Paul L. Caron
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Thursday, October 29, 2015

Simkovic Responds To New York Times Editorial On The Law School Crisis

NY Times Logo (2015)Michael Simkovic (Seton Hall), N.Y. Times Is Mistaken: Law Student Loans Are Safe and Profitable for the Government:

If the [New York Times] Editorial Board's accusations were true—if the “majority of law schools” really were running "“a scam” in which they load down their students with “crushing amounts of debt” which “they can’t repay”—Florida Coastal and other law schools should have among the highest default rates of any institutions of higher education in the country.

They don’t and they aren’t. ...

For the cohort entering repayment in 2012—the most recent year of data available*—the national 3-year cohort default rate on federal student loans was 11.8 percent.  The comparable figure for Florida Coastal was only 1.1 percent—more than 10 times lower. ...

Even low ranked law schools with allegedly “outrageously high” tuition generally have much lower student loan default rates than either the national average, or the average for institutions that grant bachelor’s or advanced degrees.

Simkovic 2

The New York Times is right that many law school graduates—around 40 percent—do not practice law. But law graduates do not have to practice law or earn spectacular salaries to benefit financially from their degrees and repay their loans over their careers.  They need only earn roughly $10,000 per year more than they would have earned without a law degree. The overwhelming majority of law graduates, including those not practicing law, receive substantially larger boosts to their earnings.

Thanks to income based repayment programs with debt forgiveness and progressive taxation, the overwhelming majority of successful law school graduates can offset the risks of investment in education for those rare unfortunate individuals who do not benefit as much from their educations.

It would be a mistake to let the small tail of defaults wag the much larger dog of public benefits.

Scaling back access to federal student loans to law students will not benefit taxpayers.  To the contrary, the loss of revenue would mean larger deficits for the government, and eventually higher taxes for the rest of us.

https://taxprof.typepad.com/taxprof_blog/2015/10/simkovic-responds-to-new-york-times-editorial-on-the-law-school-crisis.html

Legal Education | Permalink

Comments

For a guy who purports to have no horse in the race, Reader got pretty worked up rather quickly.

At some point, when the paper of record and liberal members of the US Senate begin to call out your scam as a scam, I can see why some may get angry.

If caveat emptor and our defaults aren't technically "defaults" are the best defenses you can raise, you've lost the argument.

Posted by: Jojo | Nov 3, 2015 1:49:30 AM

anon.25,
I honestly haven't thought about the answer to that as much as a lot of other people have. Fairly off the cuff, my opinion is that gov't being involved in loans isn't a bad thing, and can help ensure the access the gets talked about. And, done right, it can be a modest moneymaker for the gov't (and, despite arguments to the contrary, my gut tells me that right now, for law school loans, it isn't, but we don't really have the data right now to tell, Simkovic's claims to the contrary). I think that tuition needs to be more aligned with ability to repay, which correlates to starting salaries and a bi-modal salary distribution. Defining the majority of recent grads as suffering partial financial hardship for repayment purposes is ridiculous. And, to bring tuition down, the bottom line ends up being faculty size, salary, and teaching loads. I think there probably need to be some controls on the faculty salary teaching market, but not sure what the best way to go about that would be. Obviously, there would be lots of faculty resistance and lateral moves to other institutions that aren't putting those controls on, but how valuable is any single law faculty, really? Having Congress get involved at that level seems hard. On balance, increased transparency over the past few years has had really beneficial impacts, I think, but it's still fairly early on.

Posted by: yes, but | Nov 1, 2015 3:40:43 PM

You bloviating buffoons can all congratulate each other as much as you like, it changes nothing about the falsehoods and misleading claims in the NYT editorial. UN concocts an anecdote about one Seton Hall graduate and then generalizes it without evidence or support, in order to claim that government loans to law school graduates are bad business. This is typical of what passes for argument among you irrational zealots. Since you don’t read, let me remind you about what Simkovic wrote on this whole issue originally:

Another explanation is that law graduates could be avoiding default by disproportionately taking advantage of income based repayment plans with debt forgiveness. This explanation is also unlikely to explain most of the gap [between the default rate of law graduates and others] because (1) law school borrowers default rates were relatively low long before these programs were introduced and their advantage has remained relatively constant after their introduction; (2) if law students were disproportionately using income based repayment to avoid default (rather than to pay down their loans at a slower pace, similar to schedules available through graduated and extended repayment plans), the percent paying down their debt should be unusually low; in fact, law school borrowers repayment rates are generally as high or higher than most institutions according to recent Department of Education data; (3) law schools are nowhere near the default rates at which negative institutional consequences materialize, and therefore have little incentive to try to artificially push down their default rates (4) After the JD found that law students from the class of 2000/2001 have paid down their loans rapidly (5) to the extent that law graduates are enrolled in programs tied to public service, rather than low incomes and high debts, these public service loan forgiveness programs are working as intended by narrowing the compensation gap between private and public sector work."

Posted by: Reader | Nov 1, 2015 3:18:20 PM

"yes, but":

What's the optimal outcome here, for society? To have the government exit the student loan business?

Posted by: anon. 25 | Nov 1, 2015 12:58:51 PM

Also, at this point, the 'horse race' is not confined to the best arguments on this single thread (even if UNE is winning that too), it's about influencing US gov't policy, and while it's too early to say for sure, I suspect I know which horse is going to prevail there in the end. Will Congress get changing to student loan policy 'right' and correct this whole mess, almost certainly not - we're talking about Congress, but I'm confident that there are going to be changes that will hopefully do something to correct the 'market' distortions that are so evidently in place.

Posted by: yes, but | Nov 1, 2015 7:18:44 AM

Reader, you just lost this argument, and badly. Despite all your bluster (and aside from obnoxious nitpicking of the Times' phraseology, that's all you brought to this discussion), you did not win, but actually look rather silly in the end (but to be honest, I really don't feel as though you were trying - like I said earlier, I think you're mostly trolling, even if you are representing your real opinion). What UNE just explained, and despite your further bluster to the contrary (s)he actually knows an awful lot about what (s)he discusses on this and other blogs, this hypothetical and very plausible student would not be in default at all, yet is not able to pay down the principle on her loans. In the same way UNE doesn't know the average salary 10 years out, neither do you. And the profile of repayment is what matters here. So many students have such ballooning interest in the early years of their repayments that there's really no plausible way for them to pay back these loans, and the taxpayer will be left holding the bag, and this is not restricted to for-profit law schools. Of course, for the time being, US gov't policy is that this is ok. But hopefully that's something the news of the last week will finally catalyze to change. Further data will be enlightening, once the gov't finally gives us the specific profile of law grads over the past few years who are on IBR/PAYE - and I'm confident it is not going to be pretty.

For the sake of declaring whatever 'horse' each of us have in this race, I didn't take out any loans in law school, and I'm very thankful to have been in that position.

Posted by: yes, but | Nov 1, 2015 7:11:39 AM

Reader, it was very reasonable for UN to assume that the average graduate from the average law school (Seton Hall) will make the average salary for an attorney 20 years out of school. Inflation probably won't factor in, as there has been deflation in many areas of the law, and salaries have been flat for a decade at large firms.

Are you saying Seton Hall is better than the average school? What is the basis for an assumption that their grads would make more than the average reported salary?

You have essentially conceded that you lost this entire debate, and were completely wrong in your first assertion.

Posted by: JM | Nov 1, 2015 7:10:42 AM

You can't use data that doesn't exist, Reader. Seton Hall average (by which I presume you mean median, unless you are hoping high-earning outliers skew the number) earnings ten years out don't exist, not that ten years out matters since PAYE takes twenty years. I used the median attorney salary from BLS, which I think is more than fair - few legal observers think law will be as lucrative for this generation as it was for prior ones. And you resort with lazy ad hominems that, ironically enough, cut against the earlier research of the very author whose work you are trying to defend here. Don't you know that it doesn't matter if I practice law or not? The wage premium appears anyways. And you've appeared in this thread just as much as I have, including quite early on Sunday morning after Halloween evening, so you may want to cool it on the "How do you have so much time on your hands" angle. So again, tell me how non-defaulting law school grads with large loan balances who enroll in IBR plans don't cost the government money. That is the crux of your argument, after all - the NYT is wrong because few law grads default and that, to you anyways, axiomatically means that their loans are paid back. You are mistaken.

Posted by: Unemployed Northeastern | Nov 1, 2015 6:50:13 AM

Reader, I hope you don't think you're done with this thread. UN gave a perfect analysis of how law is a losing proposition for the average student and the Government when everything goes right. What is your response?

Posted by: JM | Nov 1, 2015 5:09:14 AM

You are making assumptions, without any evidence, about the longterm earning pattern of the Seton Hall graduate. If it were true that the majority of Seton Hall graduates had a repayment pattern exactly as you describe, then Seton Hall would be in the minority of American law schools to which the charge of "being like Florida Coastal" applies. But it is not true. Did you check the default rate for Seton Hall graduates? Do you know what average earnings are ten years out of law school? Of course you didn't check the former, and you don't know the latter. It is clear that you have a horse in this race, but your horse is losing badly.

I wonder whether the vast amount of time you spend spouting nonsense in blog comments has something to do with your employment status?

Posted by: Reader | Nov 1, 2015 4:48:23 AM

P.S. " I have no horse in this race at all"

Yeah, I'm sure the rest of the readers believe that...

Posted by: Unemployed Northeastern | Oct 31, 2015 8:29:12 PM

I see, I do have to spell it out. Let's take it back to the Seton Hall medians as a representative example of a normative outcome from a median-ish law school. Neither you nor anyone else has tried to refute my numbers, which makes sense, since they come straight from Seton Hall's public disclosures.

That median student (who received discounting) owes $200,000, has an AGI of $54,321, and a $2,220 per month student loan payment. So that person is going on PAYE, because that's more than just a partial financial hardship. Payments will be 10% of discretionary income over 150% of the poverty line. With a salary of $54,321, that PAYE payment will be... $312 per month. With the remarkable loan repayment calculator over at finaid.org, we can play around with PAYE-specific hypos. By the end of the 20 year term, let's say said debtor is making the magic/mythical median lawyer income of $113k. Guess what? Even with that increase in income, the maximum possible payment is just over $700/month, and the total paid by the debtor over twenty years will be... $116,418.19. Barely over half of the original principal borrowed, except it is all going to interest - and $272,000 in interest will accrue over those 20 years. The principal won't even be touched. There will be $155,531.81 in unpaid interest and $200,000 in unpaid principal forgiven, as per finaid.org's PAYE loan calculator. That's a write-off of $355,531.81 for the government, as well as the same amount in "realized income" for the debtor that they get to deal with the IRS about. So tell us more about how the feds aren't losing money on these non-defaulting students, huh? We're all ears.

Posted by: Unemployed Northeastern | Oct 31, 2015 8:24:15 PM

Please, this is just sad now. It is obviously false that a majority of law schools are "vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults." No evidence is cited in the NYT editorial, and no such evidence exists.

UN, you failed in your chosen career and have been trolling law blogs ever since. I feel a small obligation to push back against the ignorant stupidity, but maybe it is not worth the time. I have no horse in this race at all. It is just appalling how the mob mentality repeats again and again complete lies.

Posted by: Reader | Oct 31, 2015 6:21:47 PM

The New York Times quote in question:

"If this sounds like a scam, that’s because it is. Florida Coastal, in Jacksonville, is one of six for-profit law schools in the country that have been vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults. Yet for-profit schools are not the only offenders. A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education."

And reader's contention is that this is false because relatively few law grads default on federal student loans. But every accounting of IBR programs, regardless of the accounting system the CBO uses (present value or fair value) shows that IBR programs will take a $11 to $20 billion bite out of the profitability of the program. Obviously high-loan balance enrollees into IBR/PAYE/REPAYE will incur the largest losses to the program. And outside of medicine, law students have the biggest loans out there. As I showed upthread, the median student at a mid-pack law school like Seton Hall simply has no option except to enroll in one of these programs. At a school like Florida Coastal or Touro or Suffolk or similar, the outcomes are going to be considerably bleaker than that already bleak reality. Our tendentious "reader" has not presented a shred of evidence otherwise. Nor has Simkovic.

Posted by: Unemployed Northeastern | Oct 31, 2015 1:57:47 PM

It is false that the "majority" of American law schools are acting like Florida Coastal. That's what the "paper of record" published. They published a clear falsehood, as even you now have to admit. If they had said a "minority" of non-profit law schools were moving in the Florida Coastal direction, that would have been accurate. The editorial still would have been misleading in the other respects noted by Simkovic, but at least a blatant falsehood would not have appeared.

Posted by: Reader | Oct 31, 2015 9:30:54 AM

So Reader, your point is that because a non-negligible but non-majority of US law schools are behaving like FC that the NYT is wrong, should publish a correction, and everything is ok with US law schools?

I can't even agree to that. I guess the key phrase we differ on is 'such behavior', which you are wanting to define as enrolling very high risk students, while I think it is reasonable to define it as the enrollment of considerably worse students than in prior years to maintain revenue levels. In which case, yes, I think a majority of schools are behaving in such a manner and the NYT sentence you find so objectionable is reasonable, even if it wasn't perfectly phrased. On balance, I agree with the point the Paper of Record is making. But I do see your point.

Posted by: yes, but | Oct 31, 2015 8:06:12 AM

Reader: "Barry: this blog allows comments, and the comments are almost always worthless."

Where 'almost always worthless' means 'gave extensive criticisms which I won't refute'.

Posted by: Barry | Oct 31, 2015 6:41:36 AM

My God this is tiresome. "yes, but": the LST study does not show that a "majority of American law schools" are acting like Florida Coastal. Look at it again. It shows a small minority may be acting like Florida Coastal.

Posted by: Reader | Oct 31, 2015 5:36:14 AM

Reader, your 'facts' are simply wrong. Look at the LST figure on the front of Prof Caron's recent LST post. That obscene rise in the proportion of high risk, very high risk, and extreme risk students, based on the drop in their LSAT numbers, is not confined to for-profit law schools. Many of those students are matriculating at non-profit law schools whose bar passage stats will reflect this a year or two down the road.

This isn't even hard to refute. You're living in a ridiculous fact-challenged bubble. Have fun voting for the republicans.

Posted by: yes, but | Oct 30, 2015 7:01:04 PM

The NY Times claimed that, "A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior [like Florida Coastal's]."

This is false. Prof. Caron is generous to give you people a forum, but the facts are the facts.

Posted by: Reader | Oct 30, 2015 6:03:09 PM

@Extended terms,

1. If you graduated in 2007 and had $100k in loans, at least some of them are probably private.

2. Not being in default is NOT the same thing as making timely and full repayments. Many high-balance law school loans will never be fully paid back or anything close to it. That is the strawman Simkovic and Reader are perpetuating here.

Posted by: Unemployed Northeastern | Oct 30, 2015 2:32:08 PM

I'm not clear why some of you are seeming to assert that repaying on another other than a 10 year term is the equivalent of a default. It seems like there are lots of good reasons, including but not limited to an inability to repay, why someone would choose not to repay on over 10 years.

For example, I graduated from law school in 2007, was able to consolidate my loans at a variable (and consistently decreasing interest rate, which is now just above 2%), and have extended my repayment terms to 30 years. I extended the repayment terms because I couldn't imagine anyone else lending me $100k+ at ~2% interest ever again.

It's not that I think Unemployed NE math is wrong. In fact, his numbers are conservative. Except that deferring repayment, stretching repayment, etc. are all legitimate. Will some of these eventually default? Probably. But certainly not all.

Posted by: Extended terms | Oct 30, 2015 1:50:02 PM

Making the reader believe full payments are being made is far more dangerous false assertion than what the NYT did. I will wait for Simkovic to apologize and correct before demanding the same from the NYT. One is trying to prevent an individual from sinking 150k into something they may never get back, another one is making money off the false hope of students.

Posted by: Daniel | Oct 30, 2015 12:03:15 PM

"The realities are that most law schools are very good investments, most law graduates do not default on loans, and government loans are good business for the government."

I have a feeling that you would have forced Galileo to drink hemlock.

IBR is soft-default. Asserting 'the default rate as low' without talking about how easy default is to avoid given IBR and other programs, and how the employment data shows that new graduates would almost certainly be in actual default without such programs, is disingenuous.

Posted by: terry malloy | Oct 30, 2015 11:40:49 AM

If someone is participating in IBR, they technically are in default. The DOE does not want to let those figures out of the bag, because they will probably be horrible. I don't think the NYT needs to retract anything. If a large portion of the borrowers are in one of the above loan repayment plans we can probably assume that they will not be paid in full. Great response un-employed NE.

Posted by: LawDad | Oct 30, 2015 11:11:27 AM

Reader - why don't you make your trolling'ish anti-scam comments over on Bill Henderson's post, which seems to consist of a bunch of academics that are taking the challenges facing your profession seriously? Let us know how that goes.

Posted by: yes, but | Oct 30, 2015 9:56:49 AM

Reader,

I do hope you aren't a law professor, because this is just a sad effort on your part.

1. The New York Times made no false assertion about default rates; inability to repay does not automatically lead to default because there are about a half-dozen loan repayment procrastination measures available. Your strawman argument otherwise is duly noted.

2. As I said above, an actual majority of outstanding federal student loans are neither in default nor in active and full repayment. I can't quite tell whether your supposition that student loans only exist in default and not-default states is disingenuous or simply ignorant. IBR plans, forbearances, and deferrals account for most student loan account statuses and have for years now.

3. As per a GAO study last month revealed, large majorities of IBR and PAYE enrollees - offhand, I believe it was 65% and 72%, respectively - make less than $20k/year. There is a reason why the qualification for enrollment is "partial economic hardship"; they are basically protracted Chapter 13 bankruptcy repayment plans except with a tax bomb at the end instead of a fresh start. To the extent law grads are enrolled in these programs, it is nearly prima facie evidence that they are not experiencing the vaunted, nigh-mythical law school wage premium (or is it JD wage premium? The S&M study is so murky on this point...).

4. Neither you nor Simkovic's op-ed have done anything to take away from the point of the NYT article, which is that many law school graduates do not and will not be able to earn enough to make their standard student loan payments. That does not mean they will default; it means they will probably enroll in IBR/PAYE/REPAYE/PSLF and pay back a small fraction of what they owe. This is pretty basic student lending policy and precisely why CBO estimates on IBR programs conclude that they will take a >$30 billion bite out of federal student lending's overall profitability; do try to keep up.

Posted by: Unemployed Northeastern | Oct 30, 2015 9:41:54 AM

Woe, reader, you're really aggressive. almost seems as though you're feeling threatened by all this.

Posted by: yes, but | Oct 30, 2015 9:30:31 AM

Participating in IBR is not defaulting, so what is your point? The NY Times made false assertions about default rates among law school graduates. They should print a correction, don't you agree?

Posted by: Reader | Oct 30, 2015 8:10:09 AM

I did read Simkovic’s piece, and in no way does Simkovic demolish or even deny the role of income-based repayment programs in the low rate of default among law students. He simply asserts that it has to do with the larger incomes they enjoy, regardless of whether they belong to the 60% of JDs who will ever have a meaningful opportunity to practice law.

From the piece: "For the cohort entering repayment in 2012—the most recent year of data available*—the national 3-year cohort default rate on federal student loans was 11.8 percent. The comparable figure for Florida Coastal was only 1.1 percent—more than 10 times lower.” The link takes you to a Department of Education webpage, which in turn will link to an explanation of how the cohort default rate is established. To become a borrower included in the numerator of the default rate calculation for a given period, you either must have a defaulted loan purchased from your loan servicer by the Department within that period, or be 360 days or more in delinquency on a loan already owned by the Department (e.g., a Direct Consolidation Loan). Nobody who pays as agreed in an income-based repayment program is delinquent on their loans, no matter how little they pay relative to what they would owe if the lender held them to a strict 10-year repayment schedule. Thus, your IBR graduates are invisible to the cohort default rate calculation, even though nobody knows exactly how much money the federal government will truly succeed in collecting from them in the statutory window. And as others have already pointed out, it’s the rare JD so dumb that he can’t figure out how to apply for IBR and save himself hundreds of dollars a month in loan payments.

Posted by: Morse Code for J | Oct 30, 2015 5:25:48 AM

JM: you didn't read Simkovic's piece either.

Barry: this blog allows comments, and the comments are almost always worthless.

The realities are that most law schools are very good investments, most law graduates do not default on loans, and government loans are good business for the government.

Posted by: Reader | Oct 29, 2015 6:57:30 PM

I wonder what fraction of loans are being paid by third parties, commonly known as parents? Parents have been known to bail out their little darlings even more often than politicians bail out their favorite voters.

Posted by: AMT buff | Oct 29, 2015 6:33:49 PM

"@Math: If he demolished the claim, it would be above the line and not in the footnotes."

Posted by: terry malloy

In addition, he'd be stating his argument on a blog which allowed comments.

Posted by: Barry | Oct 29, 2015 6:01:50 PM

@ Reader,

These commenters are correct that the US Govt is likely getting a few cents on the dollar from student debtors under IBR. That is tantamount to default. Virtually all of these IBR enrollees would have defaulted if they had to repay on a conventional timeline.

Simkovic purportedly "refutes" this line of reasoning by arguing that the great majority of loans in IBR are still getting paid down. I presume he means the principal is going down (if he doesn't then his counterargument falls apart completely). So for all we know, these grads are paying their debt down by $1,000 a year, and they will be repaid when they are 185 year old if they live that long. Of course this requires estimation, but what is a good guess for the monthly payment a grad who makes $40,000 as a Wal-Mart supervisor and has $185,000 in debt (which describes most law grads, more or less)?

Posted by: JM | Oct 29, 2015 1:30:54 PM

It is remarkable that there is not a single criticism here not thoroughly addressed in Simkovic's post. Don't you folks even bother to read before recycling your usual talking points? Or do you just count on the fact that no one else will read, and so will think your points make sense?

Posted by: Reader | Oct 29, 2015 12:32:04 PM

@Math: If he demolished the claim, it would be above the line and not in the footnotes.

Posted by: terry malloy | Oct 29, 2015 11:48:23 AM

I do love the irony of "Math" claiming that someone who makes $3495/month after taxes and has a $2,220/month student loan payment can survive in oh-so-inexpensive New Jersey without enrolling in an IBR plan.

Posted by: Unemployed Northeastern | Oct 29, 2015 11:09:17 AM

Not necessary. Simkovic cannot "demolish" that claim because degree-level IBR enrollment data is not publicly available, despite numerous FOIA requests to the Department of Education. Nor can he make an argument against the public data I have used about the outcomes for his former students - the median student loan payment is more than 2/3 of the median salary. He is clearly assuming that the opposite of default is timely, full, and active repayment, which it is not. About 12% of outstanding student loans are in default, and about 37% of outstanding student loans are in active, timely, and full repayment, per the New York Federal Reserve. That means that the majority of student loans are in forbearance, deferral, delinquency, or an income-based repayment plan. Funny how that works.

Posted by: Unemployed Northeastern | Oct 29, 2015 11:06:03 AM

Wow, Unemployed Northeastern, you nailed it. I was wondering about his claim to the effect of "law school is worth it if it increases your salary by $10k each year". Instead of your estimate of $2,220/month of student loans, let's assume law school alone sets you back with just $1,500/month (this would likely be higher for someone not on a scholarship), my estimate under this scenario is that you would need to make at least $25,000 more per year (before taxes) to just break even, at least for the duration of years during which the loans are due (and I'm ignoring that you're foregoing 3 years of salary to attend law school, and that you could have invested some of this income at a very early age). My estimate of $25k may be artificially low given some of the assumptions here, so where the heck does he come up with just $10k?

Posted by: anon. 25 | Oct 29, 2015 10:51:46 AM

Read the full post on Leiter Reports, with the footnotes. Simkovic demolishes the claim that the low defaults are an artifact of IBR / PAYE.

Posted by: Math | Oct 29, 2015 10:32:46 AM

Question for Professor S: Do grads making IBR or PAYE payments of $0 a month (or another nominal amount) count as defaults? Because they should.

Posted by: Lonnie | Oct 29, 2015 9:06:05 AM

Yes, so people with seven years of college under their belt are largely able to figure out how to enroll in IBR/PAYE/PSLF/REPAYE. This is not anything we didn't already know. What we don't know is what percentage of law school grads are enrolled in such a program, because the Department of Education is holding onto that data very closely. But we can gleam a bit of the picture by reading between the lines.

Take Seton Hall Law School, for example. According to its 2014 ABA Form 509, it costs $50k in tuition and $22k in living expenses. 433 of 688 students received any discounting, with a median grant of $25k. So even though only 62% of the students received any manner of discounting, I'll be super generous and assume that the median grant represents the whole student body. Ergo, let's assume the median student paid just under $50k per year to attend Seton Hall. Then tack on a few grand in bar expenses, the nearly 5% loan origination fee, three years of interest on all of it since none of these loans are subsidized anymore, and let's say $8k in bar expenses between BarBri, application fees, and living expenses. Let's call it $175k all in. Then there's undergrad debt plus three years of interest on that! The average undergrad student debt is now about $33k, but let's use $25k just so we are talking a nice round $200k in student loans. The repayment calculator at finaid.org says that on the standard repayment plan (10 years), someone owing $200k for undergrad and law degrees at an average of 6% interest will have a $2200/month payment. That's after-tax, obviously.

Now, let's move over to Seton Hall's 2013 NALP report, the most recent available. Only 64% of the class reported salaries; another 11% were still unemployed (higher than the national average unemployment rate for four-year graduates in the class of 2013) and the rest simply didn't report salaries. Again, I'll be generous and assume for simplicity's sake that the median reported salary is representative of the entire class as opposed to just the cohort that reported salaries. The median salary was... $54,231. The income calculator at smartasset..com pegs the income tax burden (federal/state/FICA) for that salary in South Orange, New Jersey, as $12,378. Ergo, the median takehome salary for Seton Hall Law School graduates in the class of 2013 was $41,943. That's $3,495.25 per month. And they have a median $2,220 per month student loan payment.

Long story short: the median Seton Hall grad, where Michael Simkovic teaches, is only solvent because of IBR/PAYE/PSLF. They sure as heck aren't making full and timely student loan payments. Oh, and the 75th percentile income, as per that NALP form, is only $75k/year, which is $55k takehome or $4583/month, and the median student loan payment will still be about 50% of the monthly paycheck. Res ipsa loquitur.

Posted by: Unemployed Northeastern | Oct 29, 2015 8:55:21 AM

So if lending to law students is profitable, why is the government involved? Why not let the free market sort it out?

Posted by: anon. 25 | Oct 29, 2015 8:32:48 AM