Exile on Link Street—ABA Pres. Responds to Sen. Boxer, Lenders Protected from Student Debt Default, & Much More

Six links! Much happened in the world of legal education and student debt

(1) Debra Cassens Weiss, “BigLaw Lost Nearly 10K Lawyers in the Last Three Years,” in The ABA Journal

I can’t speak for 2010, but between 2006 and 2009 the legal sector (which employs most lawyers) lost 67,000 “persons engaged in industry,” according to BEA data.

(2) Mark Hansen, “ABA President to Boxer: Law Grads Shouldn’t Be ‘Shadowed by Overwhelming Debt’,” in The ABA Journal

President Stephen Zack responds to CA Senator Boxer’s request for an update on the ABA’s law school employment data transparency efforts. Concurrently, the Section of Legal Education and Admissions to the Bar sent its own update since it operates independently yet within the ABA.

Notably, Zack writes, “An interest in pursuing justice should not leave someone with a life shadowed by overwhelming debt.” Of course, there was no question of student lending or bankruptcy laws. That wouldn’t be very nice to the Senator.

(3) Malcolm Harris, “Bad Education,” in n+1

Harris gives me a much-needed primer on student debt and especially what happens if there’s a massive default on student debt: a preemptive bank bailout. And you thought TARP was bad:

Unlike during the housing crisis, the government’s response to a national wave of defaults that could pop the higher-ed bubble is already written into law. In the event of foreclosure on a government-backed loan, the holder submits a request to what’s called a state guaranty agency, which then submits a claim to the feds. The federal disbursement rate is tied to the guaranty agency’s fiscal year default rate: for loans issued after October 1998, if the rate exceeds 5 percent, the disbursement drops to 85 percent of principal and interest accrued; if the rate exceeds 9 percent, the disbursement falls to 75 percent. But the guaranty agency rates are computed in such a way that they do not reflect the rate of default as students experience it; of all the guaranty agencies applying for federal reimbursement last year, none hit the 5 percent trigger rate.

(4) J-Dog, “I Should Be Optimistic Because…” in Restoring Dignity to the Law

I haven’t seen much recently on the alleged versatility of the juris doctor. J-Dog overfeeds me with an article about U Illinois Prof. Larry Ribstein’s incoherent beliefs on the future of legal education, “Business Law Expert: Legal Education Must Respond to Market Forces.”

(5) Janie Paulson, “Finding Law Everywhere,” in JDs Rising

Paulson provides grads with the information they crave: jobs that take advantage of their law degrees. I’ll tease you with the classic “Barrista Barrister.”

(6) Peter Wood, “Clinical Discomfort,” in Innovations

Using the example of Suffolk University’s clinical course, the ‘Police Complaint Assistance Project,’ which students advertized to locals—improperly using the law school’s letterhead—as an initiative describing Boston police as bad cop/worse cops, Wood unusually criticizes law schools’ move from theoretical to clinical education:

The idea that students learn better by hands-on work, of course, isn’t new to education at any level, but it is an odd fit with law schools, which were established in the first place on the argument that the old apprenticeship approach (think Abraham Lincoln) was too unreliable a foundation for the growing complexities of the law. Education in the law, said the reformers of a century ago, requires systematic instruction in doctrine, principles, and legal reasoning…

The wheel has turned. We now have law schools that have diluted that rigorous approach in favor of helping clients, albeit under the watchful eyes of faculty members…

I am not sure that this clinical emphasis is an entirely bad thing, but I certainly register the complaints of senior legal practitioners to the effect that today’s law-school graduates just aren’t sufficiently grounded in the law.

Hating on liberal academia is one of the Chronicle of Higher Education’s big draws and Wood does not disappoint:

The promoters of this worldview take it very seriously but, for all that, promoting it isn’t a serious use of legal education. The world is a dangerous place. We need the rule of law, and for that we need people who understand it thoroughly and who are committed to it. What we are increasingly getting instead are expensive workshops in how to manufacture social grievances.

But I Deflated the Economy Right!

Enter the BIDER

Via Nicole Battles in JDs Rising, we have Andrea Hable’s, “Law School Debt Survey Results,” in the Minnesota State Bar Association’s Practice Blawg. Ms. Hable conducted an unofficial and admittedly unrepresentative sample of Minnesota lawyers’ debt situations. Minnesota (my home state) as I frequently point out, is one of the most attorney oversaturated states in the country. Expecting 100 responses, Hable received more than 300, and the survey is still open, so if you’re a Minnesota lawyer (all are welcome actually), fill it out. Interestingly, it separates “new lawyers” (licensed 0-5 years) from all lawyers, with older practitioners experiencing many of the same problems the new lawyers do. We should expect as much since the national legal sector has been in an intra-economic recession since 2005.

Hable’s research verifies the BIDER sentiment out there:

One-third of respondents left comments. The overwhelming sense from the comments is that many new lawyers feel like they are out of options, not just with money but with life. Their language shows frustration, worry, lack of control, and a feeling that the loans will never be paid off. All of this on top of an already stressful profession. With or without regret, new lawyers are scared…

Many felt taken advantage of, either by their law school or the system. People are terrified of losing their jobs. One person moved out of state for better job prospects and was not admitted due to “irresponsible” loans (amounting to about the average student loan debt).

…

There was also a sense of frustration from several people who felt like they “did everything right” and were still falling on hard times (and being unfairly blamed for being irresponsible): top of the class, law review, moot court, working during school, etc.

I don’t know where to begin with this. Like almost everyone else, I’m aghast at the idea of legal educators charging so much tuition that graduates would be unable to obtain a law license due to “irresponsible” debt levels. Beyond that, nothing ruins democracy quite like a government that alienates its own people by delivering them to permanent poverty. As the government loses credibility and inclusiveness, expect willful defaults and tax evasion to increase.

Law School = Disinflation

The survey results don’t bode well for law schools’ contributions to our economy. Without criticizing Hable’s work, allow me to translate some of the terms into pidgin macroeconomicese.

Many commented on the impact of their debt on family. Most of them talked about:

• significantly (or indefinitely) pushing back plans to get married, have children, buy a house/condo, or even a car…

Pushing back family planning means these lawyers are spending money on debt service rather than houses, cars, and toys from FAO Schwarz in the Mall of America. That retards any economic recovery and clearly demonstrates a decline in living standards.

• moving from government or non-profit to private practice when they started a family
• wanting to move to non-profit or pro bono work but can’t afford to
• wanting to go solo but can’t afford to leave their jobs

Hmm.  I thought public service and nonprofit work was supposed to be a noble endeavor, yet it appears open only to the wealthy few.

The people who are managing thanked income-based repayment programs, LRAP, scholarships, using savings instead of taking out loans, and being “lucky.”  I especially liked the commenter who said they were doing relatively well at staying on top of his debt, but that “at the end of the day, that is a lot like being the skinniest kid at a fat camp.”

Ouch.

A few people re-enrolled in school because it was the only option to further defer their loans or stand a chance at getting a better paying job. Others are considering starting nonprofits so they may be eligible for debt forgiveness in the future.

Doubling-down on an LL.M or taking on more student debt in another field to delay loan repayment isn’t good for the economy. It’s the educational equivalent to taking out a second mortgage on your house to maintain your standard of living. Both activities increase the country’s debt-to-GDP ratio rather than actually promote sustainable growth. Choosing more education out of desperation also smacks the people-go-into-law-for-the-wrong-reasons-and-don’t-do-the-math.-Don’t-they-realize-law-is-hard! blamers in the face.

Income-contingent repayment forgives student debt for those in the public or non-profit sector after ten years. I wonder how many people will see their loans forgiven ten years from now.

The actual survey asked:

35.41% of the new lawyers now live more frugally. Translation: people aren’t buying stuff. When stuff doesn’t get bought, businesses lose revenue. When businesses lose revenue, they cut prices, reduce their labor costs, and when those don’t work they then fail. Government loses revenue. Lather, rinse, repeat. Welcome to economic depression. Obviously we’re only talking about a few hundred lawyers, but given the high levels of youth unemployment, I don’t think it’s too far a stretch to assume this is a problem happening economy-wide. Nevertheless, if there’s any lesson we can take from the survey it’s that America’s law schools are hampering economic growth.

The surveys and the analysis are good reads. Check ‘em out.

Dear ABA Committee Chair, No, It’s Not That Complicated. Signed, The Legal Profession

"Even if the ABA’s hands are tied behind its back, its statements on tuition (and silence on lawyer labor supply and bankruptcy reform) suggest it suffers from Stockholm Syndrome."

Heather Diersen follows up her JDs Rising piece, “Dear Law School, It’s All Your Fault.  Signed, Recent Grad,” with, “Dear Recent Grads, It’s More Complicated Than That.  Signed, The ABA,” in which she parses an interview she conducted with ABA Accreditation Committee chair, Jay Conison, also dean of Valparaiso University School of Law.  Dean Conison made it clear he did not speak on the ABA’s behalf.  Frank the Underemployed Professional (Frank), operator of Fluster Cucked, draws first blood by attacking Conison’s credibility: US News & World Report ranks Valparaiso in its fourth tier, implying a severe conflict of interest for the dean.

Diersen organizes Conison’s responses according to three ABA committees (Accreditation, Standards Review, and Questionnaire).  I’ll summarize the arguments and accompany them with my numbered responses:

• Accreditation: Echoing former ABA President Carolyn Lamm, the ABA’s hands are tied.  If a university wants to open a law school, it is free to do so.  If it wants Title IV funding, it is free to meet the Department of Education’s requirements.  If it wishes to obtain ABA accreditation (as opposed to state, regional, or none), it must merely meet the ABA’s standards.  It’s not the ABA’s job to prevent attorney oversupply.

1).  Great!  The ABA’s hands may be tied, but its mouth isn’t gagged.[i] The ABA, representing the legal profession, is free to inform prospective law students and the general public that given the job market and the excessive tuition at nearly every private and many public law schools, legal education is not a worthwhile investment.

2).  So it’s mouth isn’t gagged; what is it saying then?  As of now the ABA has only acknowledged the tuition/debt issue with a bottlenecky chunk on its website wishfully titled, “ABA Economic Recovery Resources.”

A).  Inside, we find its document, “The Value Proposition of Attending Law School,” which uses David Van Zandt’s low-balled ROI starting salary: $65,315.

B).  It also contains Resolution 301, a futile (but thanks for trying) request to Congress asking it to convert private student loans to public loans, increased access to loan consolidation and income-based repayment plans, and amusingly, TARP funds.

C).  An article by former ABA President Carolyn Lamm,[ii] “Law School Education Debt Has a Manageable Solution,” with the following two quotes:

The ABA has for many years — regardless of economic climate — advocated for federal laws that would ease the repayment burden on law students who found public service jobs.  It’s time to explore creating additional methods to relieve repayment burdens for new graduates or new lawyers who have either been unable to find employment, have had their jobs deferred or have lost their jobs.

Now is the time for modest changes in current federal student loan programs to increase the amount that law students may borrow, and to bring existing private loans into the federal student loan system. [My emphasis]

In other words, President Lamm: (i) didn’t care if private sector lawyers were underpaid for their degrees or were drowning in debt, (ii) approved of financing the tuition bubble with taxpayer dollars, and (iii) advocated “modestly” increasing the tuition bubble with more federally guaranteed loans.  At no time did she criticize law schools for hiring superfluous faculty, raising salaries, and then raising tuition.  Bankruptcy reform was not up for discussion.

D).  And a Statement by Lamm, “ABA President Carolyn B. Lamm on GAO Law School Cost and Access Report,” addressing debt and diversity.

The ABA is committed to ensuring that the cost of attending law school does not become an increasingly insurmountable barrier for many individuals…The ABA urges Congress and the Administration to lift the cap on federal loans to finance law and other professional schools so that all students with talent and desire can attend law school—not only those of economic means. [My emphasis]

If the ABA is so concerned with diversity, accessibility, and debt, it should tell law schools to slash tuition, not ask for more free money from Uncle Sam to feed the tuition bubble.

But the GAO rightly recognizes that American Bar Association Standards for Approval of Law Schools play only a limited role in increasing cost and are not barriers to diversity.

Much more significant in terms of cost, according to GAO, have been the move toward a more hands on, resource intensive approach to legal education, and the competition among law schools for higher slots in published rankings that purport to distinguish between the 200 ABA approved law schools across the nation.

Lamm recognized that rankings dog-piling causes tuition increases, but she not only failed to connect that to ABA accreditation standards (next section, bear with me), but she also didn’t think the situation required warning potential applicants or the general public that law schools valued their reputations over their graduates’ debt loads.  Her solution was more Title IV debt-financing because in her mind law schools are entitled to incrementally raise their tuition indefinitely with no regard to graduate outcomes.

In conclusion, even if the ABA’s hands are tied behind its back, its statements on tuition (and silence on lawyer labor supply and bankruptcy reform) suggest it suffers from Stockholm Syndrome.

• Standards Review: This Committee reviews the ABA’s accreditation requirements.  Conison touts the proposed changes to Standards 302 and 303 (current standards here, redline to current standards here) to Diersen as the solution to the unskilled lawyer oversupply problem.

1).  Standard 302 replaces “Curriculum” with, “Learning Outcomes,” but the substance of the proposed rule merely tells law schools that they may change their curricula to meet their own standards.  Nothing in section 302 requires law schools to mark their degrees to the market.

2).  Section 303 serves as the new “Curriculum” section, and aside from retaining the ethics and writing requirements, it would require law schools to provide, as Diersen succinctly summarizes:

(i) a simulation course, (ii) a live client clinic, or (iii) a field placement. The theory behind this is that the students will be better equipped to practice law or seek non-legal careers upon graduation.

Again, the problem isn’t just that law schools are graduating students without marketable skills (so much for the GAO’s more expensive “hands on, resource intensive approach” to legal education); rather, they’re graduating students who have few job opportunities remunerated to make their ever more costly juris doctors worthwhile.  The proposed rule changes do not prevent rankings dog-piling, nor do they encourage smaller market schools to teach to their markets.  Even so, Standard 302 is so permissive that it’s hard for the ABA to deny accreditation to any law school.[iii]

3).  Okay.  Above, I quoted Carolyn Lamm stating, “But the GAO rightly recognizes that American Bar Association Standards for Approval of Law Schools play only a limited role in increasing cost and are not barriers to diversity.”  FALSE.  Former President Lamm, Dean Conison, GAO, and Ms. Diersen, please allow me to introduce you to Chapter 4 of the ABA’s Accreditation Standards: Faculty, which incidentally, is not under review.  Standard 402(a) states:

The number of full-time faculty necessary depends on:…(3) the opportunities for the faculty adequately to fulfill teaching obligations, conduct scholarly research, and participate effectively in the governance of the law school and in service to the legal profession and the public.

Because we know the tuition bubble functions by expanding faculty and their salaries for prestige, obvious ways to reduce the bubble include: (i) reducing the faculty by allowing higher faculty/student ratios (>30:1), (ii) relaxing the emphases on scholarship and full-time instructors, or (iii) shortening the duration of legal education since so many employers find three years wasteful.  Thus, the GAO is wrong: ABA Standards play a direct role in high education costs and consequently are barriers to diversity.

4).  Similarly, another way to save costs, reduce the Standards Chapter 6 “Library and Information Resources” requirement.  My favorite part of this section is the Interpretation 606-5:

A law library core collection shall [!] include the following:

(1) all reported federal court decisions and reported decisions of the highest appellate court of each state;

(2) all federal codes and session laws, and at least one current annotated code for each state;

Most of these materials are easily Googleable, and law students (and faculty) don’t need access to every single appellate decision across the country.  No need for tuition dollars to maintain these collections.  Remember how Minnesota’s four law schools are trying to amalgamate their libraries to cut costs?  See?  One more way ABA accreditation standards make law school more expensive.

To be clear: I don't argue that MSL's business model is perfect. I do appreciate the contributions of Minnesotan Kevin Sorbo though.

5).  Still don’t believe me?  “ABA’s Bane” Massachusetts School of Law eschews cadres of full-time faculty, keeps salaries down, charges its full-time students $14,989.80 per year, and argues the ABA’s accreditation standards cause exorbitant law school tuition and inaccessibility.  Given its frequent law suits against the ABA, it’s no surprise Dean Conison doesn’t mention MSL’s business model.[iv]

• Questionnaire: The ABA requires every law school to report whether it’s fulfilling the accreditation requirements.  Diersen writes:

When I asked Dean Conison about the allegations of misleading and fraudulent reporting of employment statistics, he believes the Questionnaire Committee is significantly concerned.  During the next year, the committee is considering recommending changes in the law school reporting requirements, particularly in the type of information given with employment statistics…This seems to be what lawyers, students, and the public want most: don’t tell us you have a very high employment rating when a substantial number are not employed in legal-related work but are searching for such work.

Diersen is right that reformers should hope the ABA will significantly improve the questionnaire.  There are three problems with it currently.

1).  First, it only asks law schools to provide employment information that they already provide NALP, even though we know NALP has no authority over law schools.

2).  Second, the ABA doesn’t collect salary information from the law schools.  That again tells us the ABA is unconcerned with the juris doctor’s market value.

3).  Finally, and most importantly, this is all self-reported, meaning law schools can game the questionnaire just like they game US News’s rankings.  Worse, they can outright defraud the ABA, so long as their responses sound plausible.  The Questionnaire will have limited reliability until law schools are subjected to independent audits.

Diersen closes with a fear that Frank also laments in his depressing piece, “Why Prospective Law Students Will Never Get the Message”: that the legal profession is broken, and the tuition bubble will not burst.  The tides of law students can never be turned away, and law graduates will end up in other fields for want of access to the profession; their law schools will then claim the juris doctor’s flexibility got them there.  Diersen writes:

The ABA’s attempts to improve our law schools’ transparency and curriculum may not decrease the number of lawyers fighting to practice. What we can hope, is that those choosing to run in this rat race will do so with more knowledge…I wonder if there are really many people that go to law school without intending to have a legal-related career. It seems more likely that people go into non-legal careers due to economics and opportunities.

When faced with the truth, that the ABA denies its accreditation authority confers to it any real power, and that it mutinies against telling the public the legal profession suffers from structural oversupply, then until Everitt Henry’s lawpocalypse we’re left with the democratic tools Nando of Third Tier Reality advocates:

This is why my goal is modest, i.e. inform people and hopefully we can prevent at least some people from committing financial suicide.

---

[i] I swear this was Elie Mystal’s metaphor, but I can’t seem to prove it.  I know I didn’t come up with it.

[ii] I’ve yet to hear any comment on the issue by the ABA’s new President, Stephen Zack.

[iii] As an aside, the current Standard 303(c) states:

A law school shall not continue the enrollment of a student whose inability to do satisfactory work is sufficiently manifest so that the student’s continuation in school would inculcate false hopes, constitute economic exploitation, or detrimentally affect the education of other students.

The proposed Chapter 3 includes no such requirement, freeing law schools to exploit their students?  Oops.

[iv] Incidentally, MSL has opened its own “feeder college,” American College of History and Legal Studies, in Salem, NH.  Its undergraduates can apply to MSL as 2Ls, saving them a year of law school—something that no law school has tried because, “Most strong law schools that are well established would be disinclined to try to create such a system because they recognize that their applicant pools are already very strong.”  The article fairly notes that the college is still unaccredited, and that MSL’s bar passage rate is 69% for first-time takers, which is below the state average.

Department of Education to the Rescue? Proposed CFR Changes to account for “Program Integrity” and “Gainful Employment”

 

The lesson I took from this exercise is that Uncle Sam has no neck.

 

Jerry Kowalski alerted me to a proposed change to the Code of Federal Regulations, (34 CFR Part 668) that just might kill the law school tuition bubble if adopted.  I’d read about the rule change elsewhere, and thought it applied exclusively to for-profit higher education institutions, including a handful of law schools that are at least provisionally ABA-accredited: (Florida Coastal School of Law, Phoenix School of Law, Charlotte School of Law, and John Marshall Law School (the Atlanta, GA one)).[i] From reading the document, it’s unclear as to whether the rule change applies to only for-profit schools or could be interpreted to apply to all law schools.

The DoE’s suspicion of for-profit education is justified, for if you think law schools are scams, wait til you see the outrageous multi-million dollar salaries CEOs of these schools make.  Whether the ones at for-profit law schools make that kind of money, I know not.  Unfortunately, according to the New York Times, resistance to the rule is strong, and I doubt conventional law schools would go along with it.

Aside from for-profit institutions, the proposed rule also refers to “recognized occupations,” specifically:

The proposed regulations are intended to address growing concerns about unaffordable levels of loan debt for students attending postsecondary programs that presumptively provide training that leads to gainful employment in a recognized occupation. (43619, left column)

It confuses me from here:

Links Dances—JDs Rising Gets the Tuition Bubble

Just so you know, I’ve never heard the Who’s Face Dances–a mystery I’m happy to leave unsolved.

Kelly Francis, “Law School Debt and the Mortgage Meltdown,” in JDs Rising

Mark Cohen, “Law School Debt: It’s Broke, Why Won’t Anyone Fix It?” in MinnLawyer Blog

Comparing legal education to the subprime mortgage market, Francis writes a post responding to Heather Diersen’s post (that I also wrote up recently):

The law schools, the ABA, and the federal government have shown a startling degree of irresponsibility in handing out student loans and law degrees to whoever will sign on the dotted line, regardless of their ability to land a job or eventually make good on the debt.  In turn, the students themselves should certainly shoulder their fair share of the blame for failing to read between the lines or see the forest for the trees.  Much like the mortgage crisis, however, it’s difficult not to assign blame to the parties that appear to be profiting the most from the drunken free for all, and in the current situation, that’s not the students.

Focusing on who profits is important, but we also need to focus on those who were in the best position to prevent the crisis.  In this case, it’s the Federal Reserve for recklessly ignoring an $8 trillion housing bubble, and the federal government that operates under the belief that full employment and income equality are discretionary duties of the state.

What’s difficult for many of us to fathom is this concept that something like higher education, even with federal student aid, is just not something that all Americans can afford.  If this is true, what does that mean for America?  What does that mean for capitalism?  What does that mean for the future?… Anytime you question long-standing beliefs about God or country like that, you should expect to have some venom thrown your way.

It occurred to me that the irrational exuberance that fuels asset bubbles is an incomplete statement about the social dynamics at work.  During an asset bubble, people who think they’re being risk-averse are actually taking an incredible risk (this is why But I Did Everything Right! is so aptly titled); likewise, they criticize anyone who doesn’t buy the asset as being risk-acceptant when the opposite is actually true.  The two groups pull far apart (Francis’ venom), yet once people start defaulting on the loans, risk-averse and risk-acceptant switch violently—much like the Earth’s magnetic fields reversing polarity at six degrees per day.

Reformers, Futile Gesturers, Blamers, and Loss-Cutters: Adventures in Anger, Personal Responsibility, and Positive Thinking

I open with sources; doodles to follow.

Heather Diersen, “Dear Law School: It’s All Your Fault. Signed, Recent Grad,” in JDs Rising

Mary Beth Marklein, “Grads Taking Law Schools to Task for Poor Job Market,” in USA Today

Don Peck, “How a New Jobless Era Will Transform America,” in The Atlantic

Susan Carter Liebel, “Don’t Be a Victim of the ‘Victim Mentality’,” in Build a Solo Practice at Solo-Practice University

Diersen’s post represents a typical response to legal education’s critics, for example:

[I]f I were smart enough to get into law school, I should be smart enough to know that there have always been too many lawyers.  There are too many lawyers because private (and some public) law schools are money-making businesses…While I sympathize with the recent grads on the job hunt and agree with the criticism against law schools’ admittance and career service practices – law school was my choice, every loan I took out was my choice, and the job market…well, it is tight in nearly every field.  I cannot blame the schools for failing to put a warning label on their applications stating: “Likely to cause debt and unemployment.” [Emphasis Original]

Marklein’s article is somewhat similar, referring to scam bloggers, Zenovia Evans’ hunger strike, and Roger Gordon’s litigation attempt to gain bar admission after only two years of law school to avoid adding more to his $175,000 of student debt.  Kelsey May, a 2010 Tulsa grad who wrote a book, What the L? 25 Things We Wish We’d Known Before Going to Law School, is loosely quoted, saying, “[T]he anger is ‘misplaced. … There should be some level of (personal) responsibility.’”[i] [ii]

There’s a lot going on in this mess of anger, responsibility, and the future.  Thinking on the subject prompted me to create a typology of who’s who in these disagreements.  There are four groups, each with their own audiences and goals.  I call them: Reformers, Futile Gesturers, Blamers, and Loss-Cutters.  These terms are an observation and aren’t meant to be exclusive or exhaustive.