Balkinization: The Law Graduate Debt Disaster Goes Critical

The Law Graduate Debt Disaster Goes Critical

Brian Tamanaha

Last year I wrote about the quickly exploding law graduate debt disaster. It is getting worse, much worse. In 2010, only 4 law schools had graduates with average debt in excess of $135,000; in 2011, 17 law schools did. This past year 26 law schools surpassed this amount.

Average law graduate debt in 2011 at both Thomas Jefferson and California Western topped $153,000. In 2012, Thomas Jefferson graduates had average debt of $168,800. Listed below are the twenty law schools with the highest average debt for the graduating class of 2012--followed in bold by the percentage of the graduating class of 2011 that landed full time jobs as lawyers (at least one year duration) within nine months of graduation (employment data from 2011 are reported because 2012 "JD required" data are still unavailable and the difference between these two years will be small):

Thomas Jefferson $168,800 (26.7%)
California Western $167,867 (39.3%)
Phoenix School of Law $162,627 (37.4%)
Northwestern University $156,791 (77%)
New York Law School $154,647 (35.5%)
American University $152,659 (35.8%)
New York University $149,336 (90.1%)
Southwestern $147,976 (34.6%)
Georgetown $146,169 (62.6%)
Whittier $143,536 (17.1%)
Florida Coastal $143,111 (36.6%)
John Marshall (Chi.) $142,587 (43.4%)
John Marshall (Atl.) $142,515 (40.9%)
Catholic (D.C.) $142,115 (43.7%)
Loyola Marymount L.A. $141,936 (42.7%)
Columbia $141,607 (94.1%)
Charleston L.S. $141,457 (51.3%)
Pacific (McGeorge) $140,566 (43.6%)
Univ. Miami $140,032 (55.1%)
Cornell $140,000 (76.1%)

These numbers substantially understate the actual debt carried by law students on graduation day, I must emphasize, because they only include debt taken out while in law school. Undergraduate debt (average $25,000) and interest accrued on law school debt, which at these levels can exceed $10,000, must be added on top.

Making these extraordinary debt levels all the worse, at the majority of law schools on this list less than half the class obtained full time lawyer jobs. Although certain non-lawyer positions can be desirable, I use the "JD required" employment statistic not only because that is the primary goal for people who attend law school, but also because only corporate law jobs pay enough to manage debt levels this high (or public service jobs with debt forgiveness). The strong preference for lawyer jobs is borne out by the fact that graduates of top law schools take "JD required" jobs 90% plus of the time (a pattern which holds for at least the past decade).

A few examples will make the above 2011 employment data more concrete: at Whittier, among 123 total graduates, only 21 secured full time jobs as lawyers; 63 out of 236 Thomas Jefferson graduates landed full time lawyer positions; at New York Law School, only 185 out of 515 graduates landed full time lawyer jobs. Poor results are not limited to low ranked law schools. At American, only 167 out of 467 graduates obtained full time lawyer jobs; Loyola Marymount saw only 172 out of 403 graduates land full time jobs as lawyers. (All figures are for jobs with at least one year duration).

Not only are many graduates from law schools on this list not landing full time jobs as lawyers, at lower ranked law schools even the fortunate graduates who get lawyer jobs do not earn enough to manage the standard monthly loan payments, which at these debt levels range from $1,700 to $2,000, and up. The bulk of graduates from low ranked law schools with lawyer jobs work in firms of 2-10, which typically pay between $40,000 and $60,000. This is not enough to manage the monthly loan payments even on the extended 25 year repayment plan. Thousands of law school graduates will be forced by financial necessity to enter IBR, a federal program designed to assist graduates in "partial financial hardship." (I will post a paper analyzing the implications of IBR shortly.)

Law graduate debt has been increasing by remarkable amounts on a yearly basis: going up at private law schools from $92,000 in 2009, to $106,000 in 2010, to $125,000 in 2011. Average debt figures for private law grads in 2012 (when compiled) will likely exceed $130,000, and average debt for public law grads, which has also gone up rapidly, will likely reach $80,000. Again, these figures do not count undergraduate debt and accrued interest.

One last piece of bad news: the upcoming JD graduating class of 2013 will be the largest ever, with the highest debt ever, flooding into a dismal job market.

Posted 10:30 PM by Brian Tamanaha [link]

Comments:

Not only are many graduate students from law educational institutions on this list not getting fulltime tasks as attorneys to Diablo 3 Gold, at lower rated law educational institutions even the lucky graduate students who get attorney tasks do not earn enough to handle the standard monthly loan instalments.

# posted by

cartier : 5:17 AM

I assume you have seen this article
http://www.huffingtonpost.com/tucker-max/law-school_b_2713943.html?goback=%2Egde_2974870_member_218900195

It was just posted on a Linked In Group for lawyer alumni of my undergraduate alma mater. A graduating senior asked the group for advice on going to law school and she received many responses, about evenly divided between those who urged her to carefully consider whether law school was worth the cost (recommending reading your book) and those who suggested she ignore the naysayers (one said that we should not crush the "nascent dreams of young people"- which begs the question of who else has nascent dreams that are crushable).

Anyway, this is a hot topic.

# posted by

mls : 8:45 AM

These schools seem like they are obviously providing expensive educations that are not worth being recouped; but it would still be better to discuss npv in a rigorous manner. Schlunk has a good series of papers on this (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1957139), but his are by no means comprehensive.

While I appreciate the "inside the law school scam" and various other criticisms of law; I think there is a simpler take that does not require listing prices, job rates or writing a book. Calculating NPVs for a range of hypothetical students and comparing them to likely alternative career paths seems like a relatively simple way to do the math.

I think the discussion would benefit from a focus on methodically comparing investments and not just calling out the worst offenders. Understanding npvs, might give a better indication of why it is worth it for students to feel like they have become lawyers and how much of a premium they are paying for that privilege.

# posted by

John : 11:38 AM

WOW! Thanks for posting this!!

Congratulations on getting linked by Instapundit!!!

Common Cents
http://www.commoncts.blogspot.com

# posted by

commoncents : 6:31 PM

Gods work, Professor.

# posted by

GeeGuy : 12:35 AM

I wonder if your UMiami data is correct, or if it might be based on an erroneous set reported by the ABA and widely disseminated.

The ABA quickly admitted its error, and the correct numbers are summarized here.

One key difference is that 72.7% of the 2011 class had "JD required" jobs, not the 55% you list. That's still far from great, but it is substantially better than the national average.

If it turns out that your post is based on the incorrect figures, would you be willing to correct the text above please? If not, could you point me to the source you are using please?

-Michael Froomkin
U. Miami School of Law

# posted by

Unknown : 8:24 AM

Permit me to offer a minor correction to your list of schools.

There is no "Loyola Marymount Law School." Loyola Law School was included in the 1973 merger of Loyola University and Marymount College, but retained its independent identity in part because Marymount College did not have a law faculty and was unable to add value to Loyola Law. Marymount brought strengths and benefits to the merger at the main campus that weren't applicable to the law school's campus in downtown Los Angeles.

This misunderstanding persists, and appears to be the result of research sloppiness at one of the ratings systems.

As to the horrific levels of debt incurred in pursuing a legal education . . . . "Mom always thought I'd be a lawyer," "It's a flexible course of study" and "I couldn't think of anything else to do" certainly won't cut it anymore.

The hiring problem has been exacerbated by reductions in state and federal employment levels, and also by the slow grind of the economic recovery. Legal work is remarkably tied to the business cycle, which is one of the real surprises faced by law students. "Corporate law jobs" doesn't begin to cover the interaction between law and business. Not so surprising is the recognition that governments collectively are the largest legal employers.

Finally, the debt levels have an impact in the classroom, too. Many students must work during the school year, and the conflicting commitments add to the pressure.

# posted by

Patrick Ryan : 10:22 AM

Michael,

I will certainly correct any errors that come to my attention. But this figure looks correct. I just (moments ago) checked the ABA legal education statistics page for U. Miami.

It states that your school had 385 graduates, with 212 in "full time long term" "bar passage required" jobs. That's 55 percent.

If your school has officially changed the data it submitted for the ABA employment report, please send it to me.

Your claim that the correct "full time long term bar passage required" jobs percentage for 2011 was 72.7% strikes me as highly unlikely, given that Miami's 9 months out employment rate for 2102 (as reported in US News) is 61%--and this includes both "par passage" "JD advantage" jobs.

I suspect you are including part time and short term jobs in your figure. These jobs are not counted in the percentages I cite (and the ABA breaks this data out) for the sound reason that those are not good outcomes for graduates, and schools have been using those types of jobs to paper over poor results.

# posted by

Brian Tamanaha : 12:42 PM

Brian-- Looking back at the old post I think you are right: I was counting the short-termers and part-timers.

It appears that working through these numbers is not for part-timers like me.

Good thing then that I think we will have a small class next year.

-Michael Froomkin

# posted by

Unknown : 1:35 PM

PS. I don't know why the site doesn't invite me to log in, I'm not being "unknown" on purpose. -mf

# posted by

Unknown : 1:44 PM

Michael,

I double-checked Miami's numbers and can explain the discrepancy.

Miami's ABA form lists under "bar passage required":

212 (full time long term)
56 (full time short term)
2 (part time long term)
10 (part time short term)

If you add all these together, you get 72.7%, but I use only the first number (which produces 55%) for the reasons I explained. Miami funded 37 (of the 56) FTST jobs--while this undoubtedly assisted your grads, it should not be included as successful outcome.

You can get the numbers here: http://employmentsummary.abaquestionnaire.org/

# posted by

Brian Tamanaha : 1:52 PM

Brian, I worry that this is presenting a somewhat incomplete picture of student debt burdens for two reasons.

First, it presents averages, but the distributions matter. If debt is concentrated in students who get firm jobs, that is a very different story than if it is concentrated in those who do not or evenly distributed. The answer may vary by school.

Second, the data presented does not account either for variation in school loan repayment assistance programs or in federal programs. My sense is that there is enormous variation between schools in their internal programs and also in the percentage of graduates pursuing careers that qualify for federal loan forgiveness programs. If so, then the average debt burdens at some schools may not in fact be nearly as severe as presented.

# posted by

Adam Levitin : 7:22 PM

Adam Levitin- The figures are presenting a very skewed picture indeed. They do not include accrued interest during law school, bar loans, or any residual undergrad debt. So tack on (conservatively) another 25K.

It defies reason to think that the debt is concentrated among people with large firm jobs. To the extent that schools award merit scholarships based on LSAT/GPA, and those two factors have a moderate correlation with first year grades, it would seem to suggest that students who receive full or near-full scholarships will have a better shot at large firm work.

# posted by

Bored 3L : 7:32 PM

Adam,

You are right that distribution is important, but that information is not available. I can only use what I have, or not present any information at all.

That said, only a dozen or so law schools have LRAP programs that provide genuine relief (there are reports on this), all of them at elite law schools, so taking that into consideration does not affect the overall picture at 180 or so schools.

At schools like Thomas Jefferson (98% of the students in debt) and Cal Western, what you see from these numbers is the real picture for the bulk of the class. Debt is high and job results are abysmal.

Bear in mind, also, that standard scholarship polices have the bottom half of the entering class (statistically) paying full price and the top half getting discounts. As a result, those with higher debt loads often have the worst job outcomes.

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# posted by

Celina Smith : 6:00 AM

Although I agree that the high tuition and consequent high debt levels for law students is a serious concern, any analysis of students' debt burdens must factor in the IBR, PAYE and federal loan forgiveness programs. These programs provide substantial relief to students who incur debt to pursue a career in law. For full information, I encourage people to visit http://www.whitehouse.gov/blog/2012/06/07/income-based-repayment-everything-you-need-know or http://www.equaljusticeworks.org/law-school/student-debt-relief.

# posted by

anonymous : 10:40 AM

I did not mean for that last comment to be anonymous. My name is Steven Freedman.

# posted by

anonymous : 10:40 AM

This comment has been removed by the author.

# posted by

Rishi : 12:51 AM

With regards to IBR/PAYE:

- It wreaks havoc on your credit score and ability to secure future loans (house, car, etc)

- Negative amortization can take effect (balance grows after each payment)

- Over the years and decades, the negative amortization can greatly swell the underlying balance, which means

1) If one gets a well-paying job after several years, they will find their balance considerably higher than at graduation, even though they have been making regular payments

2) At the end of the 25 (IBR) / 20 (PAYE) year periods, the forgiven balances are counted as realized income by the IRS.

- There is no guarantee that IBR/PAYE will last 25/20 years; since Barclays estimates it will cost $190 billion just through 2020, it seems a ripe candidate for an early death. Indeed, IBR/PAYE were lambasted in the Republican primaries last year.

IBR and PAYE keep people out of default. That's it. That is their only purpose - to artificially lower the official default rate* and keep the lending bubble going for the benefit of the government, the for-profit lenders/administrators/guarantors/originators, and the universities.

*This is where one should note that the official default rate tracks grads for two years after graduation while giving them three years of deferments and forbearances.

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