institute of Technology should have their eligibility for student loans greatly restricted until they demonstrate that their graduates do get good jobs—which they'll never be able to do. Already there are far too many law schools in the US. No others should be allowed to open courtesy of public funding.Delete
That really doesn't work since IBR is too generous and allows even "successful" grads to enroll.Delete
If a "successful" grad enrols in IBR they are by definition not successful enough to justify the tuition their school was charging.Delete
Then make the reduction of eligibility proportional to the number of people enrolled in IBR.Delete
Not really, it just means the program is too generous in some respects. It's a new program so there's certainly some fine tuning to be done and I don't think the answer to one problem is to create another. I agree with the spirit of what you're saying, just not the exact mechanics.
I don't deny that my proposal is simpler than what the practical outcome would be - but see PAYE/IBR as an opportunity to introduce what the US student loan system has lacked to date - some sort of underwriting standards based on the value of the degree.Delete
Student loan debt is just one facet of the larger problem of unchecked credit expansion.ReplyDelete
This is a world-wide problem, because banking is a global, homogenous industry. The same economic practices are employed by banks in every nation.
Why are so many European nations floundering? Even the supposed heir to economic supremacy, China, is riding a massive real estate bubble-
Outstanding debt is orders of magnitude greater than the actual monetary supply. America's recent economic growth is phantom progress fueled by endless debt acceleration.
But I though the Clinton years were times of prosperity.Delete
Do we know how often the federal government or its collection agencies garnish wages or seize assets on defaulted federal student loans?ReplyDelete
Yes, they can ultimately seize 15% of your Social Security check.
But I'm thinking that, if actual collection efforts are spotty, it can make more sense to be self-employed and just not pay and stay under the radar until you are in your retirement years.
It's important to note that the official measuring period for federal SL defaults is two years after graduation, and even putting IBR aside, federal loans come with three years of forbearance and deferral options. The default rates don't track anything like the actual number of grads/dropouts in default and is as gamed as the official unemployment rate. If anything, the official default rate is an indicator of how many people fail to fill out paperwork. Private SL defaults aren't even included in the official rate, as far as I know.ReplyDelete
Private default rates will turn out a bit different than federal ones. Private lenders can actually say "No" to an application if the borrower/cosigner cannot demonstrate an ability to repay.Delete
During the hey-of private lending, there was over $20 billion a year getting originated, and while they were more lax than today, it was still a better credit check than the Federal program that basically approves everyone.
Today the Private student loan Market is under $10 billion a year, and they are much much more strict about providing approvals. Additionally, Private Student Loans are insured against default, ensuring that private hands are dealing with loan losses, rather than the tax-payer guarantee in place with federal loans.
So let's cancel the Federal Loan program, allow loans to be dis-chargeable in BK and let Private lenders dictate approvals or denials.
Unfortunately this will reign in access for some students attempting higher ed, but I think this blog helps to demonstrate that providing education for all, but using non-dis-chargeable debt is not working.
OT: The nation’s leading magazine on legal education has named two University of Colorado educators to its list of 25 most influential people in the industry.ReplyDelete
For two very different roles.
Dean Phil Weiser was selected along with gadfly professor Paul Campos — a perfect representation of what The National Jurist editor-in-chief Jack Crittenden called “the establishment and the agitators.”
Prof. Campos's designation is well deserved. Pity that he has to share the list with Chereminsky and Wu.Delete
Sorry, I forgot to mention that vile O'Brien.Delete
Also, I find it interesting to note that not a single one of those people teaches at a law school of any reputation. Duke and Georgetown are on the list, but most of the rest range from mediocre to shitty.
Campos, Tamanaha, Henderson..Delete
WHERE THE HELL IS LEITER'S NAME??
Congratulations. When can I expect to read Colorado Law's Press Release?
Schlag got a CU press release.Delete
yea, i dont think Campos gives a fuck about that type of stuff.Delete
Also congrats to Bill Henderson, Brian Tamanaha, and Kyle McEntee (most especially to Kyle, since someone managed to spell his surname correctly for once!)Delete
This comment has been removed by the author.ReplyDelete
"Keep in mind that PAYE doesn't create a single new legal job, or add a dollar to anyone's salary..."ReplyDelete
Gosh, this sounds so familiar these days when we're discussing the federal government, it's spending habits, and the national debt.
Prof. Campos, what do you think of incorporating self-directed study into legal education? Much of what is taught in law school can be learned independently from books. So why not leave people to learn it independently? They could then take an exam on the law for admission to law school, which would be just two or three semesters of concentrated study focused on legal writing or anything else that might be difficult to acquire without instruction.ReplyDelete
This approach would greatly reduce the cost of legal education. People who failed to get into law school would be out relatively little money—the cost of a few books and some exams. Law school itself would also cost much less, even at current rates.
"Keep in mind that PAYE doesn't create a single new legal job, or add a dollar to anyone's salary..."ReplyDelete
You might say it's creating new jobs for the few new law professors being hired to replace people. But I'll agree that the number is very small.
What's interesting is what a dual-income couple might do, since the figures are based on AGI. If the one on PAYE/IBR/whatever maxes out their pre-tax retirement account distribution, using the other's income to live on, that 10% would be a smaller number.ReplyDelete
As usual, single people get screwed.Delete
That AGI is used at all is a scam, it should be based off gross income.Delete
I just read that taxes don't influence economic behavior. Clearly something is wrong with the theory.Delete
Single people in high cost areas get screwed most of all. The calculation for what you can afford is the same in NYC as it is in Peoria. (Although I guess in Peoria you wouldn't have a job at all, so it evens out?)Delete
Oh, no, Peoria has a bustling legal market. That's why we absolutely must build a law school there, if not three or four. (See Prof. Campos's recent discussion of a proposed law school for Peoria if you don't know why I'm waxing sarcastic.)Delete
"As usual, single people get screwed."Delete
The PAYE program is only available to new students with newer loans. It will not help anyone who wasn't in school after 2010 or for loans before 2008. So, those of us with private and federal loans are still in the proverbial debtor tishhole. We will continue to have private loans with a 30 year repayment plan and federal loans with a 25 year/15$ payment plan under IBR. I would LOVE to get the real numbers on how many people this program will actually help. And, who will be in charge of servicing these loans? Will it be the federal goverment? Or will private banks pick up servicing fees (and continue with their unscrupulous collection practices)?ReplyDelete
It gets worse, buddy. Newbies can work for less than you can, as their debt will be correspondingly less.Delete
It's your fault for going to law school before Obama started campaigning for re-election. Now you get more competition, fewer handouts, and your tax dollars get to support handouts to others. And it's your own damn fault.
Yes, it's our own damn fault for being born before these other people were born. (?)Delete
Exactly. That's exactly what the scammers say. If you fail, it's your own damn fault. But, if you succeed, it's because of the system.Delete
The govt may dish out the loans, but Obama transferred service of the loans from the federal govt to private banks. It's a win-win for everyone except the students.Delete
Santa Claus came to law school this year. President Obama, the Law Professor In Chief, gave to all the bad little boys and girls PAYE.ReplyDelete
Masterful, simply masterful.
PAYE is, in a word, a *scam*.
Symptom #5683 of a sick, dying society - a coat of waterpaint on the rot at the heart of the American legal system.
So now Public Service Loan Forgiveness is starting to look really good.ReplyDelete
Is PSLF the answer? Get out of debt in 10 years instead of 20.
All you have to do is get a public service job.
I would imagine that law grads would head for public service in droves, considering the dismal realities covered in this post and the comments, which made me wince.
People are learning that these jobs just don't exist. The PSLF is a joke for recent law grads.Delete
I wish there was some reporting on the number of students who actually get this type of program of debt forgiveness.
Also, schools should have to publish the number of students on their individual LRAP and how much the schools are contributing.
I wonder if PAYE will affect the LRAP calculations that law schools do now? It seems to be tied to IBR at many schools.
Also, at most schools you have to get a qualifying job at graduation (not sure if a school sponsored fellowship first and then getting a job counts.) The lack of jobs available at graduation means that fewer and fewer students will be able to get these highly touted loan repayment programs.
This is another place for transparency to do some work. I think there will be shock at the tiny number of students who actually qualify for the LRAP at all schools.
People are herding towards government work, which, as someone who has committed my entire career to government, is pretty damn annoying. I now get to compete with all the job-tourists trying to discharge their debt as well as the people who actually want to do this work.Delete
Congratulations on your lifetime of feeding a the public trough.
Riders of the Purple Wage....
@ December 3, 2012 2:12 PMReplyDelete
No need to get personal, dearie.
"Starting with the incoming class of 2013...."ReplyDelete
does this refer to the graduating or entering class year?
Graduating. If you didn't take out a loan pre-2007, and did take out at least one loan post-2010, you get the benefit (?) of PAYE.Delete
Here's an example of a proposed law school that was shot down...ReplyDelete
Weep when you realize that this law school is on hiatus because the founders couldn't find a large enough building, not because of anything related to the job market or graduates employment prospects.
Jesus H Christ.Delete
Another fifth-tier toilet. Right on the beach, too. Perfect way to lure in a couple of hundred ninnyhammers with LSAT scores in the 130s. All with the ABA's seal of approval.
i'm sure they'll find a building with University of Phoenix closing down 115 locations.Delete
Can't the University of Phoenix instead set up 115 law schools? That would be glorious.Delete
This is reminiscent of the Sandra Bullock line in Demolition Man:
So now all restaurants are Taco Bells.
--->> "You do not realize that University of Phoenix was the only law school to survive the franchise wars. So now all law schools are University of Phoenix"
Interestingly, the metaphor used in the article, "...trying to put 10 pounds of sugar in a 5 pound bag", comes from the word "blivet", which is more accurately 10 pounds of shit in a 5 pound bag -- a fitting description of the purveyors of the law school scam.Delete
There you go. If one goes for a job interview for a public service job, do NOT say that the motive for applying is SL debt!ReplyDelete
But of course it may well be. After all, 10 extra years of indebted life at are stake.
Government agencies aren't hiring. If they were, vets have preferences.Delete
"fantastic debt loads "ReplyDelete
i love fantastic stuff. - megan marks
"In regard to student debt law graduate debt is merely the canary in a coal mine that seems headed for a catastrophic cave-in."ReplyDelete
Gotta love mangled metaphors...
OMG you sure got him.Delete
The sad thing, 9:55, is that you don't even realize why the metaphor was mangled.
Sorry that your education was so lacking.
So, what TTTT do you attend?
IBR/PAYE is merely a subset of a much larger problem. The law school scam is merely one of a series of all-pervasive Ponzi schemes that permeate our entire financial system.ReplyDelete
This nation...indeed all of Western civilization...is living on borrowed money and borrowed time. We're flat broke and there's nothing holding up the joint. The piper will have to paid at some point.
Who is the piper and how many guns/ships does he/she/it have...?
The piper is China - who do have a not inconsiderable military.Delete
But what really matters is -
1) They have enough productive capacity that they are likely supplying 50% of the real goods consumed by the "developed" nations.
2) They hold trillions in FX (foreign exchange/foreign government debt) which they accepted as payment for their real goods.
Based on 1, they can A) Build a helluva military on short notice and B) Cut off the supply of real goods flowing to the West - sending inflation soaring - as hundreds of billions in Bernanke bucks chase what supply of real goods that remain...
Based on 2, they can dump their FX holdings, causing the borrowing countries' interest rates to soar - or their inflation rates to soar as Uncle Ben's Ye Olde Printing Press is sent into hyperdrive to cope with the Chinese Dump.
But hey - profs got six hour workweeks and six figure salaries...
Ye Olde Printing Press is already in hyperdrive - 90% of new bonds are bought by the Fed. See my post below.Delete
Sadly, there is no piper! China? Really? Yes, they hold lots of our debt, but their entire economy is built upon our entire economy - they produce, we buy. They aren't interested in pulling that rug from under our feet! Anywhere else?Delete
That's one big fucking question that I have. Who the fuck do we owe this money to?
Or is the ultimate debt just a big illusion because there is actually nobody to collect it?
Yes, we can look at Greece as an example, but they were a tiny country with a tiny economy that lacked any form of central banking with any global sway; Greece was/is being taken advantage of by private banks that have larger economies than Greece.
It might be a rather arrogant outlook, but debt is only meaningful if someone is there to collect. Otherwise it's just some bullshit concept used by political parties to scare us into voting for them.
Our our own individual scales, debt is a problem. My student loans are a problem, because I have to pay them back. But I think that when you're talking about an entire nation as large as the US, with its financial fingers in just about every pie across the globe, debt is a completely different concept, and one that most of us really don't understand.
China has a much greater population than the US. Ever wonder why the Chinese don't just absorb their own production? They'd have to let the yuan rise and the standard of living rise for their citizens. They're doing this slowly...which means, they don't need to sell to the US.Delete
Also, the US creditor you should be worried about is not the #1, but #2: Japan. They're utterly insolvent, and they own 1T in US debt. Wanna bet they'll sell it when (not if, when) the SHTF? 237% Debt: GDP, negative account balance save for their investment in US Treasuries, and they're rapidly entering a recession/ depression.
China has a system to close oil trade in the yuan. It explicitly says it wants a new basket of currencies as the reserve currency of the world. BRICS, that's what they're about a new reserve currency.
The IMF just accepted the Canadian and Australian currencies as reserve status.
The writing is on the wall: bye bye dollar dominance. Bye bye screwing your bond holders with manipulated rates and inflation...can't monetize your way out.
The Fed is buying 90% of new bonds issued by the Treasury.ReplyDelete
Translation: gov't prints 90% new debt.
How many more years will all this education-related gov't-backed debt creation and forgiveness go on for?
Holy cow, I've found my doppelganger! Say that article also. JPMC thinks it's more like 100% of new issuance...and longer and longer terms since they can't depress the rates w/ short term T-bills anymore (it's just like holding cash @ 3-yr duration).Delete
I keep wondering - since I've never seen it reported anywhere - what the funding mechanism for the Dept. of Education actually is: i.e. are financing their educational lending through payments into system by students or are they lending printed funds??
With no bankruptcy protection, you think we'd be charged the risk free rate! ;) IBR is just an attempt to restructure debt - the gov't is trying NOT to take a haircut, even while it's inevitably they WILL take a haircut. Nothing about this picture will change - gotta keep the ponzi going - gotta keep getting asses in seats so there are fresh victims and fresh chances at paying for all this crap. If the gov't were serious about student relief, they'd write down instead of writing off the debt - that way maybe your victims could have access to consumer credit which is so necessary to setting up a life in the USA, and being stable enough to avoid high prices (example: buying a shitty car is much more expensive even in the near term than buying a newer, more expensive car with less maintenance required).
Ain't nobody honest. Just sit back; sovereign debt will collapse.
I'm not quite your doppleganger. Because "ain't nobody honest" is what dishonest people tell themselves to justify dishonesty.Delete
I want to pay back my loans. I will use my years savings from my poverty wages job to put money towards the 50k loans I have. Im even thinking of selling the gold coins I bought in 08 after Obama won. Im not sure. Im praying about it. I owe 50k and I owe a duty to pay it back. Besides, we dont know when inflation will happen. Maybe 2013, maybe 2023. I hope my loans are all paid back by before the hyperinflation, Lord willing. Whatever I do about my gold, I want to rely on God not gold. God gave me the gold anyway, its his. He could take it away, he could give me 10x more. It only makes sense to trust him and take refuge in him in the disastrous times that are coming soon. I realize you may not believe any of this (most of my generation dont -- im 30, from NJ) but I do and I've lived in God's provision, under his discipline, under his trials and he is good. Trust in him.
If you're looking for a good investment to pay back your loans, I;ll share what Im considering now -- Greek bonds. The yield is currently 1143 on 1yr bonds. You invest for 1 yr, you get +10x back after 1 year.
I bet the EU will keep the Greeks going another year. Maybe nows a good time to kick in $2k. If the EU comes though, you get +20k. If they dont, youre out 2k. Still thinking, still praying. God bless you, reader.
Are students morally or fiscally responsible for credit bubbles? The Federal Government broke the market place, with no lending standards flooding it with cash and driving up prices, until a poor person HAD to buy his/her education on credit from the US gov't. Unless you think that it's an acceptable state of affairs for a government to bar entry to professions to poor people, because they are poor. Education isn't about merit, it's about credentialing. If it were about merit, you'd be able to sit for the bar without going to law school!Delete
The government also propagandized and bullied kids into going to college: to wit, because they failed to provide adequate public education at the high school level.
So, what is the debtor reasonably responsible for? How much of the cost of education was just a "monopoly rent"? I'm not responsible for monopoly rents...in fact, if I'm charged a monopoly rent, I'm owed treble damages under the Sherman Act. Law schools are price-fixing cartels: there's not price differentiation, courtesy of a single-payer federal student loan system.
So, I'm going to take a discount on what it is that I "owe" on paper: monopoly rent * three = I don't owe that portion. Inflated interest rate because the lender destroyed the marketplace guaranteeing defaults and then pawned off that result on whatever sucker was left paying. So, I'll take a second discount for an overstated interest rate. I don't owe that.
But you can feed the beast if you want. Just don't paint it as your Christian duty. It's absurd. God never commanded you to be an economic victim. But at least one salient quote on the matter: NEITHER A LENDER NOR A BORROWER BE.
Cryn Johannsen has been getting some interesting comments/horror stories here:ReplyDelete
It is interesting to note that these six figure debt slaves are not law grads.
"Government agencies aren't hiring. If they were, vets have preferences."ReplyDelete
How about the children of veterans?
Just what the legal profession needs: even more preferences based on Daddy's identity.Delete
My government agency recently hired a bunch of people...but all of them had at least 1-2 years of experience, primarily clerkship or big firm. Yeah, I wouldn't plan on the "government fallback," any more, new grads.ReplyDelete
most people going to law school today either won't have real legal careers at all, or will wash out of the profession sometime over the next decade or two, after enduring a series of financially and psychologically undesirable jobs.ReplyDelete
- this is too sad. It can't be that bad in real life, can it?
Since we are still in a balance sheet recession, government spending, any government spending, is probably helpful. While this might not be the most productive form of government spending, there certainly are worse ways for the goverment to spend. Like starting wars in far off places -- Iran for example.ReplyDelete
The funny thing is that the people picking up this government debt, the younger generation, are also the one's benefitting from it. Next time the millenials start complaining about the debt being run up by the baby boomers, just remind them that it was incurred for THEIR education.
If anyone believes that the student loan program was ever intended for the benefit of the students -- well, I have a bridge in Brooklyn I will sell them. The student loan program is, and always has been, about benefitting the big money bois.
None of this, of course, changes the fact that anyone graduating from law school will be both unemployed and unemployable.
And, so our system of higher education is becoming more and more like that in Australia. Perhaps we should adopt the Australian model wholesale?ReplyDelete
This would mean, among other things, giving students a fixed line of credit for their student loans. When you have spent your line of credit, you are on your own.
No interest is charged on the loans, and why should it be? Instead, adjust the amount owed to the consumer price index. There is no need for the government to try to make a profit off of this. It just needs to contain the losses.
Like IBR, payments are made from future income. But these payments should be tied to future income. Under the Australian model, no payments are made for incomes under $45,000. Then they start at 6% of income and go up to 8% of income.
Let the IRS collect the debt as part of wage withholding.
There is a model to make this work...