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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, January 6, 2018

Proposed Changes To Student Loans Worry New AALS President Wendy Perdue

AALS (2018)Law.com, Proposed Changes to Student Loans Worry Law School Association's New President:

We caught up with incoming AALS President Wendy Perdue, dean at the University of Richmond School of Law, to discuss her goals for the association, the apparent boost in law school applicants this year, and whether the closure of some schools is good for legal education. ...

How is the mood at the annual meeting? Are deans and faculty optimistic that legal education is poised to rebound?

You can’t be a dean without being optimistic. Among deans, we are always hopeful about the future. I think the concern right now is the pending education bill that would dramatically limit access to loan funds for graduate students. The house bill, at the moment, caps graduate borrowing at $28,500 and would eliminate public service loan forgiveness, that’s of great concern to all law deans. ...

Is the closure of some law schools a good or bad thing for legal education as a whole?

The number of schools closing is relatively small, so the overall impact is not very much when you think of the reduction of seats available in law schools. The last six years have been tumultuous, and I think a lot of people thought we’d see more closures earlier. Frankly, I think it reflects the value universities have put on legal education that we went a long time without schools closing.

Above the Law, Changes To Federal Loan Program Could Be Catastrophic For Law Students

https://taxprof.typepad.com/taxprof_blog/2018/01/proposed-changes-to-student-loans-worry-new-aals-president-wendy-perdue.html

Legal Education | Permalink

Comments

If you really believe in the economic value of a law degree, you won’t fret about the federal graduate lending ceiling being lowered from “whatever the school says the cost of attendance should be” to $28,500 per year. As I’ve shown before on numerous occasions, immediately before GradPLUS gave carte blanche graduate federal lending, the annual ceiling was but $20,500/year and yet numerous fourth-tier law schools stickered anywhere between $30k and $36k in tuition alone, plus another likely $15k to $18k in living expenses. And as far as I can tell, no prospective 1L stayed home because they couldn’t get full funding. That’s because there was (and remains) a private student lending market that remained eager to lend virtually any amount to any law student, even as financial services firms were predicting double-digit default rates on some offering of private law school loans. The reasons for this is that private student loans, like federal loans under the erstwhile FFEL program, are both nondischargeable and securitized. This is still the case for private student loans. And lest we forget, the accredited law schools themselves jointly own a(n erstwhile) private student lender, Access Group (now Lex Access). Where was all this handwringing a dozen years or so ago when the law schools’ own lender was lending kids with a 2.7 / 143 $30k per year so they could fully finance the likes of Golden Gate, Cooley, or Touro? If the default assumption back then was that such students wouldn’t have trouble shouldering a ~$1,000 per month after-tax student loan payment a few scant months after graduation, why should it be any different now? I mean, we keep getting told that the job market for all law school graduates is golden regardless of where they went, of whether they land a job as a lawyer, or even if they passed the bar or not. So why worry about, for instance, the 21% of Touro students who pay the $72,670/year sticker price if they can only borrow $28,500/year of that from the feds? I mean, that $132,510 shortfall over three years (not counting increases in tuition or living expenses) only equates to a standard private student loan payment of about $1,525 per month. That’s above and beyond the federal student loan repayment, incidentally. Finaid.org estimates these students will need a salary of $182,991 to reasonably afford these payments but I’m sure all these students get jobs at Vault 3 firms so that won’t be an issue…

Oh, and the HEA reauthorization plan would also get rid of the loan forgiveness for new IBR-plan enrollees: instead, they will just continue having to make payments until the principal is paid off. In a lot of cases, that will not occur in the debtors’ lifetimes. Law school loans as neo-indentured servitude: apply now!

Posted by: Unemployed Northeastern | Jan 7, 2018 10:00:41 AM

It is reasonable for law school administrators and professors to fret about the federal graduate lending ceiling being lowered and the elimination of PLSF. Even though a legal education provides a significant earnings premium, we don’t want our students to have to pay more for a legal education through higher interest costs. Especially when law school graduates play such a vital role in our society. Law school graduates serve as political leaders, business leaders, and promote social justice. Moreover, the elimination of PLSF would exacerbate the justice gap in this country. Many law school graduates may opt for the higher salaries of private practice rather than pursue jobs in public interest law without student loan forgiveness.

UNE tries to discourage prospective law students with stories of hobgoblins and boogeymen. UNE makes sarcastic comments about getting Vault 3 jobs and emphasizes the cost of a legal education. But UNE ignores proven facts. Law school graduates do not need to get jobs at Vault 3 firms to repay their student loan debt. Solo practitioners earn on average over $100,000.* Perhaps if more unemployed grads opened a solo practice rather than complaining about their law school, they would reap the benefits of their legal education. Furthermore, the only research paper to examine salaries of law graduates found that mid-career earnings of law degree holders approaches the mid-$100,000 range.** Law school graduates also have far lower default rates than graduates with only a terminal bachelor’s degree.

Maybe one day UNE will finally admit that they are employed and that they are earning a significantly higher salary than their friends with merely a bachelor’s degree.

*http://leiterlawschool.typepad.com/leiter/2016/07/how-much-do-lawyers-working-in-solo-practice-actually-earn-michael-simkovic.html

**Simkovic, Michael and McIntyre, Frank, The Economic Value of a Law Degree (April 13, 2013). HLS Program on the Legal Profession Research Paper No. 2013-6. Available at SSRN: https://ssrn.com/abstract=2250585 or http://dx.doi.org/10.2139/ssrn.2250585">http://dx.doi.org/10.2139/ssrn.2250585">https://ssrn.com/abstract=2250585 or http://dx.doi.org/10.2139/ssrn.2250585

Posted by: Wrong | Jan 8, 2018 3:10:53 PM

New year, same disproven talking points and only citing to one person – almost as if the writer is that person! Go figure.

“Many law school graduates may opt for the higher salaries of private practice rather than pursue jobs in public interest law without student loan forgiveness.”

The number of entry-level private practice jobs is declining year by year, as a stroll through either the NALP or ABA’s records makes plain. Newsflash to Ivy League law school graduates: career selection ain’t a la carte for the rest of us. Say, do you consider the ~$22/hour w/ no overtime that the lawyers in the doc review mills in major cities make to be part of those higher salary private practice jobs?

“UNE tries to discourage prospective law students with stories of hobgoblins and boogeymen.”

If you mean “UNE prefers to deal with data more recent than a very small subset of pre-recession graduates’ outcomes,” well, yes. Would you purchase a stock in 2018 based upon its performance in 2005? I think not.


“Law school graduates do not need to get jobs at Vault 3 firms to repay their student loan debt.”

Students in a post-GradPLUS future who will face realistic monthly after-tax repayments of $1,500 to 2,000 per month need to be pulling in a lot of money. Again, finaid.org, the leading website on student lending, created by career FA professionals, came up with that $182k salary based on the Touro numbers I plugged in. But yeah, that’s like what new solos make or whatever because sure it is.

“Solo practitioners earn on average over $100,000.* Perhaps if more unemployed grads opened a solo practice rather than complaining about their law school, they would reap the benefits of their legal education.”

No one who actually works as a lawyer believes this tripe, and indeed other law professors have found very different average solo practitioner salaries ($49k), suggesting that Mike has perhaps confused practice income with personal net income. And are you seriously suggesting graduates hang a shingle after graduation? WITH WHAT MONEY? STARTING AND OPERATING A BUSINESS COSTS MONEY. PRACTICING LAW COSTS MONEY YOU MORON. Money indebted law school graduates do not have and will not be lent. Malpractice insurance. Health insurance. Office rent. Personal rent. Wexis. Court filing fees. Etc., etc., etc. Easily in the five-figure per year range just for the firm expenses; forget trying to acquire health insurance or an apartment. Oh yeah, and then there’s that four-figure student loan payment in the post-GradPLUS future. Find me a how-to soloing guide that doesn’t recommend having at least two years’ personal and firm expenses beforehand. Hint: there aren’t any. And that’s before we get into the whole issue of being taught by supercilious professors who maybe clerked for one year once a few decades ago but couldn’t draft a will, take a deposition, or find the courthouse if their life depended on it.

You know, there is now a burgeoning pharmacy school graduate crisis for the same reasons there has been a law school crisis: too many grads, too few jobs, too much debt. Would you suggest to those pharmacy school grads that they should just start up their own store and stock it out of pocket? Why don’t all those culinary school grads just start their own tapas bistros in Tribeca or Miami Beach?

“Law school graduates also have far lower default rates than graduates with only a terminal bachelor’s degree”

In 2005, the glory years of the law school graduate, Nomura Securities forecast a 12% default rate for AccessGroup’s private loans for law students (say, don’t they also underwrite this Mike fellow you keep citing?). This was the third-highest predicted default among all private student loans, behind only a program for low-income Alaskans to attend college and another batch of graduate school-only loans. And given that students who enrolled in 2005 graduated in the summer of 2008, I reckon the actual default rate on those loans was considerably higher. Now that 100% of costs can be borrowed from the feds and tossed on an IBR plan regardless of employment status, I’d expect the default rate for law grads to be 0%. It isn’t, though. But with law school debt approaching $150k and starting salaries still mired in the mid-60’s, more than 20% lower than they were ten years ago, most grads sure aren’t making full and active repayment. You see, there are more repayment statuses than default and full & timely repayment. Those two states don’t even describe a majority of student loan debtors, per the New York Fed. I know plenty of unemployed law school graduates enrolled in an IBR plan who pay precisely $0.00 per month and are considered in active repayment. Remember, the unemployment rate for recent lawyers is more than twice the unemployment rate for all adults 25-34 nationwide, even though not even 4 in 10 of those people have any sort of college degree.


“Maybe one day UNE will finally admit that they are employed and that they are earning a significantly higher salary than their friends with merely a bachelor’s degree.”

Maybe one day you’ll admit it isn’t 2006 anymore and the legal market is permanently, structurally different now – just as the NALP and ABA admit.


Posted by: Unemployed Northeastern | Jan 8, 2018 11:29:29 PM