…Is up on The American Lawyer.
Truth be told it’s been up there since Thursday but I didn’t realize it. Whoops. Anyway, enjoy.
…Is everything you needed to know about last week in the world of federal student loans.
We have The Wall Street Journal‘s Morning Editorial Report … um … editorializing on the “Surge in Student Debt Forgiveness.” The whole article is subscription required, but it appears the WSJ is continuing its biased reporting on IBR by sloppily characterizing it as a loan-forgiveness program rather than a program whose intended purpose is to reduce monthly payments. That’s not to say I don’t think IBR will cost the government a lot of money or that the average amount borrowed is high enough to indicate that a lot of these debtors borrowed Grad PLUS loans, but this is pretty shrill. Like, how dare an income-based repayment program base people’s repayments on their incomes? What’s next Social Security securing society from old people starving to death in the streets??
On the other hand, we have The Washington Post, which does a much better job of pondering why student loan defaults are dropping. IBR is part of it, as is slightly better job outcomes for graduates. It even concedes that college graduates are finding jobs that don’t require their degrees. Clearly the author has not gotten the memo on occupations.
Finally we have an article by … me. This very post you’re reading. Recently, the Department of Education released its fourth quarter report of total student loan volumes by institution. The slightly good news is that last year the aggregate disbursement fell below $100 billion.
The bulk (43 percent) of the $5.9 billion decline is in unsubsidized Stafford loans to undergraduates, and 37 percent were due to subsidized Stafford loans (which now go only to undergraduates). The rest (1/4th) is due to unsubsidized Staffords to graduate students. Grad PLUS loan disbursements grew by half a percent. Can’t win ‘em all, I guess.
As for the amount disbursed per recipient (in current dollars, for loan limits aren’t inflation-adjusted and that’s the benchmark to measure changes against), most of the loan types saw negligible declines, indicating that either fewer people are taking out federal loans or fewer Americans are going to college.
Meanwhile, since the Internet tells us that Thomas Jefferson School of Law is in trouble, I figure it’s time to check in on those freestanding private law schools. TJSL isn’t alone, it just hasn’t managed to find a public university to socialize it yet (see WSJ, there’s your Social Security quip!). Western State fused into Argosy University two years ago, but I heard that was a long time coming. Texas Wesleyan is now Texas A&M, and some of the formers’ graduates want diplomas that say they went to the more reputable latter. Chalk one more up for the signaling hypothesis. Finally, the University of New Hampshire (formerly Franklin Pierce Law Center) is in fact now the University of New Hampshire. Go figure.
Oh, and how could I forget: Thomas M. Cooley is now affiliated with Western Michigan University.
I’ve heard rumors of other mergers going on among the FSP law schools, but that’s four that are adapting to the new world. TJSL just happens to be dealing with its fiscal problems by having a fiscal crisis.
There’s more to be said on this, but I figured I’d leave you with a chart comparing the average amount borrowed per recipient of federal loans at each of these law schools to their total costs for full-time students according to the Official Guide.
I draw your attention to the fact that at none of these schools can a full-time law student cover his or her tuition with just unsubsidized Stafford loans. (Also, it seems that some law students are cleverly borrowing more than the annual loan limit allows. Hm.) At the average FSP law school last year, 87 percent of students took out Stafford loans; 70 percent borrowed Grad PLUS loans.
Last week, the Census Bureau updated its personal income tables for 2013. I covered them extensively last year, and I’m disinclined to rehash that entire post since there’s little difference between 2013 and 2012 (or any two consecutive years for that matter). Just about all of what I said there still stands. It also helps that the NY Fed’s research on 25th percentile college graduates’ earnings spares me a chart for this year at least.
Nevertheless, a quick summary: The median earnings for college graduates aged 25 to 34 were just about identical to 2012. Census tracks earnings for professional school graduates, but those tend to be more volatile given the smaller sample. It’s certainly difficult to carve out law school graduates’ earnings; you’re better off looking at the law school uninfographic for that. High school graduates’ incomes fell by about four percent, which is bad.
Labor force non-participation among 25-to-34-year-olds rose a smidge in 2013. Last year, one in four high school graduates did not work, nor did more than one college graduate in eight. You can take what you will for professional school graduates.
In all, I’d say there’s slight evidence that 2013 was a harder year for high schoolers than 2012, but college grads stayed in place.
One of these days I should separate these numbers by sex. It might be illuminating.
That’s all for this week, I think.
It’s a crucial question because it’s quite possible for land market failure to cause people’s incomes to be too low for them to move into houses, which depresses future expected land values, and hence future economic growth, like Japan. It certainly doesn’t help us that our intrepid authors admit that first-time homeowners amount to 30 to 50 percent of buyers, and that “in the time series, renter-to-owner transition flows tend to lead the business cycle and house price growth.”
So basically, under normal conditions young families think things are getting better, so they jump onto the land value train. I wrote about this as social reproduction a while back. The Fed economists turn to the Survey of Consumer Expectations to answer why this isn’t happening.
For one, they find that not even 45 percent of current renters expect to move and buy in the next three years. No idea how that compares to past years. Then they discuss the reasons renters who rate the likelihood of such a move at 60 percent or less gave.
Too much debt and too little income. Hope those debts aren’t those student loans I keep reading aren’t causing any economic damage ’cause that’d just makes the problem worse. The study doesn’t find much evidence of skittishness about future housing prices falling, which you can take as you will.
If you want to see how bad things are, here’s the number of households by age bracket and their respective homeownership rates from the Census Bureau’s Housing Vacancy Survey (Table 12).
Maybe we should rename the country the United States of Houses Owned Only by Old People. USHOOOP works for me.
Oh Yomiuri Shimbun, why must you blight the Internet with such nonsense in your editorials on legal education?
[T]he number of lawyers employed by local governments and business corporations has not increased as much as anticipated. A large number of people are unable to find jobs after passing the bar exam.
Some law schools have been increasingly inclined to withdraw from their field of education in recent months. The move has accelerated since last autumn, when the education ministry said it would curtail grants-in-aid to law schools whose graduates perform poorly on the bar exam.
There was a time when law schools bloomed, with their number peaking at 74. But the number of law schools accepting applications for admission next spring is expected to decrease to 54. It is only natural for law schools to quit if their students do badly on the exam.
Clearly Japan’s law schools’ mistakes aren’t emulating the U.S. system but not emulating it enough. Employing the strategies used by U.S. law schools could really make a difference at these institutions because over here, we’ve internalized the following lessons. When graduates don’t pass the bar or don’t find jobs, do the following:
(1) Capture the accreditation system and calibrate it so that if graduates from all schools fail the exam at about the same rate, the schools keep their accreditation. You’re not over-enrolled if you’re just average.
(2) Blame the magazine rankings. (Don’t worry if they blame you back, you both make your money on the (prospective) applicants. It’s just part of the business.)
(3) Shake down your alumni to finance a new, gratuitous, state-of-the-art law school building. That’ll show ‘em.
(4) Blame your graduates for being greedy, entitled, and unwilling to make the tough sacrifices, like opening practices in rural areas. Lots of people in Shikoku need lawyers.
(5) Alternatively, blame your graduates for moving too far from the school and trying to make money where the jobs are, like Osaka perhaps. After all, it’s not the school’s fault for enrolling too many students for the local market; rather it’s the students’ fault for wandering too far from where their degrees have any signaling value.
(6) Advertize your school’s discounted tuition thanks to senior students who are asked to pay full freight courtesy of unlimited government loans. (Japan has those, right?)
(7) Complain that the press and the blogs don’t use any facts—because they don’t.
(8) Use Pyrrhonian skepticism to dismiss government employment projections showing that there is no need for your graduates’ professional labor.
(9) Notwithstanding (8), point to the imminent wave of retiring lawyers whose positions will need to be filled.
(10) In case Abenomics fails, waive away any predicted productivity increases in legal services, low household incomes and formation rates, the apparent income elasticity of demand for legal services, and predictions that the economy is going to stagnate for many years to come. Do not waver: The backlog of graduates will clear!
(11) Claim that your graduates are easily finding jobs after the employment data are collected. Disregard the findings of longitudinal studies like After the JD in the U.S., which found that graduates who enter the profession in good years frequently leave law practice several years later due to massive attrition.
(12) Throw out marginal product theory, the law of diminishing marginal returns, and the sheepskin effect and argue that your school’s degrees are “versatile,” ensuring that graduates will get an earnings premium in any occupation besides law practice because all schooling increases earnings for all positions regardless of the skill required.
(13) Ask rhetorically, “What else will intelligent young people do?” Obviously law is the answer.
(14) Plead that your school is virtuous because it enrolls minority students who do poorly on exams. It doesn’t matter if they never enter the profession or can’t service their debts. (They have IBR in Japan, right?)
(15) Use the crash in applicants to encourage people to apply. After all, it’s not like everyone will seriously heed this advice and make it self-defeating.
(16) U.S. law schools haven’t tried this yet, but yous should: Insist that the profession’s licensing rules are so restrictive that they prop up prices for lawyers’ services, which is why so many of the highest earners in the country are lawyers. Therefore, anyone who graduates from your law school is a lucky ducky. If anything, the country should allow foreign-trained lawyers to practice as it will drive costs down.
(17) And if all else fails, compare the number of attorneys per capita in your country or region to others because that’s an obvious measure of lawyer shortages. Duh.
So Yomiuri Shimbun and all Japanese law schools, the problem wasn’t adopting the American model; it’s not adopting it all the way.
A week after I sarcastically told you you to trust your east coast media elite about higher education, the NYT’s Eduardo Porter takes the bait in, “A Simple Equation: More Education = More Income.” Porter wails:
Barely 30 percent of American adults have achieved a higher level of education than their parents did. Only Austria, Germany and the Czech Republic do worse. In Finland more than 50 percent of adults are more educated than their parents.
Here’s his chart showing the international education arms race (at all levels, not just college):
The number one country is Russia, which is known for its healthy, long-lived population and very little national income from locational advantages such as oil and gas deposits. Second to last is Germany, a country with very few manufacturing exports and unspeakable squalor, which is why you never hear about it.
This pattern of stagnant mobility and rising inequality of education adds up to a dumbfounding paradox. American workers with a college degree are paid 74 percent more than those with only a high school degree, on average, nearly the biggest premium in the O.E.C.D.
Can you believe this a week after New York Fed economists report that college doesn’t pay off for everyone? Like seriously, read your own damn chart.
Yes, I’m lying, but the New York Fed’s promised analysis of five-year and six-year college degrees calls the college premium into question, not that the authors understand why. They calculate that adding a fifth or even a sixth year of college costs workers ~$65,000 or ~$130,000 over their lifetimes, respectively. Thus, I wonder, “Why not graduate in just three years then to get on that wage-premium track earlier?” Maybe people could do it in two, or one, or just say they went to college even if they didn’t. It reminds me of the “seven-minute abs” scene from There’s Something About Mary, which for some reason YouTube doesn’t have a clean copy of. Feel free to explore on your own, but if you disagree with the zero-year bachelor’s degree, then you’re dreaming about Gorgonzola cheese when it’s clearly Bree time, baby.
The lesson is: Never reason from a college premium, which apparently even college graduates can’t figure out.
The more entertaining adventure is the New York Fed’s subsequent post in which it dares to question if a world outside the average college graduate exists. It’s titled, “College May Not Pay Off for Everyone.” Heretical, I know.
Here’s the authors’ chart, which unlike any research I’ve been able to do, goes back to the 1970s.
I’ve just received word that the authors’ security clearance has been revoked.
Don’t worry, though, they hedged themselves:
While we can’t be sure that the wages of this group wouldn’t have been lower if they had never gone to college, this pattern strongly suggests that the economic benefit of a college education is relatively small for at least a quarter of those graduating with a bachelor’s degree.
Yeah, in college-premium land it’s obvious that those grads are so stupid that if they hadn’t gone to college they would’ve been unemployed—and if they hadn’t finished high school, they would’ve sold themselves into slavery.
The obvious thing to ask is what kind of occupations these workers are in. If they aren’t in positions that require much college education, then that might imply that too many people go to college, that many college grads in highish-paying jobs benefit more from the signal their degree sends than the human capital developed through coursework, that the public is filled with endless garbage about the need for more college graduates (often at the behest of student lenders), and that a lot of these low-earners who have significant student loan debts will be unable to repay them, possibly culminating in a government write-down in the future.
Or they could just be really stupid and college qualifies them to be retail salespersons. And you shouldn’t worry, all those stories are just scaremongering and you should trust your east-coast media elite.