Law Schools are not in Crisis

Many law professors would be disgusted at hearing that culinary institutes—which charge $30,000 annual tuition for two-year Associate degrees—advertise 97% percent employment rates for recent graduates when many of the grads counted as employed are working as fry cooks at fast food restaurants in positions they could have obtained without the degree.  What if culinary institutes, to boost their advertised employment rates, hire a bunch of recent graduates in temporary part-time positions to clean up and wash dishes.  On top of that, what if culinary institutes routinely claim that recent graduates earn $60,000 or more, although only a fraction get that pay, while most grads earn $30,000.

I don't know whether culinary institutes are guilty of any of this, which would be brazenly unethical.  I do know, however, that law schools across the country have done things like this systematically for years.  Conduct we would find unacceptable in others has been normal operating procedure for law schools.

To kick off this discussion the National Law Journal asks, "Are law schools in crisis?"  We should be clear: law schools are NOT in crisis.  Although a number of law schools shrank their entering class in 2011, enrollment at most law schools remains near all time highs, and tuition is sky high, especially at private schools.   Law schools have more resources than other university departments.  Law professors are paid far more than other professors and earn more than most lawyers.

The real crisis is suffered by our recent graduates, who find themselves burdened by mountainous debt, with limited employment opportunities.  Nearly 90% of graduates have law school debt.  The average debt for the class of 2010 was $92,500 (not including undergraduate debt).  To comfortably manage the monthly payment on this debt, a graduate needs to earn $120,000; if she could squeeze expenses, a salary of $86,000 might suffice.  On a salary below that the monthly debt payments would be tough to make (in addition to taxes, rent, transportation, food, etc.).

Now consider that, according to NALP, only 64 percent of the class of 2010 secured full time lawyer jobs, with a median salary of $63,000.  At least half of the graduates who landed lawyer jobs earned far less (twenty grand less) than the minimum salary required to manage the average debt.   And let us not forget the more than one third of graduates who failed to land full time lawyer jobs at all.

As high as the average debt is, many law graduates are worse off.  According to a recent poll, nearly one third of current law students expect to graduate with at least $120,000 debt.  The 2010 graduating class of Cal Western had an average debt of $145,000 (88% of class).  The graduating class of Thomas Jefferson had an average debt of $137,000 (95% of class).   Few of these graduates will earn enough to manage their monthly payments.  Law schools are graduating a slew of economic casualties.

Thousands upon thousands of law graduates have debt far above what their salaries can bear.  Meanwhile, law schools are doing fine, thank you.

Brian Z. Tamanaha

Comments

[X1]

I agree, law professors are overpaid and that's caused the problems students have now. I've had trouble finding the hard data to support this claim, though (at the graduate education level; it's easy at the undergrad level, but can I really say that's a good comparison? I will if you think it works). Can you point me to some hard data?

I'm particularly interested in comparisons to those teaching at the graduate level in engineering, medicine, business, even fields like physics and biotechnology. The lawyer salary claim is a new one to me, but one I'd like to follow up on. Do I need to include just lawyer salaries, or does the claim hold for all lawyer compensation? If I could see the data you use it would be a big help to a project I'm working on in this area. Thanks.

[Brian Tamanaha]

If you email me at btamanaha at wulaw.wustl.edu I will send you information on the level of law professor pay, and how it compares to other professors as well as to lawyers.

[Mikey the Nail, Esq.]

I don't necessarily agree that law professors are overpaid as a whole. Law professors are incredibly intelligent people who deserve to be well-compensated.

I do believe that law schools, mine in particular, tend to have a number of small iniatives that may be interesting or that appeal to the political agenda of the school leadership, but which cost a great deal of money and do not speak directly to the students' legal education.

Other initiatives are non-partisan and do speak directly to education. Therein lays the pork...

Further Mikey Sayeth Naught.

[Barbara Seville]

But why does "being incredibly intelligent" necessarily entail "deserving to be well-compensated"?

[Orin Kerr]

Brian writes:

The average debt for the class of 2010 was $92,500 (not including undergraduate debt). To comfortably manage the monthly payment on this debt, a graduate needs to earn $120,000; if she could squeeze expenses, a salary of $86,000 might suffice.

Brian, I'm sure you've explained this somewhere else, but can you say more about what you think it means to "comfortably manage" the monthly payment and to "squeeze expenses"? What kind of income do you think a person needs to be comfortable if they do or don't squeeze expenses, loan payments aside?

[Orin Kerr]

Oops, it seems the software doesn't accept html tags. The paragraph above beginning "the average debt" should be block-quoted.

[Brian Tamanaha]

Orin,

I use FinAid, a student loan service site (http://www.finaid.org/calculators/scripts/loanpayments.cgi) to make these calculations.
I assume a consolidated loan rate of 7.25, which is a combination of Stafford (6.8) and GradPlus (7.9). All law students who finance their education through loans now borrow directly from the federal government.

On a standard 10 year repayment program, according to FinAid, with $92000 debt the graduate should have an income of $129,000. The debt payment would be 10% of monthly income. To be conservative, I lowered this amount by $9000, so the figure I use is higher than 10%. The $86,000 figure is 15% of income.

FinAid says that paying 15% could cause "financial difficulty" for the debtor. Hence I say "comfortable" for the former, and "squeeze" for the latter.

These are standard benchmark percentages of manageable payments among economists who study student debt. A strict upper recommended limit among these economists is 18% to 20% of income toward debt payments.

Obviously, there is a big difference between cities on living expenses. As graduate in NYC will have much higher rent, taxes, and living expenses. So these are generalizations.

[Mark Davis]

The assumption that a a law school entrant is of above average intelligence is absurd. Anyone with a C average and the five figure tuition can find obtain a legal degree somewhere in America. Curriculums of most schools are superficial at best. This fact would explain why the level of incompetence in the profession is at an all time high. Law schools are under no obligation to tell potential students that the market for their services have moved into the netherworld. Lawyers are pricing themselves out of business. 1.1 million presently complicate every facet of life,and society is allowing them a freehand to continue. Demons of Democracy was written to explain how America has fallen at the hands of the legal profession. It discusses why many members of the profession are not up to the challenges they confront daily. A potential student of the law may think twice before seeking law school admission. The sad fact is the ignorance of the profession may be the America's undoing. Mark Davis, M.D. [email protected]

[Erik S]

I have to disagree that law school debt is as much of a problem today as Brian is making it out to be. Your analysis assumes that the graduate does not take advantage of the numerous public programs that help graduates manage their debts.

In addition to Stafford loans, since 2006 the Department of Education has offered GradPlus loans that allow a student to borrow up to whatever his school says is the cost of tuition+expenses. Upon graduation, the student can consolidate these loans and repay them under the DoE's "Income Based Repayment" program, which lowers your monthly payment to 15% of the difference between your income and the poverty line.

For example, I graduated from American University Washington College of Law in 2008 with about $140,000 in debt at 7.25% interest ($120,000 of which was Stafford/GradPlus and $20,000 was private). I work for a nonprofit law firm and make less than half of what finaid.org's calculator says I should. Yet my monthly payments are an entirely-affordable $550, which includes payment on the private loan. Moreover, under the new Public Service Loan Forgiveness Program, if I work in nonprofit or government for 10 years, the DoE will FORGIVE whatever balance remains.

Similarly, all of the top law schools that I'm familiar with (AU, GW, Georgetown, NYU, U of Michigan, U of Chicago) also have pretty generous grants available for grads who take low salary jobs in "public interest" (i.e. government or nonprofit). Just this year, AU upped its income threshold from $50K to $75K, so that any graduate who takes a nonprofit/government job and makes less than that can apply for assistance and the school will pick up a portion of their monthly payment.

Honestly, between the favorable government repayment options and the assistance provided by AU itself, I only know of one person who is really struggling with his loans, and that's because he had a huge amount of private debt before he went to law school. The rest of us, even those doing temp work, are doing fine on our non-corporate wages.

This is not to say there aren't huge problems with how law schools do business (e.g. misleading salary and career projections), just that tuition doesn't have to be one of them.

[terry malloy]

Erik,

Monthly interest rate =.0725/12 = .0060416
Monthly interest on 140K = 140000*.0060416= 845.824

Your principal balance increases by 845.824 - 550 = 295.824 every month.

Unless the government bails you out (IBR *and* tax free discharge), you will never be out of debt.

You just don't understand how screwed you really are.

Everyone is drowning in debt and no one is talking about it.

[terry malloy]

In addition,

How many public interest/government jobs do you think are out there? Enough for the ten thousand that don't get into Big-law?

Are you entirely sure that you do not work for a career services office at a low ranked school?

[Brian Tamanaha]

Eric,

I'm glad things worked out for you and the people you know, but your good fortune is not widely shared by fellow law graduates, especially since the situation as worsened since you graduated.

Only 59.5% of the 2009 graduating class of American landed jobs as lawyers, and the average debt of the class (84% in debt) was $128,258 (fourth highest in the country).

You are right that the "public service" forgiveness after 10 years is a very good deal. The problem is that the competition for these jobs is keen, and the vast majority of graduates will not get these jobs.

The alternative, which most graduates will have to take, is IBR with forgiveness after 25 years. That is not a good deal, not only because it means the debt will remain for the bulk of your career, but because it has significant secondary effects, including affecting the FICO score, saving for retirement, etc.

Perhaps a dozen law schools have genuine loan forgiveness programs--which is no help to graduates of the other 190 or so law schools.

You talk about your $140,000 debt as if it is no big deal. We should be cautious about cavalierly dismissing the significance of such large debt, even when it is forgiven. It exacts a price on the graduates who carry the debt, as well as the taxpayers.

[Orin Kerr]

Brian,

Thanks for the info. With that said, the methodology you're using doesn't strike me as providing the information I thought you were providing.

As I understand it, the FinAid model for comfortably managing debt does not track income after debt payments, but rather the percentage of a person's income that they pay to manage the debt. That is, it measures how much a person's income would be impacted by having to pay off the debt, not whether they are rich or poor after doing so. For example, if I make $300,000 a year and I pay $31,000 a year to manage my debt, then under the FinAid model I cannot comfortably manage my debt, as my debt is more than 10% of my income. I need to make more than $310,000 to be able to manage that debt comfortably.

That seems strange to me. If the purpose of taking on debt (by going to law school) is to obtain a higher salary, isn't the relevant reference point whether the increase in salary is greater than the cost of the debt payment?

[Alison]

It's completely crazy how high debt loads are for recent law grads, particularly in light of their rather dismal employment opportunities.

Luckily, I think people are starting to wake up and see that: a) law schools have been, shall we say, massaging their employment statistics for years; b) starting law salaries are bimodal, so the median starting salary number is meaningless; and c) debt loads are higher than many recent grads have any chance of comfortably managing.

Sure, some people get firms jobs, like them, and end up wealthy partners, but this isn't a feasible path for most (just look at associate attrition rates).

I've got more info on all of these topics here, in my Law School Myths section:

http://thegirlsguidetolawschool.com/10/law-school-myth-6-you-can-trust-a-law-schools-employment-numbers/

http://thegirlsguidetolawschool.com/09/law-school-myth-1-lawyers-make-a-lot-of-money/

http://thegirlsguidetolawschool.com/09/law-school-myth-2-student-loan-debt-is-good-debt/

[Jon]

So after 10 years of IBR, Erik will probably have a higher loan balance than when he graduated law school, which will then be forgiven by the taxpayer. Erik may transition to higher paid private work during that time if he has the option but then repayment becomes 20 years and society loses his services in a public interest line of work. This is all contingent on IBR still existing in 10 years, which is less likely when people begin to realize how it is mathematically impossible to guarantee a "comfortable" loan repayment schedule while still reducing the balance of the loan. That's doesn't even begin to take into account the effect all this has on Erik and his generation's incentives to invest, start a family, or save money vs. pouring their income into debt servicing.

[Brian Tamanaha]

Orin,

Your response points out that the higher income you earn the greater percentage a graduate can bear. In principle that is correct, but FinAid is for college and graduate students, few of whom are earning such sums upon graduation. As you know, law graduates are not earning $300,000 out of school.

As a person's earnings go up (assuming it does), the loan payments will be much easier to manage. If that's your point, you are correct--although I should emphasize the pay for people who start in corporate law firms often goes down because many leave within five years for government positions or lower paying legal positions (60% or so lawyers move within 7 seven years).

The problem I am focusing on is when law graduates do not earn enough out of the gate to manage their loan payments. That is the case with thousands of students. The average debt of $92000 for the class of 2010 cannot be easily managed on the average income ($77,000) or the median income of lawyers ($63000) that year.

Someone who earned $160,000 will do fine. But only 20% of graduates earned that. I am focusing on the thousands who will not be fine. Take a look again and the average debt for Cal Western ($145,000) and Thomas Jefferson ($137,000) and consider how many of their graduates will earn enough to manage this debt. This is not just a problem with lower down schools. Outside the top 30 or so law schools less than 10% of graduates (and at many schools less than 5%) land NLJ 250 firm jobs.

It is also important to note that if you cannot manage you debt from the start, the situation will get worse because under IBR the debt will continue to grow. That makes it far more difficult to a graduate to get out from under the debt until forgiveness kicks in 25 years later.

[Orin Kerr]

Brian,

I appreciate the response, but isn't the relevant issue whether graduates are making enough additional money over an alternative career they would have followed to offset their loan costs? If I would have made $40,000 a year if I didn't go to law school, and instead I'm making $60,000 after law school, whether law school is worth it economically should be answered by whether my loan payments are less than the difference in my salary (adjusted for taxes, etc).

Put another way, you can't answer whether law school is worth it economically without comparing it to the career alternative I chose not to pursue by going to law school. The abstract question of whether paying the debt from the higher salary is "comfortable" doesn't seem helpful.

[Alison]

Orin -

I see your point, and I think it's valid to an extent. One key difference, however, is that the person with a $40K salary and no debt has more options than someone with a $60K salary and a large debt load (even if their bottom line is the same, or slightly better, after law school).

The law grad can't quit and start a business, or accept a lower paid but more desirable job, or take a few years off to take care of a kid. So the debt is controlling their life choices, in ways that aren't readily predictable to a young soon-to-be law student.

[M]

Eric,

I wonder what school you went to where few graduates have problems with student debt. (I also wonder what planet it's on - I'd like to move there.)

I graduated from law school in 2010. Good student - honors scholar, on the Dean's List, on a national team, interned for a federal judge and for the prosecutor's office, etc. I am also fluent in several languages, graduated with honors from undergrad from both an American and French university, and have over 10 years in the working world before law school, some of it spent working for the government overseas.

Before law school I had no student debt and was offered a $60,000 a year job. I declined because I had a passion for public interest law. I wasn't interested in a big salary. $20,000 or $30,000 would have suited me fine, as long as I could have served low-income populations. I would have been happy, because I believed that that's what the justice system needed.

After graduation - after trying, for a year and a half to find a legal job and volunteering that entire time for free doing unpaid legal work - I now work in a job completely unrelated to law where I earn $13,000 a year, with no luxurious benefits such as holidays, health care or vacation. I have $60,000 in student debt solely from law school. I know that my legal career is dead. And you know what? 50% of my graduating class is in the exact same situation I am in. Many work in retail stores such as Wal-Mart or Home Depot.

What have I done wrong? What was my mistake? Every day, I wrack my head trying to figure out what I did wrong. I have the years of work experience, the years in unpaid legal internships, the grades, the educational and professional accomplishments. Yet every day, I live at a level that is considered in poverty. There is no way for me to repay my loans, let alone afford health care. Why did they make legal education so expensive? Why have they destroyed the chances of so many who simply wish to get a legal education to ensure those from lower incomes get representation in our legal system too? What will our future legal system look like when we make it impossible for those from middle or lower classes to have access to a legal education? Will lower-incomed individuals be able to have representation in our legal system if we only allow those with large pocketbooks to have a legal education?

Why is my story important to you all? Because I am the future. I am the future of our legal system. The questions I ask MUST be answered. Not next year or next month. TODAY. By financially destroying me and others like me whose only sin was to commit ourselves to helping low-incomed individuals gain access to the legal system, we have destroyed the future of the legal profession. We have destroyed one of the most fundamental requirements for a democracy: access to the judicial system for all.

[BH]

This sounds very much like a comment that appeared on another blog, and someone questioned its authenticity because the person said he/she worked at Walmart, but misspelled Walmart throughout the comment, and talked about dressing rooms in Walmart, although the store does not have them. Here, it is other people working at Walmart. I defended the authenticity when it appeared. Now, I'm not so sure.
If this is another person, I apologize.

[M]

I am the original poster of the comment that you referred to as well as the comment above. Please note that keeping my anonymity is very important to me. While most commenters of my original comment were right to pick up on the fact that Wal-Mart or Walmart or Wallmart was not the actual store retail store I worked in, a few posters pointed out what seemed obvious to me when making the posting: that I never intended to use the name of the actual retail store where I worked (would have been foolish to do so in this economy and could have revealed my identity.) I used the name Walmart, synonymous with large box retail stores, to indicate just that: that I worked in a large chain retail store.

As to the above comment, you are correct that I refer to other people working at Walmart (and for the literal types, by Walmart, I don't literally mean Walmart, I mean at 'low paid retail jobs' that pay less than $10 an hour and are not law related.)

My job situation, unfortunately, is not an anomaly. I have plenty of company. 50% of those I know who have graduated from law school w/in the last three years have had to take low-paying 'Wal-Mart' jobs.

For specificity and clarity, here's a summary of the job outcomes of the law graduates with whom I am most familiar with and who graduated w/in the last 3 years: one works at Home Depot. And yes, that's the real name of the place he works. Another works as a $7.50 an hour security guard. Another graduate I know just applied to Wal-Mart. Another works as a computer lab technician at the law school for $10 an hour - passed 3 bars. Another graduated two years ago and works at the reference desk of the school library, for $8 an hour - she has passed 2 bars. Another actually works in a law office as an attorney, for $500 a month for an 80 work week and no, that's not a typo. Another female, who was on law review, works for $10 an hour as a paralegal. She graduated two years ago and passed two bars. The majority of graduates I know, however, work in retail.

This issue is much, much more than one student stuck in a low-paying retail job. It's about thousands and thousands of law graduates with such jobs. My story ends up being just one of many...

[John]

@Orin: You raise a valid point, and I would like to see a detailed comparison done. That's one reason why a full and accurate data set would be very useful to the profession going forward, and also why law schools' intransigence regarding transparency reform is so exasperating.

[BH]

@M -- I understand your point about anonymity.

[Z32]

Eric, Brian, and Orin:

I agree with Eric that large amounts of debt can be “manageable” for certain employed grads. 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.

[Z32]

I’ll add to my comment above that I’m a first-time commenter but have been following with interest all of the blog conversations about the role/complicity of law faculty in the problems of contemporary legal education and job prospects. To indebted students I would just say that some of us are closer to your situation than you might imagine. To professors and administrators, I would flag the fact that your incoming generations of young faculty have personally experienced the recent professional and financial napalming of law graduates. And this, for at least some of us, radically informs our perspective on the legal education project. I don’t underestimate the hegemony of traditional legal academic structures, but do hope for some institutional shifts as more of the next generation of legal teachers and academics shares similar experiences as mine.

For now, I can say I hustle like hell to help my students find jobs—one of the most concrete ways a professor can be of use outside of class. I don’t lie to them about employment prospects, or about how bad it all went in 2009. I warn all my students to limit their borrowing and at try to pay off their accruing loan interest during school if possible to avoid compounding (especially because law students will not have access to subsidized Stafford loans after this year). But for many of them, as it was for me, loans are their only real educational and living option (and making interest payments during school requires a source of cash to make those payments). And, many of my students graduated college at the bottom of the recession so didn’t have paying jobs before law school either, rendering moot the financial analysis of any “alternative career they would have followed” other than law school.