Paul L. Caron
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Friday, October 30, 2015

Senators From Both Parties Take On Law Schools For Failing Students

Bloomberg, Senators Take On Law Schools for Failing Students:

Law schools just made some new enemies. This week, lawmakers from both parties sharply criticized U.S. law schools for leaving students with overwhelming debt and degrees that may not get them jobs.

“We need to move away from a system that results in too many law school graduates twisting in the wind,” said Senator Chuck Grassley (R-Iowa) in an e-mailed statement. Putting law graduates in a position from which they might default on federal loans “isn’t good for the graduates, and it isn’t good for the taxpayers,” he added. 

Grassley said he was “troubled” by problems illustrated in a new report by Law School Transparency, an advocacy group. The report highlighted the large numbers of under-prepared students being accepted into law schools. Test scores have declined for the lowest-achieving students since 2010 at the majority of law schools. Padding classes with underqualified students, the report said, is “leaving thousands deep in debt with few prospects for employment that will enable them to pay off their debt.”...

On Monday, Senator Dick Durbin (D-Ill.) blamed the government’s generous loan programs for encouraging troubled law schools to hike prices. In 2006, Congress made new federal loans available to graduate students, allowing them to take out as much debt as they want in order to finance their education. 

“Now that we’ve taken the cap off what you can borrow for graduate courses, they have decided they are going to just charge to the heavens in terms of tuition for worthless, worthless law school degrees” said Durbin, at a Congressional meeting on student debt this week, referring to for-profit law schools.

By 2013, the sticker price at private law schools had shot up to nearly $42,000, from $25,600 in 2003. The typical law graduate held $118,600 in debt, according to Law School Transparency.  

Bloomberg 2

“When I ask the presidents of universities ‘Why do you charge so much to go to law school?’ they say ‘Because we can; the students are applying and they’ll pay whatever we tell them,’” Durbin said.

(Hat Tip: Kyle McEntee.)

Update:  Above the Law, Senators Are Tired Of Law Students Flushing Loan Dollars Down The Toilet For ‘Worthless’ Degrees

Other TaxProf Blog posts:

https://taxprof.typepad.com/taxprof_blog/2015/10/senators-from-both-parties-take-on-law-schools-for-failing-students.html

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Comments

Please remember that several years ago before the plus loan was available it was private banking making loans to these students and not the federal government. Private banks were just as ruthless in their lending practices and many times failed to help the student when they could not make payments.

At least with the plus loan, although I will agree the amount of lending is too high, there are repayment options and terms that make defaulting less of an issue.

Posted by: Ann | Nov 16, 2015 10:06:32 AM

Wow.

See what a mere 20 years of screaming at the top of our lungs can accomplish in the "best political system in the world...."

Posted by: cas127 | Oct 31, 2015 4:30:30 PM

Why is law school three years? I'm confident an overwhelming majority of lawyers would agree that the third year is wasted.

Here's a modest proposal: After the first year, give the MBE. If you don't make an acceptable score on the MBE, you don't go to the second year.

After the second year, give the LL.B. and send the students off to take their state bar exams, which would consist only of state-specific subjects.

I realize this would gore many oxen, among them law school faculty, and BAR/BRI and other bar review cram courses. Tough.

Posted by: Jim | Oct 31, 2015 1:51:24 PM

Quote: “Now that we’ve taken the cap off what you can borrow for graduate courses, they have decided they are going to just charge to the heavens in terms of tuition for worthless, worthless law school degrees” said Durbin..."

Why is Durbin surprised?

Posted by: Michael W. Perry | Oct 31, 2015 11:03:28 AM

@anon.25,

The ability of private lenders to securitize and sell those loans (a la NINJA mortgages) circumvented the need to conduct due diligence. Law schools cost a LOT more than the $20k/year you could borrow in federal loans pre-GradPLUS, and no law student ever got turned down from any private lender to cover the spread for any law school - even before the loans were made nondischargeable in 2005. Yank GradPLUS, and private lenders, including the one owned by the law schools themselves (Access) will fill the void the very next day.

Posted by: Unemployed Northeastern | Oct 30, 2015 2:02:48 PM

This is excellent news. It was a long time coming. Schools denied and obstructed. Now, you lost the ability to participate in the change. Congrats, law schools, you failed the bar and the profession.

Posted by: Jojo | Oct 30, 2015 12:42:26 PM

Other bits of news: Senator Lamar Alexander, who is in charge of the HEA reauthorization, wants to limit graduate school lending to $150k, though it is not clear if that is a lifetime cap or for each advanced degree one might get. PSLF is still in the crosshairs for repeal by Republicans and Obama is still willing to limit its forgiveness to $57,500 (with the remainder moving over to IBR or PAYE). PAYE just got modified by executive action or order to REPAYE, which lengthens repayment for graduate school loans back to 25 years and now uses your spouse's income to calculate payments, even if you are filing separate tax returns. The current system is simply not going to last.

Posted by: Unemployed Northeastern | Oct 30, 2015 12:31:03 PM

For some recent historical perspective, Grassley (along with Boxer) is one of the two Senators who used the implicit threat of a Senate investigation into the ABA's worthiness to continue as law school accreditor to get them to create the new employment reporting requirements back in the summer of 2011.

Posted by: Unemployed Northeastern | Oct 30, 2015 12:27:37 PM

Sticker price and actual price are two different things. Also, how much of "average debt" is law school tuition related?

Posted by: Questions | Oct 30, 2015 11:51:17 AM

This might actually prompt the ABA to start enforcing some of their rules on the lower performing law schools.

Posted by: Justin | Oct 30, 2015 10:52:33 AM

Very interesting. So Congress (which is comprised mostly of lawyers) has set sights on this issue. Law schools have already locked in three more consecutive classes of graduates who will fail the bar at historic rates, and pass rates are likely to dip 5-10% below this year's performance. The performance of student loans in IBR will probably be dismal, and will come under close scrutiny. I don't see any way for law schools to weather this storm. Major reform to federal lending, and perhaps to accreditation oversight, is coming.

Posted by: JM | Oct 30, 2015 9:43:42 AM

Oh, snap.

Posted by: yes, but | Oct 30, 2015 9:25:18 AM

I think it's generally good to have a high sticker price and then give various discounts. In theory this should allow for people who are independently wealthy to effectively subsidize the education of others (although I know that in practice oftentimes the wealthiest students get the scholarships).

In any event, sorry that I keep asking this question, but the issue keeps coming up in all of these articles: Why doesn't the government just get out of the business of student loans? The government already subsidizes higher education in many ways. For professional degrees, if the investment for a particular student makes sense, a private lender will make the loan. This seems like a prime example of where the free market might properly sort things out and the government should simply get out of the way.

Posted by: anon. 25 | Oct 30, 2015 9:14:02 AM