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Saturday, June 15, 2013

Washington University Law School Offers $145k Scholarships -- But Only If Applicants Accept Within 24 Hours

Wash U LogoAbove the Law reprints an email from the Washington University School of Law (St. Louis):

We are excited to announce that additional scholarship funds have become available. As an outstanding applicant, Washington University School of Law is able to offer you a full tuition scholarship of $48,345 for your first year of law school with the same amount guaranteed for your 2L and 3L years for a total of $145,035 for the three years of law school.

We can only keep this opportunity open for 24 hours because these funds are limited. If you are interested in accepting this offer and matriculating at Washington U Law this year, you will need to let us know by June 13, 5pm CT.

If you have any questions, please do not hesitate to contact me. We look forward to hearing from you and seeing you here this fall!

http://taxprof.typepad.com/taxprof_blog/2013/06/washington-university-.html

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This is the school that is lecturing everyone about the failure of law schools . . .

Posted by: michael livingston | Jun 17, 2013 5:21:48 AM

Do the folks at Wash U not realize that schools that compete with them will react by doing the exact same thing to them?
Wash U won't get any competitive edge, they'll just drive down revenue for themselves and everyone else.

It's a sign of weakness, and serious mismanagement.

Posted by: Anon | Jun 17, 2013 11:20:01 AM

@11:20

I would expect all schools in the 15-30 range to start doing this anyway. What on earth could any one of these schools offer a student with highly competitive credentials (3.7/170) to entice them to matriculate other than a full scholarship? There is no margin for error at schools like GW/BU/BC/USC/UCLA-- you have to be in the top 10% of your class or you will not get a BIGLAW offer. At Columbia/Penn, it's still more like top 50%.

There is no reason to attend law school unless you have a full scholarship or will get a BIGLAW job. I hope this goes without saying, but some professors are still in pure denial about this fact.

Posted by: JM | Jun 17, 2013 2:13:31 PM

JM,

The value of a law degree in increased earnings exceeds its cost by a wide margin. Focusing excessively on minimizing the cost of the degree is foolish, because the cost is already minimal compared to the lifetime increase in earnings.

The focus should be on maximizing the earnings premium. If Wash U offered me a full ride and I thought I could make 25 percent more by going to Harvard, I'd be better off paying full freight at Harvard and turning Wash U down.

Posted by: Anon | Jun 17, 2013 3:58:27 PM

@ 3:58

If making money is your primary motivation, then you are correct that the focus should be on maximizing the earnings premium. I'm pretty sure the majority of the Harvard class does choose to attend Harvard at full freight rather than take a full scholarship at Wash U or an equivalent institution. I think they made a wise choice.

Then again, if you desire to work in a lower-paying sector of the legal profession, and you hate the idea of spending any significant time in a major law firm, then it makes much more sense to reduce the cost of the degree by virtue of a scholarship.

However, this is all pretty irrelevant to my original point, which is that offering a full scholarship is the ONLY way for schools like Wash U to compete for "elite" prospective students that have the option to attend T10 schools. As you point out, even this tactic won't succeed in most circumstances.

Posted by: JM | Jun 17, 2013 4:15:11 PM

If I wanted to work in public interest law, I'd still go to Harvard over Wash U unless I really, really wanted to be in St. Louis. I'd borrow as much as I'm allowed in federal student loans, and then use IBR and pay as you earn to get debt forgiveness after 10 years of public service work.

Wash U is fighting a losing battle going after the Harvard students, and giving the legal education away for free is just a bad business decision. The cost isn't zero, the value isn't zero, and the price shouldn't be zero. Marginal cost pricing and inciting price wars is the kind of mismanagement that causes firms to go under. Average cost pricing, differentiation, and competing on value instead of price is much more sensible.

If only more law professors had a business background.

Posted by: Anon | Jun 17, 2013 6:11:07 PM

@anon,

That's a pretty heavy bet that IBR, PAYE, and PSLF will stick around for ten years. Given that Barclays estimates they will cost at least $190 billion through 2020, I don't necessarily think it would be wise to take that bet. Your thinking also required that GradPlUS loans aren't repealed while you are in law school, as the Gates and Lumina Foundations desire, as well as Simpson-Bowles.

Posted by: UnemployedNortheastern | Jun 17, 2013 9:19:20 PM

Unemployed Northeastern,

GradPlus loans make money for the government, so I don't know why Simpson Bowles would be against them. Do you have links to back up your claims?

The Contract Clause prevents congress from repealing IBR and Pay as You Earn retroactively. https://en.wikipedia.org/wiki/Contract_Clause#Modification_of_Government_Contracts

They could only do it prospectively. But this would simply be making the budget worse, since educated workers pay far more in taxes than their education costs. In most of the world, governments fully cover the cost of higher education, so student loans with IBR is hardly a generous program by global standards.

The Barclays report is propaganda from the for profit student loan industry trying to take business back from the government so they can overcharge students.

The assumptions are absurd, and they ignore the tax benefits of increased educational attainment. From the Barclays report:

"Barclays projects that over half of all borrowers going forward will be eligible for the new IBR program, based on statistics reported by the Kansas City Federal Reserve Bank. The Department of Education believes enrollment will be just six percent."
http://edmoney.newamerica.net/blogposts/2012/barclays_student_loan_report_new_income_based_repayment_enrollment_to_balloon_cost_75

So to believe Barclays, you have to multiply the government's estimates by 833%.

And trust the New America Foundation, a think tank producing the usual garbage analysis to promote the interests of its financial backers,

Lumina (an arm of a private student lender)
http://www.luminafoundation.org/publications/From_the_Ground_Up.pdf

And here are the folks at New America who are coming up with these numbers:

Alex Holt, a 2011 college graduate with a bachelors degree in "Political Communications" and no training in economics or statistics
http://newamerica.net/user/426

And Jason Delisle, a Republican Operative, again with a background in Politics, not economics.
http://newamerica.net/user/227

These folks are a whole lot better at Propaganda and getting media attention than they are at actually analyzing numbers. The folks at the Department of Education actually have PhDs, real expertise, and credibility.

Posted by: Anon | Jun 18, 2013 5:55:34 AM

Here you go:

Student loan programs are profitable for the government according to the Congressional Budget Office:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44198_StudentLoanPrograms.pdf

Direct loans by the government are less expensive to the government than guarantees of private financial institutions:
http://www.cbo.gov/publication/25051

Under CBOs most conservative assumptions, student loans cost the government less than $10 billion per year from defaults exceeding repayments and financing and admin costs--
http://www.cbo.gov/publication/44318

not bad for a multi-trillion dollar program that boosts labor productivity and generates hundreds of billions in extra tax revenue every year.

Posted by: Anon | Jun 18, 2013 6:10:02 AM

Here's the 12 year old who allegedly wrote the report for Barclays:
http://www.linkedin.com/pub/cooper-howes/22/1a4/558

If you've got a link to the report, put it up, since all I can find is summaries of it by dubious sources.

Posted by: Anon | Jun 18, 2013 6:16:47 AM

If Congress tries to retroactively cancel IBR and PAYE, they're going to have a Supreme Court battle over the Contract Clause of the constitution.

Posted by: Anon | Jun 18, 2013 9:42:03 AM

Simpson and Bowles, A Bipartisan Path Forward to Securing America's Future, http://www.momentoftruthproject.org/sites/default/files/Full%20Plan%20of%20Securing%20America%27s%20Future.pdf. Pp 35-36: "Another $15 to $20 billion could be generated through a number of more targeted changes such as [irrelevant list for our purposes], repealing GradPLUS loans, [more items]... These reforms would produce enough savings to generate substantial deficit reduction while helping to provide permanent fixes to funding issues for the Pell Grant and other student loans."

You have to admit, that's a brilliant gambit - get rid of unlimited federal lending for soon-to-be-wealthy law and business students (as you so often contend) in favor of helping poor undergraduate students. But since you keep claiming that a law degree pays for itself several times over and therefore I am just too lazy to go to the magic upper-middle class job tree, well, certainly the prospect of borrowing $20.5k/year in grad Staffords and $40k to $60k/year in private loans, for a nice $2500/month repayment for a few decades, is just a minor bump in the road, right?

New America is just one of sixteen groups that created white papers for Gates regarding the overhaul of student loans. Most recommended killing GradPLUS. But New America did write that unlimited GradPLUS loans, "especially when coupled with loan forgiveness and Income-Based Repayment, can discourage prudent pricing on the part of institutions and prudent borrowing by students," and that this will:

"likely push some graduate students into the private loan market, this could ultimately be beneficial in addressing the high costs of graduate schools. If institutions can no longer rely on PLUS loans to fund their high-tuition programs and if the private market is responsive to the ability of borrowers to repay (based on changes to bankruptcy law recommended later), then graduate schools may have to set their pricing based, in part, on students’ expected earnings."

So I can see why you would want to impeach their integrity. You will also see in CHE and IHE's coverage of these plans that I am quite critical of them. http://chronicle.com/article/Report-on-Student-Aid-Reform/136887/, http://www.insidehighered.com/news/2013/01/29/new-america-paper-financial-aid-calls-changes-loans-pell-grant-tax-credits. Nevertheless, anonymous law prof, you and I are mere anonymucles compared to these organizations, especially New America, whose paper is evidently the one most favored by the Gates Foundation and its billions of dollars of influence, I mean endowment. Deal with it.

I am in full agreement that Lumina is a venal, self-interested subsidiary of Sallie Mae that exists to propagate "Dire College Grad Shortage!" *studies* in a time of ~50% college grad un/underemployment and a 31% student loan delinquency rate. That does not prevent it from wielding MASSIVE influence in Washington, and not just because its executives are generally either coming from or going to the Department of Education. It tends to get what it wants, and it wants to end GradPLUS.

The Barclays report was not released to the public; only its synopsis. If you have competing figures for how much IBR/PAYE will ultimately cost the taxpayer, I'd love to see them.

As for cancellation of IBR/PAYE, well, I do recall Romney and some of the other Republican nominees floating the idea during the primary season. I also recall older lawyers telling how law professors and administrators were telling them not to worry about borrowing $100,000+ in private student loans because, in the worst-case scenario, they were dischargeable in bankruptcy. Then Congress unilaterally made them retroactively dischargeable, after Sallie and Citi lobbied them very heavily to do so. No court battle. No handwringing, even. But a huge surge in the valuation of the SLABS market. Sure, maybe the penumbras of the laws that created IBR and PAYE are on more solid ground, but there would be no USSC case if they were repealed, because the aggrieved, by their nature of needing prolonged repayment plans and partial financial hardships, cannot afford to take anything to small claims court, let alone the USSC. Besides, the general anti-Millennial sentiment in this country would quash any notion of a successful court battle. Note also Wisconsin Republican Congressman Petri has introduced a bill that would eliminate PSLF and restructure IBR, as it is currently "unsustainable." http://chronicle.com/article/How-to-Repair-Income-Based/139697/#comment-927902358

Finally, the federal student lending program is only profitable under one accounting system - the one most favorable to it. The CBO's discount rate on student loans is risibly tied to Treasury bonds. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/20/no-the-federal-government-does-not-profit-off-student-loans/. Further, most federal lending does not make a profit if one gleams the numbers under fair-value accounting, as everyone from the liberal WashPo (ibid) to the conservative Heritage Foundation http://www.heritage.org/research/reports/2013/04/the-unknown-cost-of-federal-student-loans - "In contrast to the government’s current accounting practices, which show student loans making a “profit” for the government of 9 percent, the CBO’s alternate—but more accurate—analysis found that between 2010 and 2020 the program would cost 12 percent more than it brought in."

So, like in most respects to higher education and law school, you choose the rosiest of possible outcomes, and I choose a more pessimistic set. Time will prove who is right.

Posted by: Unemployed_Northeastern | Jun 18, 2013 2:27:00 PM

Anon @ 5:55,

You state:

"The Contract Clause prevents congress from repealing IBR and Pay as You Earn retroactively. https://en.wikipedia.org/wiki/Contract_Clause#Modification_of_Government_Contracts

They could only do it prospectively. But this would simply be making the budget worse, since educated workers pay far more in taxes than their education costs. In most of the world, governments fully cover the cost of higher education, so student loans with IBR is hardly a generous program by global standards."

How confident are you about this? I can see a couple scenarios in which the Govt could still repeal IBR/PAYE. For example, what if these programs specifically provide that the Government can cancel the program at any time? The Contracts Clause only disallows legislation interfering with existing contract rights, but the enrolles in these programs may not have any guaranteed right by contract to these benefits. Also, perhaps these programs aren't considered contracts, but one-sided entitlements that can be withdrawn.

I'd bet a few thousand bucks that the Govt could legally rescind IBR/PAYE at any time, and leave the borrowers on the hook for the balance. If we get a Republican Govt., this is likely what will happen. Only a total fool would take out $200,000 in loans on the assumption that they can all be discharged in 10 years under these programs. If they don't last, the borrowers financial life is absolutely ruined.

Posted by: JM | Jun 18, 2013 2:33:18 PM

"There would be no Supreme Court case if they were repealed, because the aggrieved, by their nature of needing prolonged repayment plans and partial financial hardships, cannot afford to take anything to small claims court, let alone the USSC. "

I'm sure some law students, law professors, and pro-bono lawyers would be happy to donate as much time is required for an aggressive Supreme Court challenge.

"what if these programs specifically provide that the Government can cancel the program at any time?"

Here's the text of the statute:
http://www.law.cornell.edu/uscode/text/20/1098e

I don't see any ability to cancel the program at any time built in. Do you?

Posted by: Anon | Jun 18, 2013 7:29:18 PM

"The CBO's discount rate on student loans is risibly tied to Treasury bonds. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/20/no-the-federal-government-does-not-profit-off-student-loans/."

Yes, as it should be, because the discount rate is being used to account for the government's financing costs and the time value of money, while expected defaults and losses are built in separately to the cash flows to account for risk.

"Fair value accounting" is just a fancy way of saying that anytime the government charges less than what a private student lender would charge--even if the government is making a profit and the budget is improving--then the government is actually losing money, because they could have charged more.

It's a slight of hand designed to attack any subsidy.

Posted by: Anon | Jun 18, 2013 7:37:32 PM

"You have to admit, that's a brilliant gambit - get rid of unlimited federal lending . . . in favor of helping poor undergraduate students"

It's brilliant rhetoric and horrible economics. Getting rid of profitable public investments in education will mean the government has less money for everything, not more.

If the government wants more money for pell grants, there are many places where they could get the money, like increasing capital gains and dividends taxes, or cutting spending on wasteful programs, like the oversized military (50 percent of global military spending is by the U.S, and most of the rest is by the U.S.'s close allies).

We don't have to rob one education program to fund another, any more than we need to amputate one arm to keep the other. We can invest more in many different education programs and waste less in other areas.

Posted by: Anon | Jun 18, 2013 8:50:26 PM

1. A future Congress simply repeal the entire College Cost Reduction Act of 2007. They could call it the Millennial Bootstrapism Act of 2017.

2. From The Atlantic, whose writers I trust a lot more than an anonymous law prof with a vested interest in the system: "Traditionally, the CBO has used a procedure laid out in the Federal Credit Reform Act (FCRA) of 1990 to assess the cost of federal loan programs. This method produces the gaudy student loan surpluses cited by student advocates (and displayed here, in CBO's 2013 forecast for student loans).

But by the CBO's own admission, the FCRA procedures don't account for the cost of "market risk," or the potential for economic forces out of the government's control to affect the ability of borrowers to pay back their loans. When the economy goes south, for instance, borrowers are more likely to be delinquent or to default, leading to lower recovery rates and higher collection costs for the government.

Luckily, the CBO has recently experimented with another method--"fair value accounting"--that better acknowledges the cost of market risk. What difference does it make? A lot, it turns out. The six education loan programs go from a surplus of $36.3 billion under the government's traditional accounting methods to a surplus of just $5.5 billion under fair-value in FY 2013 (see Table 1 here), or from about 32.1 cents for every dollar lent to 4.9 cents. That's just for one year, and doesn't count administrative costs. Map the difference over the standard 10-year budget window and we're talking big money." http://www.theatlantic.com/business/archive/2013/04/how-much-money-does-the-government-really-make-from-student-loans/274912/

3. I see you are evading me on the GradPLUS issue. If the mega-higher ed foundations and the US Senators get their way and repeal GradPLUS, how enthusiastic do you think private lenders will be to extend $40k to $60k per year at a time when barely 1 in 2 law school grads land jobs in the profession at any salary? I mean, aside from CUNY and Mass School of Law, who charges under $20.5k/year for law school these days? Let the private market decide, I say.

4. Where are all of those lucrative careers for non-practicing JDs (that do not require other specialized degrees, extensive work experience, or a HYSCCN degree) that you keep proclaiming are out there?

Posted by: Unemployed_Northeastern | Jun 18, 2013 9:50:27 PM

"If the government wants more money for pell grants, there are many places where they could get the money, like increasing capital gains and dividends taxes, or cutting spending on wasteful programs, like the oversized military (50 percent of global military spending is by the U.S, and most of the rest is by the U.S.'s close allies)."

Yes, because that's about to happen. This is what people mean when they talk about the cluelessness of the Ivory Tower and career academics.

Posted by: Unemployed_Northeastern | Jun 19, 2013 12:20:54 AM

I'm still not buying the argument that IBR/PAYE is a contract. Where is the consideration going to the Government? It's just a Government program that people can choose to enroll in, like welfare. There is no contract here.

Not to mention, while the statute may say nothing, I bet that the paperwork that applicants are required to fill out specifically states that there is no guarantee of the program's continued existence.

There's just no way that IBR/PAYE survives the next decade. Any Repulican candidate will hammer away at the debt-forgiveness aspect, and that will have huge traction with the working class. People are tired of this gilded age in acadamia.

Posted by: JM | Jun 19, 2013 9:29:44 AM

Where is the consideration going to the Government?

Origination fees and interest payments.

Student loans are contracts. The payment terms are part of those contracts. IBR and pay as you earn were both implemented prospectively, for new loans after a particular date, as would be expected with a change in contractual terms.

They are contracts.

"I bet that the paperwork that applicants are required to fill out specifically states that there is no guarantee of the program's continued existence."

Show us the paper work.


"Any Repulican candidate will hammer away at the debt-forgiveness aspect, and that will have huge traction with the working class. People are tired of this gilded age in acadamia."

Yes, some Republicans will try to take away debt forgiveness, just as they have tried to cut investment in education, science, infrastructure and healthcare. They are far more interested in reducing taxes for the rich than in helping the working class become middle class.

And working class people are seeing through it, as evidenced by the recent election results in Congress. The middle class want their kids to be able to get a decent education, and IBR helps reduce the risks associated with investment.

Why should wealthy corporations be the only ones who get government subsidies and limited liability?

Posted by: Anon | Jun 19, 2013 10:06:47 AM

"But by the CBO's own admission, the FCRA procedures don't account for the cost of "market risk," or the potential for economic forces out of the government's control to affect the ability of borrowers to pay back their loans. When the economy goes south, for instance, borrowers are more likely to be delinquent or to default, leading to lower recovery rates and higher collection costs for the government."

True, but irrelevant. The government is not subject to systemic risk or liquidity shocks. They can borrow unlimited amounts from the federal reserve. That's why the government (Fed & Treasury) bail out the private financial institutions in times of crisis. That's why almost all economists agree that monetary and fiscal policy should be countercyclical to stabilize the economy.

The fact that IBR payments go down in times of crisis is actually a great feature, because countercyclical lending is automatically built in. This is what economists call "automatic stabilizers."

Direct lending using the government's financing costs is just getting rid of inefficiency in the existing system that enables private financial institutions to extract subsidies from government safety nets in times of crisis.

Instead of the shareholders of Sallie Mae benefiting, students and taxpayers benefit.

As for who would like to lend to graduate students:

Sallie Mae, PNC, Chase, Citibank, Wells Fargo, SunTrust, Charter One, and many, many others.

The cheap law school you mentioned has terrible bar passage rates and some of the worse student loan default rates among law schools. The question is quality and value, not price.

Posted by: Anon | Jun 19, 2013 10:17:44 AM

"This is what people mean when they talk about the cluelessness of the Ivory Tower and career academics."

Would you prefer an in-the-know think tank hack spreading propaganda for billionaires while worshiping money and power?

It's touching that you have so much confidence in the Atlantic Monthly. It is not profitable. It only survives because a successive line of very rich people keep pumping money in for the influence it affords them.

https://en.wikipedia.org/wiki/The_Atlantic#Ownership

Like most magazines and journals, they are not financially independent, and they can't afford to be intellectually independent.

That's why we need universities, and university based research--some of the last bastions of independent research remaining.

Posted by: Anon | Jun 19, 2013 10:37:50 AM

"They are contracts."

I'm not persuaded. It's a government program to help provide relief to student debtors. The law and eligibility requirements have been changed numerous times. People have to provide annual documentation to remain enrolled. The Govt. can change that criteria, and make it impossible for people to re-enroll and hit the 10/25 year benchmarks.


"Yes, some Republicans will try to take away debt forgiveness, just as they have tried to cut investment in education, science, infrastructure and healthcare. They are far more interested in reducing taxes for the rich than in helping the working class become middle class."

Investments in education can often justifiably get lumped in with the tax breaks for big business. It's self-serving to automatically equate them with investments in science, health (sometimes), and infastructure, which I agree are very worthwhile. We are in a guilded age of the education business, and it needs to stop.

Posted by: JM | Jun 19, 2013 10:56:00 AM

"The government is not subject to systemic risk..."

But federal lending is. Like from, say, how only 42% of college grads landed college-level jobs, on average, since 2003 (!) (Pew). Or how 31% of student loans in repayment are delinquent (Federal Reserve Bank of New York). As compared to the 8% mortgage delinquency that crashed the world in 2008. What can't be paid back, won't be. Hence the need for an accounting system that is realistic enough to account for the fact that not everyone will be able to repay their loan balance.

You're dreaming if you think Sallie, Citi, et al are going to lend $100k to $200k in private student loans per student with the reported job outcomes for the last few years. Particularly if they can't get government guarantees anymore, which would appear to be the case. While you may blind yourself into believing all law school grads land six figure jobs out of the gate, the lenders won't. Not a chance. Even in the absence of bankruptcy protections, they have fewer options for collection, and at the end of the day, you can't bleed stones. Maybe if they made the law schools the guarantors/co-signers of those loans. But I doubt the parent universities would be too thrilled with that notion. Even if they did extend such loans, they would not be eligible for IBR/PAYE/PSLF, and the notion of having a $2000/month to nearly $3000/month student loan payment will scare off many, many, many 0L's, notwithstanding your hollow posts on the Law Prof Network, which precisely no prelaw student has ever read.

Mass School of Law's first-time bar passage rates are not appreciably lower than Suffolk or New England's, as JM and I have previously cited, and MSL's tuition is about 1/3 of those schools (and the cost of living in metro Lawrence is MUCH less than the cost of living in metro Boston). But it doesn't really matter, since 2500 people pass the bar each year for 700 legal jobs in Massachusetts (Mass Bar Association), and they're pretty much all doomed.

Posted by: Unemployed_Northeastern | Jun 19, 2013 11:31:04 AM

"Hence the need for an accounting system that is realistic enough to account for the fact that not everyone will be able to repay their loan balance."

The accounting system the government uses already accounts for the risk of default and the losses in the event of default. Using a higher discount rate would be counting the risk twice because of claims that the risk is correlated with other risks and therefore can't be diversified away through a portfolio of assets.

However, the government, unlike a private lender, can diversify the risk away.

In times of crisis, the interest rate on treasuries drops because of a flight to quality, and the value of treasuries goes up. It becomes easier for the government to borrow, not harder. The reduced borrowing costs offset any increased costs due to student loan defaults.

Education also reduces unemployment, which reduces other costs the government faces during recessions. And unemployment increases earnings, which increases tax revenue.

The government is large, diversified, and in a position to fully diversify the risk, which is why treating assets they hold as if they were held by a private financial institution subject to market risks inappropriate.

Your vigorous defense of private student lenders--at the expense of students--is quite revealing. I can only assume you work for or are funded by the financial services industry.

Private student lenders had a booming business in private loans to graduate students prior to the adoption of GradPlus loans. Read Jonathan Glater's research.

That's why the private lenders and their allies at think tanks have been lobbying so aggressively against Plus Loans. They want the profitable business back.

Why do you think Barclays--a private investment bank bound by law to try to maximize profits for its shareholders--is publishing research reports on government student loans?

There is no way for Barclays clients to use this research to take a position on student loans (that is, a financial bet), unless they want to short Treasuries based on the incredibly flawed assumption that federal student loan performance (a swing of perhaps $10 billion a year) is large enough to influence the $5 trillion dollar+ treasury market.

Posted by: Anon | Jun 19, 2013 1:36:39 PM

" And unemployment increases earnings,"

Correction: Education increases earnings.

Posted by: Anon | Jun 19, 2013 1:37:43 PM

"Mass School of Law's first-time bar passage rates . . . "

Here's the latest data:

http://www.mass.gov/bbe/statisticsjuly2012.pdf

Mass School of Law's overall bar passage rate is 50 percent versus 80 percent for Suffolk and New England.

Students care not only about whether they pass the bar on the first try, but also about whether they pass on the second or the third try.

So why are you excluding information that students should care about? It's not justifiable to exclude that important information.

According to the Department of Eduaction, Mass School of law's 3-year cohort default rate on federal student loans in 2009 (latest date available) was 9.3 percent. New England School of law's default rate was 1.1 percent.

So Mass School of Law is one third of the price and 8 times riskier.

Like I said, it's quality and value that matters, not price.

Posted by: Anon | Jun 19, 2013 1:45:21 PM

"But it doesn't really matter, since 2500 people pass the bar each year for 700 legal jobs in Massachusetts (Mass Bar Association), and they're pretty much all doomed."

Or maybe they get jobs in fields where a law degree is an advantage but not a requirement, either within or outside MA, as the data suggests.

Posted by: Anon | Jun 19, 2013 2:31:09 PM

"" And unemployment increases earnings," Correction: Education increases earnings."

Except for the law school crisis. And the veterinary school crisis. And the nonelite business school crisis. And the humanities graduate programs crisis. And the natural sciences grad school crisis. (Take a look at the Chronicle of Higher Education's "From Grad School to Welfare: the PhD Now Comes With Food Stamps" - it got nearly 1000 comments). And of course, the 76% of the nation's college professors who are not tenured nor TT provide a nice refutation of your absurd point - as does the aforementioned 31% student loan delinquency rate.

Ah, so you are implicitly agreeing that the first-time pass rate for Mass School of Law is essentially the same as it is for Suffolk and NESL, both of which cost several magnitudes more than MSL. Thanks for corroborating that. Again, no prospective law student has ever followed this blog, my dear fool.

"Students care not only about whether they pass the bar on the first try, but also about whether they pass on the second or the third try."

Good lord, why would they care about that? Are they going to take that state's bar exam again after they passed it? Think about what you just typed, professor.

Do I work for the private lenders? Don't I wish it - a living wage and health insurance; the dream of any law school graduate. Nope, I'm just another one of America's tens of thousands of un/underemployed law school graduates. Aside from First Marblehead, which is just a SLABS bundler whose stock is hovering just outside the delisting zone, I can't think of any private student lending entity in Massachusetts, and I'm far too poor to move anywhere else. So let me get this straight: student lenders, most of whom needed liquidity injections in the last decade and are limping along at present (SLM just split itself in two) are going to lend upwards of $200k to kids attending law schools like NESL and Brooklyn and NYLS where barely 1 in 3 graduates finds a legal job at any salary? Um, OK...

Speaking of self-interest, then, you were obviously vocal against Dean Matasar being the head of the board of Access Group, which made federal and private loans, at the same time he was running the tuition into the stratosphere at NYLS, right? But I can't help but notice how you evaded my point, which is that legal education would collapse in the absence of unlimited GradPLUS. To my mind, this is a silent acceptance.


Do tell - what kind of jobs are those 3 in 4 law school grads getting that justify the $200,000+ they spent on Suffolk/NESL/NUSL/BC/BU? Private equity? Nope - they hire based on prestige; those resumes would get laughed right out of the office. Venture capital? Pedigree hires. Investment banking? Pedigree. Cardiologist at MGH? Nope - didn't go to medical school. Work at one of the startups? Not unless they happen to be a hotshot programmer, which has nothing to do with law school. BCG or Bain or Cambridge Associates or Analysis Group, etc? More pedigree hiring. State government? Nope - been hiring freezes for years. Federal government? Nope (this can be verified from the ABA disclosures). Major corporations like Staples, State Street, Fidelity, etc? Nope - despite the *vast versatility* of those 2nd to 4th tier law degrees, they actually still just hire biz majors and MBAs. Law professors? Do I even have to answer that one?

C'mon, labor economist law prof (BTW, I can count the number of defender-of-the-status-quo labor economist law profs on my thumbs, so you aren't really that anon-ymous), tell us: where are all those six-figure jobs for law grads who can't even join their own profession? And don't punt and say its OK b/c of IBR/PAYE, or I'll have to bring up negative amortization, lowered credit scores, inability to secure a mortgage, and the nice tax bill at the end of the 25/20 year period of indentured servitude.

All "the data" suggests is that law school graduates have more debt and a higher unemployment and underemployment rate than undergraduates; a truism you've desperately been trying to avoid for like two years now, while I've been looking for a job. Any job. Huh. And of course during that time everyone from the BLS to the ABA to the NALP to Senators Grassley and Boxer to every major news outlet in America (and several outside it) have proclaimed what is happening to folk like myself a disaster.

I mean, you're obviously up on all this already as a labor economist and someone so smart he doesn't need to provide citations, so I don't need to tell you this, but you do understand now that most employers use software filters to cut down on the hundreds of resumes they receive for every opening, and those software filters automatically reject resumes with degrees and majors that aren't those listed in the job requirements? See the work of Wharton management professor Peter Cappelli for more in this regard - a professor at a far better institution, and with a far better publication record, than yourself.

Posted by: Unemployed_Northeastern | Jun 19, 2013 5:15:08 PM

"So Mass School of Law is one third of the price and 8 times riskier.

Like I said, it's quality and value that matters, not price."

Except when schools like Wash U offer full rides in mid-June to fill their class, which is why we're here, isn't it?

Posted by: Unemployed_Northeastern | Jun 19, 2013 5:18:21 PM

BTW, is that the same Jonathan Glater whose 2011 law review article "THE OTHER BIG TEST: WHY CONGRESS SHOULD ALLOW COLLEGE STUDENTS TO BORROW MORE THROUGH FEDERAL AID PROGRAMS" was ripped apart by Mark Kantrowitz and just about every other financial aid professional? See http://business.time.com/2011/07/05/one-really-bad-way-to-overhaul-the-student-loan-market/, among others. Just wondering.

“Students often treat loan limits as targets, so it is likely that this will lead to undergraduate students borrowing more than they need,” Mr. Kantrowitz said in an email. “It would also lead to students enrolling at colleges they can’t really afford, since they could borrow without restraint up to the full college costs. That will make it more difficult for them to repay the debt, since the debt will be out of sync with incomes. Income-based repayment does provide a safety net, but one should not need to routinely rely on such a safety net for more than a few percent of the student population. The risk with the colleges is not that they would increase tuition more than they already do given an unlimited source of liquidity, but rather that they would substitute the loans for institutional grants, reducing the amount and proportion of gift aid in the financial aid package. That would yield a significant real increase in the bottom line cost of college.”

Posted by: Unemployed_Northeastern | Jun 19, 2013 5:38:32 PM

"is that the same Jonathan Glater . . . "

Mark Kantrowitz is welcome to express his opinion on as many blogs and websites as he would like. He doesn't have any data or peer reviewed econometrics studies to back it up, though--it just his opinion.

As Professor Glater and others have pointed out, the Federal loan limits do not actually prevent students from borrowing. They simply cause students to borrow from alternate sources of more expensive credit.

There's no problem with schools charging more as long as they use the money to invest in the students. Dale and Kruger have found that after controlling for student ability levels, students who attend schools that cost more end up earning more money.

The ability to borrow more and invest at an early age in an education that will boost earnings for the rest of your life is a wonderful opportunity, and we should try to make the cost of capital as low as possible so we get as much investment as possible.

Posted by: Anon | Jun 19, 2013 8:21:30 PM

As for your ad-hominem attacks against Glater, that's really just dodging the facts.

Professor Glater's research shows quite clearly that for profit lenders did have a profitable business lending to graduate students and that they have been lobbying aggressively and using all of their political muscle to try to get that business back.

Whether you think they deserve the business and students should be forced to pay more and get less--because the school will have less to spend on students and the money that goes to student lenders as interest is not going to fund instruction--is besides the point.

They want it. And they are wielding all of the influence they can through New America and other propaganda outlets to try to get it back.

Posted by: Anon | Jun 19, 2013 8:56:50 PM

Unemployed_Northeastern

The "law school crisis" and "veterinary crisis" are media-created panics created by journalists and bloggers who haven't actually looked at the data, or don't know how to run a regression so they can actually understand what it means. These are the same people who brought us the Y2K crisis, the birdflu crisis, the swine flu crisis and claims of Weapons of Mass Destruction in Iraq.

If you actually look at the data, those with law degrees and all manner of medical degrees are still doing much better on average than bachelors. Everyone is struggling in the recession, but those with more education are doing better than those with less.

You can see some of the data here:
http://www.bls.gov/emp/ep_chart_001.htm

Your reliance on anecdote and opinion from journalists and bloggers will steer you wrong.

You don't need a six figure job for law school to pay off. Depending on debt levels, interest rates, and opportunity costs (for many, the alternative to graduate school is unemployment) around $12K per year more than you would have made with just a college degree is enough for the investment to payoff. Very few law school graduates borrow $200K for law school. Of those who borrow, $100K is much more typical. (See ABA data).

Studies of employment based on blindly sending out resumes are fundamentally flawed. Resume dumps don't work--straight into the circular file. People have known that for years.

The way you get a job is by getting to know the people at the company you want to work for, and having people on the inside advocate on your behalf and shepherd your application through the process.

Posted by: Anon | Jun 20, 2013 7:22:11 AM

Unemployed_Northeastern

Just think of all of the things you could have been doing to find a job instead of making 4,862 comments on Disqus.

Posted by: Anon | Jun 20, 2013 7:55:20 AM

Well Anon,

I tire of this, and since the good Prof Caron did not put up my last response, it would appear he tires of it as well.

As I attempted to post last night, my dear anonymous prof, if I wanted to impeach or ad hominem against Glater, I would have mentioned that he wrote his pro-unlimited federal lending law review article the same year his employer (UC Irvine, or Chemerinksy's Folly) stopped being free and started being $40k/year in-state and $52k/year out-of-state. Huh.

The average private law school debt - exclusive of undergrad debt and surging interest, since no part of law school lending is subsidized anymore - is $125k. The ONLY way not to qualify for a partial financial hardship (IBR) is to have a BigLaw salary - and of course, those firms have an 80% attrition rate over five years. You can verify this with any IBR calculator.

I have applied to jobs beyond reason or count. I have attended nearly every networking event in eastern MA for the last X years - during which I have met long-term unemployed graduates from every law school in the state, up to and including Harvard. I have had several other professors, both in and outside the legal academy (and Chronicle of Higher Education editors) seek out my pseudonymous email address to tell me I should write a book or should blog for them. So, yeah, I don't think I'm too far off the mark.

As for "The way you get a job is by getting to know the people at the company you want to work for, and having people on the inside advocate on your behalf and shepherd your application through the process." You're getting pretty close to admitting that employment isn't about what you know, but who you know, which of course is the truth but demolishes your false egalitarian promises that more education is the way to more income. The poor have few connections, and like all unemployed law school grads, I am poor.

The law school crisis is no invention of the mass media; it has been acknowledged by the ABA, NALP, BLS, the bar oversight committees in MA, NY, and elsewhere, and by several law school deans and professors. Funny how you dance around the whole MA/MS/PhD issue, since it quite glaringly cuts a huge hole in your "more education = more earnings" reduction ad absurdum...


I'm only hear because you write three or four responses to my one. What does that say about your time's priorities?

Posted by: Unemployed_Northeastern | Jun 20, 2013 10:01:26 AM

"The "law school crisis" and "veterinary crisis" are media-created panics created by journalists and bloggers who haven't actually looked at the data."

From Jim Leipold, executive director of the NALP, this very morning:

"[W]e still see very high unemployment and underemployment, and there are no indications that the employment situation will return to anything like what it was before the recession." Source: ABA Journal

Unemployment rate for law schools' Class of 2012: 15.3% Source: NALP
Unemployment rate for the undergrad Class of 2012: 6.3%. Source: BLS.

Average student debt for law school grads: $125,000 (plus undergrad debt)
Average student debt for undergrads: $27,000

Res ipsa loquitur.


Had I more time, I would quote Richard Posner and Joseph Stiglitz on how there is too much student loan debt, but no doubt you are smarter than a 7th Circuit judge-cum-philosopher and a Nobel Prize winning economist. Actually, Krugman also thinks there is a student debt bubble, so make that two Nobel-prize winning economists.

Posted by: Unemployed_Northeastern | Jun 20, 2013 10:32:27 AM