The Debt Travails of One of Our Law Faculty Colleagues

Brian Tamanaha

In response to posts I have been writing about the broken economics of attending law school today, I have heard from several law professors (and a dean) who are skeptical that law school debt is as much of a problem as I make it out to be. In the hope that law professors will be persuaded that the situation is indeed severe, I am reprinting below a comment on one of my posts by a visiting fellow currently on a law faculty (I have confirmed this):

I also want to echo Brian, M, and others that the scope of modern law student debt (particularly as metaphorically and literally compounded by the effects of the recession) is unreal. This is true even for those of us who have won the employment lottery—and it is a lottery.

I’m one of the lucky ones. I went to a highly-ranked law school, knocked the academic ball out of the park, and now I’m teaching. I’ve effectively “managed” my debt, kept my credit gleaming by always paying on time, but after 3 and a half years I still owe as much or more than I borrowed on many of my loans, because of the effects of amortization and compounded interest. I don’t know how grads with different circumstances than mine, or those with kids, have a snowball’s chance in hell at managing numbers like this.

I went to law school in a major city after paying off nearly all of my undergrad debt, and ultimately took out $136,000 in student loans ($5k Perkins, $25k private, the rest subsidized and unsubsidized Stafford and PLUS). I received a very small merit scholarship, but although my income was very low before law school I qualified for no grant aid (my school followed the popular law school practice of taking my parents’ income into consideration for my aid package, despite me receiving no family support for law school and not having been a tax dependent of my parents since the 90s). I accepted all this as the price of admission.

Here’s how three and a half years of “responsible” management of this debt still hasn’t gotten me ahead of it in the recession era, even with enviable employment prospects: I graduated in 2008 with enough bells and whistles to land a federal clerkship. I started paying off my loans at about $1,300/month on the 10-year standard plan as soon as I graduated. Because of amortization, of course, very little of these payments went to principal rather than interest. Also, although I had paid off the interest accruing on my private loan during school, $8,300 worth of interest had compounded on my unsubsidized federal loans, and was added to my principal after graduation.

During my clerkship year, I lived cheaply and continued paying on the standard plan, sometimes a little extra, until the bottom fell out of the economy. Start dates were pushed back, I saw equally qualified friends laid off right and left as jobs evaporated, and in autumn 2009 after my clerkship ended I went on unemployment and deferred my federal loans during an unanticipated three month gap before finally starting work at a firm. I began paying my loans on the 10-year plan again as soon as I was employed again, but another $1600 of interest had compounded during my deferral and was again added to principal. In 2010 I switched to an extended 25-year repayment plan in order to set aside cash for an emergency fund and a cushion for a transition to academia. This year I took a law teaching fellowship for $50k/yr, and went on IBR, where I will remain until I either take a tenure-track position or go back to practice.

Have I been able to “manage” my debt over three and a half years in ways that have allowed me to preserve my credit, pay my bills, and make career transitions on my own terms? Absolutely. Do I feel lucky every day (and never entitled) that I survived the 2008/09 guillotine that took down the careers of plenty of people with the same qualifications as me? Hell yes. But, after more than $35,000 in loan payments, I’ve only paid off $6k of original principal, and on some of my loans I owe more than what I borrowed. I still owe almost $130,000 (and on IBR my federal loan interest is again accruing, as Brian points out). Again, I consider myself one of the lucky ones, as I have at least made minor headway.

For me, my choice of law school has been worth it career-wise, if not “economically” by Orin’s metric. Still, my financial situation is radically different than that of the older law professors at my institution. My massive debt may be “manageable” but I’ve accepted that if I follow my chosen career path it’s gonna haunt me for life.
Posted 3:40 PM by Brian Tamanaha [link] (2) comments

The Death of Democracy in Greece

Sandy Levinson

Posted 11:29 AM by Sandy Levinson [link] (36) comments

What Federal Loans Do for Law Students and Law Schools

Brian Tamanaha

Federal loans for law students are justified as “providing access” to a legal career for the middle class and poor. That’s one side. When you examine how the funding operates, however, it becomes apparent that federal loans are an irresistible (and life-sustaining) drug for revenue addicted law schools.

When a student applies for a federal loan, the law school processes the application. Loans are granted by the government without any evaluation of the likelihood of repayment. Accordingly, a student at Thomas Jefferson Law School is treated exactly the same as a student at Harvard Law School, without regard to the fact that the former is far less likely to repay the loan.

Among the 221 graduates of the 2010 class of Thomas Jefferson, only 73 obtained jobs as lawyers. According to information provided by the school, the highest earners worked in private law firms, with a 75th percentile salary of $77,500 (only 12 of 55 graduates in private firms reported their salary). Based upon the numbers provided, and making a few reasonable assumptions, we can estimate that at least 80% to 90% of the class earned less than $77,500.

Now consider that the average debt of 2010 graduates of Thomas Jefferson was $137,000 (95% of the class had debt). The monthly payment for this debt is $1,600. Graduates must earn over $100,000 to manage this level of debt.

Thus, only about one third of graduates actually ended up as lawyers, and most of the graduates that landed lawyer jobs did not earn enough to manage the average debt of the class. It appears that a significant proportion of the class is likely to enroll in IBR, a federal program designed to help graduates in “financial hardship,” paying reduced monthly payments based upon a percentage of their income, with the loan forgiven after 25 years. That is what “access” to a legal career comes to for many unfortunate law graduates today.

Let’s now look at things from the law school end. From 2008 through 2011, Thomas Jefferson law graduates had a total combined debt over $100 million, nearly all of it federally guaranteed or directly borrowed from the government. How many students with positive outcomes did this money buy? Read more »
Posted 7:00 AM by Brian Tamanaha [link] (15) comments

Minneci v. Pollard & Justice Scalia's Honor

Jason Mazzone

Read more »
Posted 1:53 PM by Jason Mazzone [link]

Why We Cannot Expect Change from the ABA

Brian Tamanaha

The National Law Journal is sponsoring a discussion on legal academia. In this post I critically respond to a post by the Chair of the ABA Section on Legal Education:

As Dean O'Brien writes, the ABA is currently considering a series of changes to how law schools report employment information for recent graduates. Unfortunately, his statement of the problem raises doubts about this effort:

Though the number of institutions that fail to report employment data accurately is small, their actions hurt the credibility of our entire industry. For that reason, the ABA Section on Legal Education and Admissions to the Bar (of which I am the current chair) has taken a fairly aggressive stance on addressing this issue, with job placement information now being reported directly to the ABA. This will have positive impacts; the quality of the information will be better and the specificity of the data will increase.

The credibility of legal academia as a whole has suffered not owing to the bad conduct of a few law schools but because it has been widespread and systematic. The problem is not that the information is inaccurate (though that is also a problem) but because it is stated in misleading ways. Read more »
Posted 7:47 PM by Brian Tamanaha [link] (4) comments