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Monday, December 12, 2016

ABA's Proposed 75% Bar Passage Requirement Ignores Key Problem: Failure To Tie Student Loans To Job Outcomes

American Lawyer LogoThe American Lawyer:  The ABA Raises the Wrong Bar, by Steven J. Harper (Adjunct Professor, Northwestern; author, The Lawyer Bubble):

[I]n October, ...  the ABA's Section of Legal Education and Admissions to the Bar recommended a rule change that it thought was monumental. It's actually far too little coming far too late. The new rule would require at least 75 percent of a law school's graduates to pass a state bar exam within two years of receiving their degrees. The current standard requires a 75 percent pass rate within five years. Since 2000, only four law schools have faced difficulty under the current standard, and all were restored to full accreditation.

Plummeting national bar passage rates coupled with growing student debt for degrees of dubious value are the culmination of a dysfunctional market in legal education. That dysfunction is taking a cruel toll on a generation vulnerable to exploitation by elders who know better. Sooner or later, we'll all pay the price.

The ABA's latest misfire toward a remedy misses the key point: Even passing the bar doesn't mean getting a law job. Within 10 months of graduation, less than 60 percent of 2015 graduates obtained full-time long-term employment requiring bar passage. Compared with the class of 2014, the number of such positions declined by 10 percent (from 26,248 to 23,687). The total number of 2015 graduates: 40,000.

Students attending marginal schools bear the greatest burden. Their schools use a business model that relies on federal student loan dollars to fill classrooms. Because schools have no accountability for their graduates' poor employment outcomes, they are free to dip ever deeper into the well of unqualified applicants. ...

As educators rely on student debt to keep their law schools operating, they're getting paid, regardless of how their graduates fare in the job market. That frames the issue with which the ABA should be grappling but continues to dismiss: Marginal law schools are unable to place most of their graduates in full-time long-term bar passage-required jobs.

Solving that problem requires schools to have financial skin in the game. Here's one suggestion: tie the availability of a student's federal loan dollars to a law school's employment outcomes. That would create accountability that no dean or administrator currently possesses. And they sure don't want it.

The ABA is institutionally incapable of embracing the change required to create a functional market in legal education. Vested interests are too embedded. The clout of the marginal schools is too great.

[T]he people running law schools view students as revenue streams for which the schools will never have any financial accountability. The federal government backs the loans; educational debt survives personal bankruptcy; many in a generation of young would-be attorneys begin adulthood in a deep, six-figure financial hole.

http://taxprof.typepad.com/taxprof_blog/2016/12/abas-proposed-75-bar-passage-requirement-ignores-key-problem-failure-to-tie-student-loans-to-job-out.html

Legal Education | Permalink

Comments

Excellent summation of the issue. Harper speaks truth to power.

Posted by: Old Ruster from JD Junkyard | Dec 12, 2016 6:21:44 AM

So do both.

Posted by: Harbinger | Dec 12, 2016 7:08:15 AM

A little over a year ago, Senators Hatch (R-UT) and Shaheen (D-NH) proposed a system whereby colleges and universities would be required to repay a portion of their respective students' unpaid federal student loans - including the balances tossed into an IBR plan. Pretty elegant as far as getting skin in the game. A downside of tying federal student loan dollars to job outcomes is that private student lenders are alive and well and growing their originations. A prospective student for (insert your least favorite unselective private law school with ~40% placement or less here) will not be aided if a job-based federal student loan eligibility plan means s/he can only borrow $30k of the school's $70k cost, because they will likely as not get the rest of the funding from SLM or Access or whomever. Still can attend the school, school still gets its revenue, but after graduation the monthly payments are much larger because a big chunk of the loans are not eligible for any IBR plans.

Posted by: Unemployed Northeastern | Dec 12, 2016 8:08:23 AM

I agree that we should look at student loan performance data and not jump to conclusions about these law schools based on short term bar pass rates.

A lot of these “marginal” law schools have much lower default rates than the national average across institutions. The national average 3-year cohort default rate in 2013 was 11.3%.
http://www2.ed.gov/offices/OSFAP/defaultmanagement/schooltyperates.pdf

The same default rate for Mass Andover—probably one of the most “marginal” law schools in the U.S.—was only 5.4 percent.
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=19&ope_id=032353

Most of the other famously “marginal” law schools have even lower default rates, in the 1 to 3 percent range.

If the most "marginal" law schools in the country have good student loan performance, that says a lot about how robust the employment market for law graduates really is.


Southwestern – 1.8 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=0&ope_id=001295

New York Law School –1.2 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=5&ope_id=002783

New England – 1 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=11&ope_id=008916

Thomas Jefferson—2.3 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=12&ope_id=010854

Thomas Cooley—3.5 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=14&ope_id=012627

Albany—1.6 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=8&ope_id=002886

South Texas – 0.4 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=13&ope_id=011934

Vermont—0.3 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=13&ope_id=011934

John Marshall—0.9 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=1&ope_id=001698

Mitchell Hamline—0.9 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=3&ope_id=002391

Ave Maria—2.1 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=22&ope_id=036914

Florida Coastal—2 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=20&ope_id=033743

Appalachian—2.4 percent
https://nslds.ed.gov/nslds/nslds_SA/defaultmanagement/cohortdetail_3yr.cfm?sno=21&ope_id=035593

Posted by: Data | Dec 12, 2016 10:43:33 AM

Data is knowingly misrepresenting what "performance" and "default" mean in the context of student loans. Just because you know enough about the consequences of default to go on IBR or PAYE, does not mean that your loan is being paid as agreed.

Obscurantism as argument.

Appalachian. Ha.

Posted by: terry malloy | Dec 12, 2016 1:11:39 PM

UF law dean has a solution: disembowel the school's formerly top tax program. Great idea! That will fix the mediocre law school!

Posted by: Anonymous | Dec 12, 2016 6:12:14 PM

Wow, what low default rates, Data. But as we been over before (and over and over), we do not exist in a binary / full repayment world. Many law graduates - at least a plurality, possibly a majority - are only not in default because they are in one of the four IBR plans making minimal payments, usually while watching their balances accrue. This is not really disputable; the average student loan debt is creeping up towards $150k, exclusive of interest, undergrad loans, or bar debt, and the median NALP starting salary is still mired around $63k. If you disbelieve this, well, you should be screaming to the heavens for Congress to pass the Shaheen-Hatch plan to hold colleges and universities responsible for a portion of the loans that go into an IBR plan, because the alternative seems to be Trump and the new Congress's desire to "get the federal government out of student lending" and repeal PSLF and PAYE (since the latter is part of the ACA legislation). This would leave students at the mercy of private lenders and their loans' near-complete lack of repayment flexibility.

Then again, private student loan defaults don't do anything to the federal student loan default rate, so maybe you don't care.

Posted by: Unemployed Northeastern | Dec 12, 2016 6:25:12 PM

Data, your links were not accessible. Is it possible the default rates are low on those schools because the students are in forbearance and repayment is suspended while the students try to find work. Or that they are on IBR plans which are tied to their $30k a year job.

Posted by: Chris P. | Dec 12, 2016 7:03:37 PM

According to a recent GAO report, grad plus loans have the lowest "subsidy rate", so it seems unlikely that the low default rates for law schools are due to IBR.

In any case, the low default rates predate PAYE and many other IBR programs, and there was no noticeable change in law schools' relative default rates (compared to national average) after IBR programs became more generous.

And, DOE repayment rate data shows law schools doing pretty well as well.

So yeah, the law students are more likely than most students to repay their loans and earn a profit for the taxpayer.

Posted by: Data | Dec 12, 2016 8:26:25 PM

Here's the thing about starting salaries--they're much lower than people's salaries 10 or 20 or 30 years later. We know from Census data that the overwhelming majority of law school graduates earn hundreds of thousands of dollars extra thanks to their law degrees, and the degrees more than pay for themselves.

The student loan default data bears this out.

The private student lenders rushing to compete with the DOE bear this out.

Republican efforts to privatize the highly profitable business of student lending to professional students bear this out.

There's no reason educational institutions should be in the business of providing insurance to the federal government. Educational institutions educate. They don't underwrite. The federal government can far more easily absorb the risk and more than recoup it with the profits it makes on student loans and taxes on educated labor.

Posted by: Facts | Dec 12, 2016 9:20:13 PM

Yawn, ipse dixit reasoning. Doesn't work well in court, doesn't work well on people who actually know these issues. So many hollow arguments that I must be brief:


- Ah, the "all law school grads embark on healthy multi-decade careers and their incomes only ever go up" line of reasoning. (one must assume this is an offshoot of the old *all law professors would have easily been the 1 in 20 1st year associates to make equity partner and thus are giving up millions to teach* canard).

- I can point you towards any number of think tanks screaming that GradPLUS are an enormous drain on the system and have all sorts of *facts* and *charts* to show you. There is one particular individual, formerly of New America, now I think at AEI or Heritage, who is pretty much the complete inverse of who I suspect facts/evidence is. You're both amusing in your little silos.

- Wow, it's almost as if before IBR plans law students could only borrow $20.5/k year from the feds and the rest would have to be private loans, the defaults upon which would have no effect on the DOE repayment rates. How about that? And I'm sure that the fact that defaulting on a federal student loan can cost a lawyer their law license has NOTHING WHATSOEVER to do with the low default rates. Nope.

- I'm not in a mood to rehash MILLION DOLLAR DEGREEZ for the billionth time. I'll just note that it does not include data from graduates after 2008, only includes like two dozen people from the classes of 2007 and 2008, and has been thoroughly countered by multiple lawyers with actual graduate degrees in the social sciences, a Rhodes Scholar-winning economics journalist at the New York Times, and is contradicted by pretty much every industry report on the legal profession since the Great Recession.

- Since you seem bone ignorant about the current state of higher education policy with regards to student loans, let me summarize: the most recent projections on federal student loan repayment show significantly lower returns because hordes of people are enrolling in IBR plans, the next president and Congress are almost certainly going to get rid of some federal student lending, and in addition to the Congressional proposal I mentioned earlier, Trump has also stumbled across the notion of making universities have 'skin in the game,' as it were.

"There's no reason educational institutions should be in the business of providing insurance to the federal government. Educational institutions educate. They don't underwrite. "

Seriously, have you even looked outside a window this year? This attitude is so blithely 2008 that I don't know how to respond to it. People are screamingly upset at the subsidies to higher education and the cost of tuition, and like it or not, the people spoke last month. Deal with it.

Posted by: Unemployed Northeastern | Dec 12, 2016 11:44:30 PM

"We know from Census data that the overwhelming majority of law school graduates earn hundreds of thousands of dollars extra thanks to their law degrees, and the degrees more than pay for themselves."

Do we know that from census data? Cite please?

Posted by: census data | Dec 13, 2016 2:10:25 AM

@Census data,

Note that even this purported Census data is based on payroll information and thus doesn't include any solo practitioners, who account for something like 40% of all lawyers.

Posted by: Unemployed Northeastern | Dec 13, 2016 10:18:05 AM

Census data--The Economic Value of a Law Degree and Timing Law School are both based on Census data, written by professional labor economists using standard and widely accepted methods, and both peer reviewed.

After the JD reaches similar results using another data set.

Posted by: Facts | Dec 13, 2016 10:36:23 AM

"I can point you towards any number of think tanks screaming"

Yes, think thanks are very good at making a lot of noise. They're not very good at impartially and honestly analyzing data. Many of those same think tanks and pundits have been arguing that man-made global warming is fake and that cigarettes don't cause cancer.

It's not surprising that think tanks are advocating for student loan privatization.

Guess which private student lenders, tobacco companies and oil companies fund the think tanks.

Posted by: Think Tanks | Dec 13, 2016 10:39:39 AM

Actually, the recent GAO report suggested that the costs of IBR per student have been greatly exaggerated, even by DOE.

DOE did not allow incomes to grow with inflation and does not allow for the fact that many people who enroll in IBR drop out by not re-certifying their incomes every year and therefore will not get forgiveness.

Growth in IBR has been higher than initially expected, but Grad Plus loans are still highly profitable for the government, even after taking into account the costs of IBR.

Posted by: Federal Student Loan Profits | Dec 13, 2016 10:46:38 AM

Higher education spending is not a subsidy. It's a public investment with a very high rate of return for the federal government. The government is heavily dependent on the earnings of educated labor to support many of its less profitable expenditures, like the military and social security and medicare.

Some private student lenders are upset that they have to compete with a government program, and some ideologues who believe the government should be nothing but a military are upset. But that's about it.

Posted by: Public Investment | Dec 13, 2016 10:52:09 AM

From the outside looking in, I’m perplexed with the fascination over Bar passage rates. From what I have been told (having never crossed the threshold into law school), most law schools, particularly the top ones, don’t teach the Bar exam. So why is the ABA trying to measure something law schools don’t teach?

Moreover, it is my understanding the Bar passage rates of the top schools (which again don’t teach the exam) are significantly higher than those of lesser schools. This leads me to conclude students at the top schools are smarter and better test takers than their lesser endowed peers. But, wait a minute, don’t law schools already measure smartness and test taking skills? Isn’t there something called the LSAT? Isn’t it true a high LSAT correlates with a higher probability of passing the Bar? Putting this all together, I’m thinking if the ABA wants higher Bar passage rates, they should mandate minimum LSAT scores for admission into any law school, much less the top ones. Mm... I guessing the ABA will not want to go there. Maybe they should find some other oxen to gore. (Oh, wait, goring oxens will piss off the PETA people. Damn, it is so difficult today.)

Posted by: Dale Spradling | Dec 13, 2016 6:51:35 PM

It has not escaped my notice how the underlying theme underlying all of these pro-law school posts, quite obviously written by the same barely-anonymous individual, basically boil down to this:

- Law schools should not be held accountable for bar passage rates
- Law schools should not have any skin in the game

Well, tough. A decade's worth of bad press and thousands of buried graduates is going to bring, one way or the other, accountability. The voting public is sick to death about college costs and taxpayer financing of them. If there is any group that garners even less sympathy among the public than lawyers, it is law professors who earn enormous salaries for 2-2 teaching loads (if that) and a distressing lack of knowledge of how to actually practice law. Remember, dear my Ivory Tower friend, 6 in 10 adults has no college degree. Whining about how law school loans are actually super profitable based on circumstantial evidence on how you think law school loans are faring (save for MDs, no one borrows more GradPLUS than lawyers, median starting salary is still 20% below what it was in 2008 in real dollars, and BLS data shows completely stagnant wage growth for the profession, while industry reports scream about labor-saving changes, client pushback on billings, refusal to pay for junior associates, etc) will not persuade them nor our next prez and Congress.

Oh, and as for those think tanks that are not very good at being impartial and honestly analyzing data, I'll point out that the one study you keep citing was written by folk work off about a quarter million dollars in grant money from the people who administer the LSAT and a private student lender jointly owned by the accredited law schools (and the study doesn't include any meaningful new graduate data past 2006). And as far as I can tell, has never written one negative word about law schools. If I am in error here, please show me where he says "this tuition is too high" or "these job outcomes are unacceptable" or something along those lines.

"Census data--The Economic Value of a Law Degree and Timing Law School are both based on Census data, written by professional labor economists "

Careful: it was written by one economist and one law professor with no graduate education in economics or any other social science. If said law prof were to hold himself out as a professional labor economist despite 1) not being employed as a labor economist and 2) not having any graduate training in economist or any other social science, it could run afoul of MRPC 7.1: "A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading."

And again, Census data does not include the large plurality of lawyers who are solo practitioners and make an estimated $49,000 per year.

Posted by: Unemployed Northeastern | Dec 13, 2016 7:57:43 PM

Addendum:

"According to a recent GAO report, grad plus loans have the lowest "subsidy rate"."

I presume you are referring to page 84 here: http://www.gao.gov/assets/690/681064.pdf. But it doesn't say Grad PLUS loans, it says PLUS loans, which includes all ParentPLUS loans (you can verify this in footnote 8 to the chart), which get paid down faster than anything else because 1) they aren't eligible for IBR plans and 2) parents tend to have actual assets they might lose if they default.

Posted by: Unemployed Northeastern | Dec 13, 2016 8:26:41 PM

"Census data does not include the large plurality of lawyers who are solo practitioners and make an estimated $49,000 per year."

Wrong on both counts. Census data does include solo practitioners (I think you are confusing Census with BLS data), and solos typically earn closer to $100,000 per year according to After the JD3 and Census data.

http://leiterlawschool.typepad.com/leiter/2016/08/glass-half-full-author-concedes-problems-with-estimates-of-solo-practitioner-incomes-and-headcounts.html

Posted by: Data | Dec 13, 2016 9:28:03 PM

Sorry, guy, but default rates have always been lowest for graduate and professional student borrowers.
https://trends.collegeboard.org/student-aid/figures-tables/five-year-federal-student-loan-default-rates-institution-type-over-time

Those PLUS loan profits are driven by professional students--law students, medical students, MBAs, and other Master's degree holders.

Which is exactly why advocates of student loan privatization are so eager to turn those profitable customers over to the private lenders.

Posted by: PLUS | Dec 13, 2016 9:49:14 PM

I assume that you think everyone involved in the production of those studies was on the take, right?

The U.S. Census Bureau and the Department of Education which supplied the data, the legions of labor economists who developed the techniques that were used, the companies that publish statistical software, all the peer reviewers and conference participants, it's all one big conspiracy!

Posted by: The Paranoid style | Dec 13, 2016 10:08:28 PM

1. I love the cognitive dissonance: "Data" et al. talks long and earnestly about the sanctity and unimpeachability of IRS data... until I bring up Ben Barton's study that uses IRS data to find that real dollar salaries for solo practitioners have declined from $74k in 1967 to $49k in 2012. http://taxprof.typepad.com/taxprof_blog/2016/08/law-profs-debate-solo-practitioner-earnings-usefulness-of-irs-data.html. Don't you know that hundreds of thousands of lawyers underreport their revenue to the IRS to the tune of $50k or more per year? Barton dismissed this risible contention, and so do I.

2. Yes, PLUS data in your GAO study aggregates both Grad and Parent PLUS data. I'm glad I could help you read the chart. But in response, your link to five-year student loan defaults over time is a chart by INSTITUTION TYPE, NOT BY LOAN TYPE: graduate students can borrow Staffords, Perkins, and GradPLUS. IT IS NOT A CHART SHOWING GRADPLUS DEFAULT RATES OVER TIME. And again, law grads have a particular interest in not defaulting on federal student loans because it can mean the loss of their license(s), so they will go to extreme ends to avoid it. Not that they even have to, since as I said before, enrolling in an IBR plan will ward off default, as so very many law grads have done. And hey, look at this: grad students are just 8% of the college population but comprise 40% of federal student lending: http://www.wsj.com/articles/loan-binge-by-graduate-students-fans-debt-worries-1439951900. But yeah, I'm sure that given an average student loan debt of at least $140k (2012 figure per the WSJ link) and a median starting salary of under $63k (NALP), yeah, there's no way law school grads are enrolling in IBR, PAYE, REPAYE, or PSLF en masse. Totally. Because have you seen the wage premiums for the Class of 1995? Sigh. One might note that at the former law school home of the one individual you keep citing (Gee, I wonder why?), the NALP median was just $50,707 - barely one hundred dollars higher than the $50,651 average starting salary for four-year college graduates across all majors, http://www.naceweb.org/s11182015/starting-salary-class-2015.aspx, and in fact less than one year's tuition at said law school. The irony...

So either your data analysis is pretty poor or you are being openly disingenuous, and in either event you are moving the goalposts with each response and hoping no one else notices. In any event, this is more than enough to discredit, in my eyes, everything you've written here. Fortunately, 0L's are smart enough to see through this sort of haze, which is why applications for next year are down another 5.1%. Or maybe they are reading the sundry articles about the government's plans to limit federal student lending and repayment options. But I'm sure you and others will have no problem exhorting future prospective students to borrow private loans and face four-figure loan payments a few months after graduation. You know, because wage premium.

Looking forward to your next half-dozen frenetic posts to the same one individual. Don't be surprised if I ignore them, though. At a certain point, it's best to let people tilt against windmills by themselves.

Posted by: Unemployed Northeastern | Dec 14, 2016 8:16:52 AM

At this point, not even Barton will defend the way Barton misinterpreted IRS data. The IRS itself does not support his views. The problem isn't the IRS. The problem is that some people have used data without understanding it to tell an exciting (and wrong) story.

Graduate students have higher incomes and lower default rates than undergraduate students. The larger the loan, the higher the quality of the education, the more likely the student to complete it, and the lower the default rate.

http://www.nytimes.com/2015/09/01/upshot/why-students-with-smallest-debts-need-the-greatest-help.html?_r=0

We can reasonably assume that as between Parental Plus and Grad Plus loans, the Grad Plus loans are the stronger performers. After all, private student lenders try to refinance Grad Plus loans much more aggressively than they try to refinance Parental Plus loans. Their profits depend on knowing which borrowers are good credits

Posted by: Data | Dec 14, 2016 10:52:35 AM

"Their profits depend on knowing which borrowers are good credits [sic]"

Uh huh. "SLM Corp, the largest U.S. student lender, last week sold $1.1 billion of securities backed by private student loans. Demand for the riskiest bunch—those that will lose money first if the loans go bad—was 15 times greater than the supply, people familiar with the deal said." http://www.wsj.com/articles/SB10001424127887323293704578334542910674174

And beyond that, your narrative continues to be made from whole cloth for the best possible sheen for law schools. You haven't the foggiest idea whether GradPLUS are stronger performers than ParentPLUS loans because the data is not available. Quite frankly, the sheer fact that GradPLUS can go on IBR plans and Parent PLUS cannot is almost de facto proof that Parent PLUS loans are paid down faster. And googling Parent Plus refinancing reveals that all of the usual suspects - SoFi, SLM, etc - are eager for the business.

Funny, because the person you keep citing claims victory over everyone even if they ring his bell, like Barton, Scheiber, Leichter, and Harper have all done over the years. So many similarities...

"Some people have used data without understanding it to tell a story."

Oh, like how your buddy claimed that the 5x depression during law school is solely attributable to genetic predisposition (and therefore law schools should not be blamed or change in any way) even though every study shows only about 40% of depression and 50% of happiness have any sort of genetic link? Even my primary Taxprof commenter-antagonist "Rob T" agrees that this contention is ridiculous.

Posted by: Unemployed Northeastern | Dec 14, 2016 7:36:26 PM