September 25, 2012
Solomon: Who Pays Law Professor Salaries?
Like most people, I try not to think too hard or often about my life. It's a pretty good one, but reflection is a dangerous enterprise. Sometimes, though, I like to take stock. But I'm having trouble figuring out the answer to the most basic question about how I make my living: who pays my salary?
I'm a professor at William and Mary's law school, where most of our budget -- like almost all law schools today -- comes from student tuition. The students, though, pay very little of that tuition in "real time." It comes from the federal government in the form of loans, and has to eventually be paid back. ... [M]y best answer is that taxpayers in the 2030s and 2040s mostly pay the salaries of me and my fellow law professors.
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Taxpayers aren't "paying" for law school--all they are doing is providing credit and earning a handsome return on their investment.
The interest rate on student loans for graduate students is now 6.8 percent for stafford loans and 7.9 percent for grad plus loans. 10 year treasuries are now yielding 1.7 percent; 20 years are 2.5 percent.
The government is charging a credit spread of between 6.2 percent and 4.3 percent above the risk free rate. Plus origination fees. Even though the recovery rate on student loan defaults is above 80 percent. In the old days, we used to call this usury.
To put this into context, the 3 year default rate on student loans would need to be higher than 50 percent for the government to start losing money.
And that is ignoring all of the money the government is making on additional income and payroll taxes paid by high earners with law degrees.
Taxpayers aren't paying law professors' salaries.
Rather, law schools and law graduates are paying for social security, medicare, and the military and helping to keep taxes lower for everyone else.
The question we should be asking is why the government is overcharging our students so much on their loans and taxing them so much on their investment in "human capital."
Posted by: Anon | Sep 25, 2012 9:13:50 AM
Soloman needs to go back to teaching and quit reflecting on his life. Wouldn't it be a great movie scene in "Patton" for a GI to tell the general that he's having all sorts of tingly irresolutions about who pays his wages? The soldier would be slapped and rushed to the front of the line, where he would find that there are more important things to worry about.
Who pays anyone's wages -- the employer, the customers, the shareholders, the finance companies, the trust funds of the customers....? What difference does it make as long as you know that the money is going to continue to be supplied?
What he needs to reflect upon is that he took time to share his "enlightenment," which is a waste of time and a distraction from his real job -- which he should, instead, be thinking about giving one-hundred percent of his professional time.
I suspect that the professor, nice as he might be, must have been patting himself on his back for coming up with such an emotional, thought-provoking, and sensitive issue. That's how Harvard and Columbia can turn a mind into mush.
(Some days certain things rub me the wrong way.)
Posted by: Woody | Sep 25, 2012 10:25:34 AM