NYT Op-Ed Provides Mostly Irrelevant, Unsubstantiated Reasons for Two-Year Legal Education

Daniel B. Rodriguez and Samuel Estreicher, “Make Law Schools Earn a Third Year,” New York Times, January 17, 2013.

Right off the bat, Rodriguez and Estreicher mean well when praising New York’s discussion about reducing its legal education requirement from three years to two. Unlike others who’ve written op-eds for the Grey Lady in the past, I believe they are working in good faith, and make no mistake I’m fine with reducing the number of credits people need for law school.

…But I’m not fine with doing it for irrelevant or incorrect reasons because it doesn’t solve the underlying problems. For instance, the op-ed’s banner (the text in the tab at the top of your browser) reads:

Practicing Law Should Not Mean Living in Bankruptcy

Clearly the authors have never heard of Income-Based Repayment or Income-Contingent Repayment. These policies make it quite easy to practice law (or do anything else for that matter) if one has excessive student loan debt.

The piece, unfortunately, sprawls around, but here’s a list of claims as they appear:

(1)  Law school will be more accessible to low-income students

Law school is already over-accessible. People can finance their degrees plus living expenses with unlimited federal loan dollars. The problem is their low-incomes after they graduate (to the extent they’re not caused by the depression), their non-lawyer jobs (ditto), and the law school debt the government will write-off in twenty years.

(2)  Two-year legal ed. will help the next generation of law students avoid a heavy debt burden.

The solution to the problem must address the paramaters of the problem. Between 1999 and 2011, four of New York’s 13 private law schools joined the buy-two-get-one-free club because their tuitions grew by fifty percent in constant dollars. Another two probably crested the line this year, but I ain’t checking. Hacking off a year of law school (scholarship redistribution aside) only sets most of them back to the late 1990s. There’s no reason to believe it’ll halt future tuition increases because it doesn’t address their cause.

(3)  Legal education in the United States will improve.

Yay! I get to agree with someone! Y-A-Y!

Students would have the option to forgo that third year, save the high cost of tuition and, ideally, find a job right away that puts their legal training to work.

Yes, but less time in law school does not create jobs.

Myriad services are now being outsourced (often abroad) to nonlawyers, and the number of positions with large firms is dwindling, making it harder for graduating students — many of whom are saddled with six-figure student-loan debts — to find work at the outset of their careers that can even begin to pay off their obligations.

Such prospects are discouraging many young people from pursuing law degrees, and pushing away lower-income students the most.

I’ve never seen any evidence whatsoever that poor people are being “discouraged” from law school due to the fear of outsourcing and low pay. I suspect that it’s mostly wealthier people who have gotten the message and that the people enrolling today aren’t from the class that reads The New York Times.

Then again, I barely read The New York Times, except the international section, the addictive obits, and Krugman’s blog.

Law schools must do a better job of containing these costs. We also need more financial aid for students.

But the financial aid is already over-generous. That’s why law schools don’t feel the need to contain costs: So long as there’s a core of people willing to pay whatever absurd amount of money the marginal law school is willing to charge, nominal tuition will continue to increase.

As of today, there is no marginal law school because they’re still viable despite the applicant nosedive. That may change, but even if law schools close the first one left standing won’t slash its tuition, move into a smaller building, cancel its profs’ tenure, or force academics to teach full course loads.

While this wouldn’t increase the number of available jobs…

Yes, because less time in law school does not create jobs.

…A two-year option would allow many newly minted lawyers to pursue careers in the public interest or to work at smaller firms that serve lower- or average-income Americans, thereby fulfilling a largely unmet need. As it is now, many young lawyers say they would love to follow this path but cannot afford to because of their onerous debts.

But new grads have IBR and ICR. Their debts are not an issue (for the majority). The problem is that poor people are poor, not that lawyers’ debts are preventing them from charging $1.77 per hour.

Many law students can, with the appropriate course work, learn in the first two years of law school what they need to get started in their legal careers.

Most people who attend elite law schools can probably pass a bar exam with one year of self-study.

With this reform, law schools would have an obvious financial incentive to design creative curriculums that law students would want to pursue — a third-year program of advanced training that would allow those who wished it to become more effective litigators, specialize or better prepare for the real-world legal challenges that lie ahead.

Maybe, but creative curricula do not create jobs.

Those who graduate from rigorous three-year programs will not only emerge with sharper legal skills, but also be more essential to employers, raising the rate of job placement out of law school.

Sharper education will not create jobs. (Come on guys, you’re making me lose readers!)

A handful of states, including New York, allow individuals to take the bar after working for a law office for a number of years, in lieu of going to law school, though this approach is seldom used.

I’m glad Rodriguez and Estreicher brought this up because it raises a very important question: Why is this route seldom used? What does law school offer that law office preparation does not? What are the law students paying for? In theory (there is a theory behind mandatory legal education, right?), law school improves the likelihood of bar passage for those who might otherwise fail, but given the LSAT-bar passage correlation, it probably doesn’t. If people need some formal education to pass a bar exam, why not let the evil grubby free market provide it (without unlimited student loans)? Maybe people go to law school because they (rightly) think no decent-paying legal employer will hire them if they don’t buy the degree from a prestigious institution. If signaling value is all that law schools sell, then why do we need the ABA to regulate them, lend their students unlimited sums, and let them operate tax free?

Some will argue that the two-year option would only create unequal classes of lawyers and glut the marketplace with attorneys who don’t have the skills and training that generations of law school graduates before them have had.

We doubt this will occur. And in any case, the risk ought to be balanced with the varied needs of the American people for legal services.

Count me out of this “some,” for as I said at the beginning, a two-year law school is better than a three-year because it saves law students’ time and money, though it will throw recent grads under the bus by glutting the market even more (bet they can’t wait to send those employment data to U.S. News). I just think that legal educators need to come up with better reasons for why people should have to attend law school before becoming lawyers. I certainly don’t see how a two-year lawyer balances the needs of the American people. The beneficiaries are the students and taxpayers, but comprehensive reform would serve them better.

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Wait, I take it all back. These are flawless arguments. I’m willing to sell out for these irrelevant justifications for shortening law school because maybe in another 15 years when tuition grows by another fifty percent, some law professors will write another op-ed for the Times rationalizing one-year law schools.

NYT Obituaries Are a Time-Suck

Stay clear, whatever you do. While searching for Japanese filmmaker Nagisa Oshima’s obit, I ran into this one today, “Jeffrey O’Connell, Legal Scholar of No-Fault Coverage, Dies at 84“:

In 1965 Mr. O’Connell joined with Robert E. Keeton, another law professor, to write “Basic Protection for the Traffic Victim: A Blueprint for Reforming Automobile Insurance,” a book in which they proposed to do away with a system in which an accident victim had to sue another driver to collect damages, in most cases from the second driver’s insurer.

The authors proposed that the victim’s own insurance company would pay the damages instead, regardless of who was at fault. The other driver would recover damages from his own insurance company.

Except for cases of extreme loss, in which lawsuits would be permitted, suits to get greater sums would be prohibited, depriving personal-injury lawyers of a ready supply of clients.

As a result, the authors contended, everyone could be quickly compensated, and administrative costs, particularly legal ones, would be curbed. Logically, insurance payouts would drop, meaning car owners’ premiums could be reduced.

Everyone who’s taken the New York bar knows about the no-fault system, which at least was simpler to understand than the elective share statute. If I recall, accident victims can only sue other drivers if their injuries are over $50,000 and they are “catastrophic” in character, or something like that.

Does the system work? Legendary scamblogger L4L of Big Debt, Small Law says “No.”

Okay, he didn’t just say no, he wrote a delightfully satirical post in March of 2010 on the subject that I will reprint. I cannot vouch for the veracity of any of L4L’s claims, but his point that no-fault can be easily defrauded is plausible.

If anything, the insurance defense sweatshops were latecomers to outsourcing’s bandwagon. We speak from experience here, having launched our legal “career” from a $40 K a year downtown no-fault mill (no kids, that number’s not missing a digit) back in 2006. Sweet Jesus, the memories. King’s Civil Court, 141 Livingston Street, Brooklyn. The infamous 9th floor “no-fault” part.

How fondly we recall the motions being wheeled into chambers via a rusted Pathmark shopping cart, its wheels buckling under the weight of so much legal toilet paper. John, the grouchy but loveable court clerk, had Stage IV throat cancer and would hack blood while rasping at us losers to “shut the Fuck up and listen for your case” during calendar call.

He wasn’t kidding. John kept a .38 special, sans holster, tucked in the waistband of his trousers. Sometimes he’d hammer a stapler inside a steel wastebasket to get the attention of us barristers when the din of no-fault bickering crossed a certain decibel level. Hell, even a chainsaw operator would cringe at how loud that place could get. We still awake at night with ears ringing, recalling the nightmare of $347 neck-brace negotiations. Those old “dollar collars.”

That said, John was one of the few good guys you’ll meet in the miserable sewer of ShitLaw practice. He realized full well what a pathetic waste of time the entire charade was, and how poorly paid we were paid to boot. Your humble narrator’s constant complaining once led him to announce: “if you monkeys ever form a union, you’ve found your shop steward.” They just don’t make ‘em like John anymore. Blue-collar Brooklyn all the way. A Mets fan. God bless the old bastard. Cancer long since carried him away to that big courtroom in the sky.

For those unfamiliar with no-fault practice, a brief primer: It’s the legal equivalent of stamping license plates in a prison metalshop, only at lower wages and more authoritarian working conditions. In NY State, a driver’s own insurance company pays medical expenses and lost wages regardless of accident fault. This moronic idea, hatched by “policy” wonks in the NY legislature, naturally resulted in systemic and wholesale disaster. To wit:

Mobsters get two junkyard cars, register & insure them, and then recruit homeless dudes and illegal immigrants to stage minor accidents. The police are summoned, an accident report prepared, and the scammers then begin “treating” at bogus outer-borough medical mills operated by the crime syndicate. The insurance carrier is then billed for the phony “treatments” plus a truckload of phantom medical supplies like canes, neck braces, massage units, and so on. NY even allows billing for quack “medicine” like aromatherapy, acupuncture and other witch-doctor nonsense.

Like the Lilliputians in Gulliver’s Travels, these parasites teamed up to hamstring the insurance carriers. Remember kids: a cloud of mosquitoes tops a tiger’s death toll any day. The rules & caselaw all favor this infectious swamp of scammers, and billions have been stolen from NY drivers as a result of this ongoing heist. Shady collections law firms “buy” collections files from the clinics at 50 cents on the dollar, file Summary Judgment motions, and then just wait for the case to come up on calendar. For every victory, the medical mill gets an additional cash kickback. The byzantine rules and massive deluge of cases (150+ a day in Brooklyn alone) make it death by a thousand cuts for the carriers, who simply raise rates rather than pay a living wage for the cases to be properly litigated.

That doesn’t stop the occasional IDH (Insurance Defense Hero) from slipping thru now and then. All veterans of ShitLaw know the type. These barristers make up for their abysmal salaries in bare-knuckle belligerence and “fighting the good fight.” Unlike the usual hung-over, half-asleep J.C. Penney clad schlubs of ShitLaw, the IDH struts into court like Clint Eastwood entering a saloon. For their 40 K a year they’d take a bullet for Geico or Allstate, and take it with pride. Every case is like “High Noon.” One almost expects an IDH to come flying into depositions wearing tights and a Superman cape. We’ve often thought of pitching this character as an action-hero cartoon. Just imagine:

“Slower on the LSAT than a lobotomy victim, more powerless than a day-old fart, able to cut n’ paste huge motions with a single click- what’s that flying into court?

It’s a BIRD-it’s a PLANE- no, it’s the INSURANCE DEFENDER !”

Hell, we’d watch it. So would you.

Today it’s not uncommon for no-fault associates (or what’s left of them) to earn as little as 25 K a year,with turnover measured in hours opposed to months. After just 6 weeks at my first no-fault gig, I’d already risen 7 seniority notches on the letterhead. But wait: this “firm” gets even funnier:

Too stingy to buy motion-exhibit tabs, they’d instead have us cannibalize incoming papers for their office-supply content.

“Just pry apart the Velotex binding and yank the fuckers out”, said the partner. He even had a custom-bent screwdriver designed just for that purpose. We associates swapped these exhibit tabs like inmates trade smokes. An “Exhibit A” and other high-alphabet letters were always in short supply, whereas a “Q” was common as cabbage. Whenever someone quit we’d quickly plunder his desk to “stock up” on these much-needed supplies. One nasty, rodent-like guy who’d lasted 10 months had a real motherlode: eight “A’s” and eleven “B’s” stashed in his drawer. Or should I say “under his drawer.” Well hidden-the prick. For what motion he was saving them I have no idea. We called him “the squirrel.”

This dump also printed us our own cheesy business cards on that perforated cardstock you can buy at Staples. For laughs I’d bring the whole sheet into court and just rip them off as needed, like a dispenser. Once I gave this hot Wilson Elser chick a whole uncut page of them, but she never called me.

Sadly, my once-rising star was an elevator to nowhere. Insurance defense work is so boilerplate and mindless that many firms “dump” experienced associates once a certain salary threshold is reached (roughly 60-65 K). Five year’s experience isn’t worth much more than five minutes, and it’s simply more cost effective to “keep the line moving” with freshly minted suckers from Car’Bozo, Brooklyn, NYLS and other gutter schools than pay experienced associates a living wage. Now that Bangalore &Co. are handling all the paper-churning, these insurance “firms” can simply troll craigslist for per-diem clowns to show up in court and bicker over the cases for as little as $25 a file. Like the Joads in The Grapes of Wrath, these migrant barristers wander the court system like fruit pickers.

The work was beyond mindless. Like the A-Team, if you’ve seen one episode, you’ve seen ‘em all. The characters changed while the script stayed the same. Day after day, year after year, squads of TTT grads trekked off to court, got yelled at/berated by court personnel, and limped back to the office to cut n’ paste the next day’s sad mountain of paperwork together. “Lateral” options from this practice area included can & bottle scrounging, panhandling on the 7 train, or becoming assistant fry cook at Burger King.

You can read the rest here (17-20).

But I Thought There Were No Cheap Lawyers…

If you did, then I recommend Daniel Fisher’s article in Forbes, “Class-Action Firms Capitalize on Wretched Market for Law-School Grads.”

Fisher managed to find a lawyer (or two with the same name) who went from charging $500 for a fixed-fee case a few years ago to $1.5 million for 2,711 hours of “legal” work in a class action lawsuit against Citigroup—except there’s no evidence he received anything close to that kind of compensation because he was contract attorney. He was billed out at $550 per hour when according to an anonymous source on the same job the contractors were paid a $35 rate at most. If the case lasted two years, that’s about $47,500 annually. That’s not the worst salary to have in the city, but it’s one-fifteenth what he was billed at, which might vex clients and the class action lawsuit activists mentioned at the end of the piece.

I liked Fisher’s article, especially the well-deserved mention of Tom the Temp’s Temporary Attorney: The Sweatshop Edition, which might be the earliest scamblog, starting in late 2005. What’s surprising though is that Fisher added the law school tack at all because it wasn’t really necessary. The story’s really about the very large multiplier between the contracting rate and the billing rate. I suspect that if this piece came out three years ago, it would’ve noted the contractors’ student loans only in passing. Instead, in 2013 we get:

Many of the temp attorneys on the Citigroup case graduated from law school in the past five years, some of them from prestigious schools like NYU and Georgetown.

Whoa.

I can’t say I expected Forbes to present the legal contracting world through the eyes of Big Debt Small Law.

Business Insider Article Shows Why Measuring Applications Alone Isn’t Helpful to Readers

Aleksi Tzatzev, “Despite Getting Sued By Graduates, This Low-Ranked Law School Has More Applicants Than Ever,” Business Insider.

The article’s opening speaks for itself:

“While some other law schools are struggling to attract applicants, New York Law School is doing better than ever.”

Additionally, according to the dean quoted in the article, NYLS received 5,998 applications in 2011, up from 4,510 in 2010 and even 5,606 in 2008.

The photo, however, is my favorite part.

I just wish I knew who was saying “People want to go to our school!” because while it’s literally correct, relative to other law schools nationally it’s not.

I should preface by saying that I’m not going to delve into part-time applications, which the dean above is obviously doing. Tracking full-timers is enough of a burden, so there will be a little apples/fruits comparison going on here, but most of the fruit are apples.

In 2008, NYLS received 4,721 full-time applications, 3,685 in 2010, and 5,054 in 2011. This is all fine and good, but the number of applications doesn’t matter so as the number of people who ultimately show up, which is why I torture readers with arcane stats like the number of “full-time matriculations per 100 applications.” This figure has the benefit of giving an estimate of how good a fit law students are with their law schools, the higher the better. Tracking it against law schools’ acceptance rates helps us distinguish between law schools that reject many of their applicants and applicants who reject the law schools they apply to, like that one in the lower right whose name we daren’t utter. Discovering schools that tend to accept more applicants who are willing to show up tells us something that the rankings don’t as it measures what applicants are thinking rather than what U.S. News wants them to think. This doesn’t mean such schools’ outcomes are any better, but that’s a little off-topic today.

In 2011, NYLS had 7.42 matriculants per 100 applications, way down from 14.11 a year earlier. An inauspicious fall, but it’s not the only New York Law School in those parts of the chart, just north of St. John’s but south of Hofstra and Pace. NYLS accepted 45.4 percent of its full-time applicants (the fourth fifth of all law schools), and its yield was only 16.3 percent (25^th lowest for 2011, the bottom fifth system-wide). The size of its full-time entering class was only 375, down from 520 in 2010, the smallest class since 2004.

Although NYLS had a large haul of applications, the vast majority of them apparently preferred going elsewhere. A better title for the article would be, “Sued by Graduates, This Low-Ranked Law School Is Only Slightly More Preferred Than St. John’s, but Less Than Hofstra and Pace.”

You are, of course, invited to take Business Insider‘s survey on whether you believe law school is worth the cost of tuition.

New Am Law Daily Article: ‘New York’s New Mandatory Pro Bono Requirements a Step in the Wrong Direction’

‘New York’s New Mandatory Pro Bono Requirements a Step in the Wrong Direction’

A little shorter than most of my publications, so enjoy.

Open Letter to the New York State Bar Association

I didn’t intend to write anything about the new mandatory 50-hour pro bono requirement New York will impose on its bar applicants next year, figuring I had nothing new to add. However, I received an e-mail from the New York State Bar Association’s Office of the President, saying:

In his Law Day speech on Tuesday, Chief Judge Jonathan Lippman announced that beginning next year, people seeking admission to the bar in New York will be required to perform at least 50 hours of pro bono service at some point prior to their application. According to Chief Judge Lippman’s speech, this service can be performed during law school, or prior to the admission process. (Text of Lippman’s speech: http://www.courts.state.ny.us/whatsnew/Transcript-of-LawDay-Speech-May1-2012.pdf)

The New York State Bar Association has not yet seen any written version of this new requirement, but will follow the matter closely. In the meantime, we are interested in our members’ reactions and comments. Email us at probonocomments@nysba.org.

It appears the new requirement was hatched without the NYSBA’s knowledge, which surprises me. If I were to politic it, I’d reckon that the request for members’ reactions suggest the association is nonplussed by the announcement and doesn’t know how to proceed, so since it asked, I sent this e-mail with the appropriate subject line, “All Oblige and No Noblesse Makes Law a Dull Profession.” It gets a little sharp at the end, but that’s where the muse took me.

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Dear NYSBA,

Thank you for asking NYSBA members for their opinions about Chief Judge Jonathan Lippman’s announcement regarding the new mandatory 50-hour pro bono requirement applicants to the New York bar will have to meet before admission. This issue is important to me not just because I have friends in law school who might seek licensing in New York but because I research the cost and value of legal education in the United States on my blog, The Law School Tuition Bubble, and in my submissions to the Am Law Daily. Here are my thoughts.

Judge Lippman grounds the new pro bono requirement in a belief that holding a law license entails a “responsibility” (a word he uses five times) that demands a sacrifice on the lawyer’s part. For example, he opens his Law Day 2012 speech saying, “Those who are privileged to call ourselves lawyers have a special duty as the gatekeepers of justice to participate in preserving what we hold so dear.”

Unfortunately, as a lawyer of four years, I do not know what privileges Judge Lippman is referring to. He never lists them in his speech, and I will not waste my time looking for a “List of Lawyers’ Privileges” on the State Judiciary’s Web site, for I suspect there is none. Indeed, since I am currently licensed but not practicing, I barely see myself as a lawyer. I rarely refer to myself as one, and when people ask me what I do for a living, I tell them that I am a “writer,” a profession that does not come with any “privilege” I know of. Although I intend to renew my license this summer, there is a growing possibility that I will never use it again, though I believe I am more likely to than my peers.

Thus, from my standpoint a law license allows a person to represent people before a court. That is it. There is no other grand responsibility be it “pressing,” “special,” “social,” or “professional” as Judge Lippman qualifies it. Pro bono service should be done out of a lawyer’s magnanimity, not the requirements of bar authorities. I would take a different opinion if the law schools and the bar colluded to engineer a shortage of attorneys in New York to ensure stable practices for them. Were that the case, then I would easily be able to work as an attorney and collect economic rents along with my wages. In this circumstance, I would feel honor-bound to provide free legal services, and I would simultaneously argue that an artificial scarcity of lawyers is fundamentally unjust. (Ironically, Judge Lippman disagrees, for a mandatory pro bono requirement discharged only in New York will hamper out-state petitioners’ applications.)

However, there is no shortage of lawyers in New York. The State Department of Labor projects that between 2008 and 2018, 1,700 new lawyer jobs will open each year due to both growth and replacement. Meanwhile, the state’s 15 law schools graduated nearly 5,000 people in 2010, and there is no Shangri-La legal market in the United States for them to move to. Many will never practice law in any meaningful way.

Although Judge Lippman is correct that many poor people need legal services, one wonders why aspiring lawyers should be ordered to provide them. Bar applicants often lack experience as lawyers, and since they will mostly be providing their services through programs organized by their law schools, they will ultimately be paying wealthy institutions money to supervise their service. Given how much law school costs—especially in New York—there is a high probability that there will be no net social benefit from these programs: Law students will indenture themselves to the U.S. Department of Education to help the poor—something they can do more effectively by not going to law school.

At the same time, neither judicial authorities nor the ABA (i.e. those who are “privileged to call themselves lawyers”) has shown any interest in advocating eliminating the monumentally wasteful federal student loan program or reforming the law to enable the tens of thousands of lawyers who owe excessive debt on their degrees to reduce or discharge their loans in bankruptcy. Instead, these “gatekeepers of justice” quietly prefer to shift the problem onto future taxpayers. It is in this context that I find appeals to lawyers’ “special responsibility” to serve the poor galling. Consequently, I do not support the new pro bono requirement.

Thank you for considering my thoughts,

Matt Leichter, Esq.

New York Spared a 16th Law School, for Now

Emily Melas, Daniel O’Connor, and Nate Fleming, “Plans for law school tabled by BU officials,” in Pipe Dream (State University of New York (SUNY) Binghamton newspaper)

It appears SUNY Binghamton’s law school has gone wherever law schools go when they’re tabled indefinitely, like Wilkes-Barre in Pennsylvania.

“There are law schools right now who are not filling up their seats, there are graduates from law schools who aren’t getting jobs, and so the environment right now to found a new law school isn’t a particularly favorable one,” [Vice President for Academic Affairs Brian] Rose said.

Remember, it’s good to open law schools as long as it appears that law schools are doing well. Graduates’ long term outcomes aren’t to be considered. Okay, that’s not true; they do consider graduates’ long term outcomes but only in the most outrageously irresponsible manner conceived, such as Indiana Tech.

In order to create an accredited law school, the University took steps to gain approval from the New York State Division of the Budget, the SUNY Board of Trustees, the Board of Regents and the governor, as well as the American Bar Association. The University secured $3 million in state funding for the initial design and planning stages of the law school.

Please don’t say the $3 million has already been disbursed.

As to more law schools in New York … Query: What are the actual graduation plus nine-month outcomes for SUNY Buffalo and City University of New York law grads? What are their five-year career outcomes? Twenty-year outcomes? What about New York’s other 13 private law schools? The rest in the region? The J.D. plants in New England?

Also, since law degrees are very easy to find in the northeast, why should New York’s taxpayers (esp. the ones who already have to subsidize all the real estate speculators midstate and upstate who just got their property taxes capped) subsidize training for something they can import from elsewhere? Or worse, subsidize training that can be exported to different states?

Public legal education may be cheap, but is it necessary?

NYSBA Journal Article Relies on Several Logical Fallacies to ‘Connect the Dots’ on Legal Education’s Outlook

Gary Munneke, “Race to the Finish Line: Legal Education, Jobs and the Stuff dreams are made of,” New York State Bar Association Journal

Citing his 40-years’ observation of the legal job market, Pace Law School professor Gary Munneke writes, “So when I say the writers and bloggers in the legal press have missed the mark in their criticism of legal education, it is not without recognizing that there is some merit in what they have to say.” (11) Professor Munneke is a frequent contributor to the NYSBA Journal. I’ve liked some of his past articles, particularly one about the end of general practitioners last year. He’s only touched on legal education briefly, until this month’s Journal. It’s not good, and because the article isn’t on line yet (check here later), I’ll quote it extensively. He writes:

“It is true that the recession of 2008-2009 seriously undermined the job market for both new and experienced lawyers. It is also true that legal education is expensive, and many students pay for it through loans that have to be repaid after graduation. And it is well documented that some law schools misstated employment and other statistics in the tight, competitive job market of recent years. But connecting the dots in this case does not lead to a conclusion that our system of legal education is bankrupt or that law school is not an excellent career choice for many students. This article will attempt to re-connect the dots in a way that more accurately reflects contemporary legal education and the job market for lawyers.” (11)

At least Munneke leaves us with no questions as to where he stands on the issues. Instead of giving us hard evidence, though, (who exactly is saying that the system is “bankrupt,” aside from scambloggers? And what does this mean?) he essentially opens by telling us that “everyone” has known about legal education’s problems: high tuition and few high-paying jobs, yet this is a non-sequitur. Our focus is the law degree’s value, not whether criticisms are novel. Moreover, it’s not just “some law schools” that misstate their employment data. Anyone who even skims Law School Transparency’s Winter 2012 Transparency Index Report can see the embarrassing results, law school by law school. Worse, in 2011 it also came to light that at least two schools, Villanova and Illinois, had been defrauding the ABA for years with inaccurate incoming student data. Munneke whitewashes these problems.

Munneke’s article then confuses readers. Beneath a header titled, “The Good News,” he writes:

“Signs abound that the market for legal services is picking up, in concert with the general economy … It is not likely, however, that we will return to those halcyon days before 2008.” (12)

This, much less the subsequent paragraphs predicting the rise of staff attorneys, pro se litigants, and online non-lawyers, does not sound like “good news” for the median 2L in most law schools.

“With respect to graduates who go to work for small firms, government agencies, not-for-profits and other organizations, anecdotal evidence suggests that they do pay their bills and repay their loans. Chicken Littles who cry that it cannot be done are simply wrong. Thousands of law school graduates have been following this path for years. It may not be as easy to get by when you are making $60,000 compared to $160,000, but somehow you do it, and you survive.” (13)

Is this satire?

The problem is that like most law students, Munneke believes the $60,000 jobs are there for graduates if they want them, unless they decide to make the noble sacrifice and choose to work for $30,000 helping the destitute. On the one hand, Munneke thinks the economy will create enough law-ish jobs for everyone to pay down their debt, but on the other he says that things won’t be as good as they used to be. This is the “good news.” I can only explain this dissonance by assuming Munneke is committing the lawyer/J.D. equivocation fallacy. Sure, people in small firms, government agencies, and nonprofits have law degrees, but that’s not what happens to everyone who completes law school. For example, how many Pace grads over the last decade have defaulted on their loans?

If you knew where this was headed, you’re right. Munneke’s next point: the unsinkable, versatile juris doctor.

“[T]hose who claim that there are not enough legal jobs to go around fail to understand that the job market for lawyers is incredibly elastic, because a law degree is incredibly malleable and flexible.” (13)

Munneke leans on the findings of a 40-year-old ABA task force study that researched the “oversupply of lawyers” and determined that if law graduates couldn’t find work in law firms, they went to work in non-legal jobs. This is another straw man argument. Reformers are not committing the Luddite fallacy, arguing that law grads who can’t find work as lawyers never work a day in their lives again. But have heart, for Munneke anticipates this:

“[A] legal education provides training that will give you an advantage in the job market – both in getting the job and performing the job. What the [ABA] Task Force discovered in the 1970s remains true today.” (14)

He then provides an endnote to a book he coauthored, Nonlegal Careers for Lawyers.

Now, I’m not criticizing Munneke for citing his book in the endnote or even writing one on the topic. I’m sure plenty of lawyers would like to go into non-legal careers, and it gives them good advice. Rather, I’m going to point out two things. One, I have yet to see anyone quantify the “advantage in the job market” that a law degree provides. Even reputable organizations researching the topic make the shocking methodological error of equivocating holding a juris doctor and working as a lawyer, such as the Pew Center’s “Is College Worth It,” and Georgetown’s “The College Payoff.” Any skills taught in law school can be learned in a solid undergraduate program—and should be. Two, many lawyers seeking alternative careers are pretty intelligent to begin with. I seriously doubt law school (much less college) found them as lazy dolts and forged them into precision workers. This is a post hoc fallacy: you went to law school, then you became a good worker, therefore law school made you a good worker. At this point, I’ll add a line from the BLS’ Occupational Outlook Handbook that I typically underemphasize:

“As in the past, some graduates may have to accept positions outside of their field of interest or for which they feel overqualified.”

Notice that “overqualification” here is based on a “feeling,” not on an empirical observation that the graduate’s qualifications exceed the employer’s demands. This is the heart of the rebuttal to the versatile juris doctor: it’s unfalsifiable. Law school ends up working out for everyone regardless of the outcomes, be they monetary or intangible, particularly higher workplace autonomy. Yet, it’s one thing if people who can’t find lawyer jobs earn some premium for their law degree elsewhere, but it’s another if the degree provides no benefit or a detriment. The BLS is open to this possibility; Munneke is not. Ultimately, he provides no reason for us to believe that making diligent workers requires $120,000 in tuition debt, plus living costs and forgone income.

Which leads me to my favored elephant: Munneke doesn’t discuss the federal student loan program’s impact on how legal education is financed. Sure, he says law schools should be more “cost-effective,” but throughout his article, he implies that tuition increases are accidental. No discussion on the Direct Loan Program, bankruptcy nondischargeability, or any serious inquiry as to why law school needs to be expensive. It just is. He’s perfectly content to let taxpayers loan unlimited sums to law students like it’s Monopoly money, no matter what their future incomes are or how many loans on IBR will have to be canceled 25 years after graduation. Again, this is a straw man, or well, an invisible straw man argument. For example, in 2011 Brian Tamanaha wrote on the intersection between federal education policy and legal education, I’ve also researched it as well, but Munneke declines to directly engage these claims.

“There is no evidence that people will stop coming to law school, nor is there evidence that they should.” (14)

On the contrary, we’re seeing a decline in applications and LSAT takers, and there’s good reason to believe that marginal law schools will see shortfalls in desired applicants.

(I’m assuming February 2012 LSATs are the same as 2011, so this is conservative.)

And there’s plenty of evidence, which Munneke characterizes as “anecdotal” in the beginning of his article, that a law degree is not a good investment. For example, law students going on to IBR would suggest law degrees aren’t self-sustaining. Also, Herwig Schlunk recently redid his 2009 calculations and found that everyone loses money on law school. University of Louisville dean Jim Chen conducted similar calculations and their implications lead to the same conclusion. Batting these efforts away as “anecdotal” reflects either an unwillingness to research contrary evidence or a deliberate attempt at evading them.

Yes, it’s true that law schools didn’t cause the housing bust and overall wage stagnation in America, but Munneke’s attempt at “reconnecting the dots” on legal education employs so many logical fallacies that I think it’s worthwhile to list them for the sake of practice:

• Straw men
  • Who is claiming legal education is “bankrupt”? What do they mean by this? Is this a commonly held view?
  • Who is saying that graduates will be permanently unemployed? Is this a commonly held view?
• Argument from authority
  • Munneke’s experience over 40 years, while interesting, is not evidence of legal education’s value.
• Hasty generalization
  • Munneke’s experience of graduating during a recession in 1973 is not comparable to those graduating in 2009 due to differing economic factors and the nondischargeability of student loan debt.
• Non-sequitur
  • “‘Everyone’ has known about legal education has problems, therefore critics are saying nothing new.” That doesn’t mean they’re wrong.
• Post hoc ergo propter hoc
  • “Lawyers are good workers, therefore law school makes people good workers.”
• (Hidden) Argument from incredulity
  • “Knowledge and skills picked up in law school can’t possibly be learned elsewhere for cheaper.”
• Unfalsifiable claim
  • “The juris doctor is so versatile that everyone who obtains one still finds gainful employment, even outside the legal profession.”
• Composition fallacy:
  • “There’s no evidence that people will stop going to law school.” There were fewer applicants in 2009 than we would’ve expected, and now there’s a decline, so won’t some law schools be more adversely by the applicant shortfall than others?
• Invisible straw men (ignoring contrary evidence)
  • What about reformers who criticize the Direct Loan Program?
  • What about reformers who are looking at the root cause of tuition increases?
  • What those asking about the responsibility the profession has to ensuring tax dollars are well-spent on legal education?
  • What about those who point out that the number of people applying to law school is dropping?
  • What about those who calculate that law school requires an income-to-debt ratio of 2.0 or higher?

Then there are a few borderline cases.

• Equivocation
  • “Lawyers can be found in good jobs, therefore all law graduates have access to good jobs.”
• Misleading statement
  • “Some law schools are misstating their employment data.”
• Refusing to research contrary information
  • How many law grads have defaulted on their loans?
  • How many require family help to pay them?
  • How many are on Income-Based Repayment or Income Contingent Repayment?
  • What are their income-to-debt ratios?
  • How many law grads believe they are underutilized in their work?

I count nine (really eight) classes of clear logical fallacies in Munneke’s article, along with three classes that are judgment calls, and that’s only from excerpts gleaned from reading the article twice in one evening without taking detailed notes. I also didn’t need a legal education to see them (okay, my grad degree did, like, 25 percent of the work). Gary Munneke did not connect the dots on what’s really going on in legal education and disserved NYSBA Journal readers as a consequence.

Update on News in the Law School World

There were a bunch of articles I couldn’t get around to this past week, and they’re worth consolidating into one post.

(1)  Law School Lawsuits

“New York Law School fights class-action suit over job rates,” Thompson Reuters.

NYLS’s attorney states:

“The allegations are not only baseless, but also belied by the plaintiffs’ own complaint, which demonstrates this case has nothing to do with New York Law School and everything to do with a crusade against the entire law school industry.”

The graduates’ attorney says:

“The fact remains that when our clients paid the annual tuition of over $40,000 to attend New York Law School, they did so based on New York Law School’s misleading representation that they had an over 90 percent chance of getting a job, and that those jobs paid certain salaries,” [Jesse] Strauss said. “That representation is demonstrably false.”

We’ll see how this plays out.

(2)  University of Baltimore Law School

Karen Sloan, “Following dean’s resignation, Baltimore relents on law school money,” National Law Journal.

Debra Cassens Weiss, “U of Baltimore Law School to Retain More Money After Outgoing Dean’s Protest,” ABA Journal.

Sam Favate, “Law Schools Recover Lost Cash, As Grads Seek Tuition Refunds,” Wall Street Journal.

A few months ago, U Baltimore asked Phillip Closius to resign after he blew the whistle on the university for allegedly over-taxing the law school to pay for other university programs.

“Under the new funding agreement, an estimated 90% of the funds generated by the law school will return to it, [Baltimore Law Professor] Meyerson said. The arrangement ensures that law student tuition will not increase next year. Students were informed by e-mail that the administration would try to minimize future tuition increases.”

A year without tuition increases is good, but whether they will occur is indisputable.

(3)  Irate Senators

“Coburn, Boxer Call for Department of Education to Examine Questions of Law School Transparency,” Office of Senator Barbara Boxer.

Senators Barbara Boxer’s and Tom Coburn’s joint press release opens with, “To help better inform Congress as it prepares to reform the Higher Education Act…” Reform the HEA? What’s on the table here? This is the first I’ve heard of planned HEA reform. Returning to the lawsuits:

The New York Times found the same school [NYLS] is ranked in the bottom third of all law schools in the country and has tuition and fees set at $47,800 a year but reported to prospective students median starting salaries rivaling graduates of the best schools in the nation “even though most of its graduates, in fact, find work at less than half that amount.”

Ouch. Even if NYLS wins its motion to dismiss, it’ll still have to convince legislators that it’s not doing anything wrong.

Other reports question whether or not law schools are properly disclosing their graduation rates to prospective students.

Graduation rates? I’ve never heard of law schools concealing their graduation rates.

The senators then ask the Department of Education to provide them with the following things:

1. The current enrollments, as well as the historical growth of enrollments, at American law schools – in the aggregate, and also by sector (i.e., private, public, for-profit).

2. Current tuition and fee rates, as well as the historical growth of tuition and fees, at American law schools – in the aggregate, and also by sector (i.e., private, public, for-profit).

3. The percentage of law school revenue generated that is retained to administer legal education, operate law school facilities, and the percentage and dollar amount used for other, non-legal educational purposes by the broader university system. If possible, please provide specific examples of what activities and expenses law school revenues are being used to support if such revenue does not support legal education directly.

4. The amount of federal and private educational loan debt legal students carried upon graduation, again in the aggregate and across sectors.

5. The current bar passage rates and graduation rates of students at American law schools, again in the aggregate and across sectors.

6. The job placement rates of American law school graduates; indicating whether such jobs are full- or part-time positions, whether they require a law degree, and whether they were maintained a year after employment.

Enrollments and tuition are publicly available, though it may require dumpster-diving into paper editions of the Official Guide to go back ten years (1. & 2.). Revenue will be in universities’ hands (3.). I’ll publish federal and private debt data very soon (4.). Graduation and bar passage rates are mostly available in the Official Guide. I use “mostly” because bar exam data are published in calendar years while graduation rates are in school years, and not all graduates immediately take the bar exam (5.). Job placement rates? Good luck prying that from the law schools or NALP. The primary difficulty with legal education reform via self-reported employment data by law school is that it’s trying to gather the highest-hanging fruit to reform the system when BLS data already tell us there’s a structural overproduction of juris doctors (6.).

(4)  Can law schools save themselves?

Kyle McEntee & Patrick J. Lynch (“LST”), “Do law schools defraud students?” New York Post.

Brian Tamanaha, “The Depth and Breadth of Misleading Employment Numbers by Law Schools (And How to Solve It),” Balkinization.

These two pieces bring up some subtle points worth my editorializing. First, the LST editorial refers to prospective law students as “consumers,” a term I dislike not because it hints of mindless consumerism, but because it tries to take a neutral view of the Direct Loan Program. For instance:

This year, ABA-approved law schools will get at least $4 billion in taxpayer support, thanks to the government’s decision in 2010 to directly lend to students. But when graduates can’t find jobs that allow full loan repayment, they either default or sign up for hardship programs. The taxpayers are on the hook for the lost interest income and unpaid loan principal.

So isn’t the Direct Loan Program the bigger problem rather than law school employment data? It’s not the law schools’ fault that the bank is knowingly loaning money to students whom it knows will not work as attorneys according to its own employment projections. Maybe the government shouldn’t nationalize credit markets and then guarantee the loans to itself.

There are a few more points I disagreed with in the editorial, but I didn’t start this blog to criticize transparency advocates when they’re not the ones profiting from the current system. The important line, though, is towards the end:

Whether tuition drops because consumers finally receive the real employment statistics, or because the government stops lending essentially unlimited amounts of money to students, schools will need to either reimagine the kind of education they provide or close down.

Okay, I give LST credit for putting Direct Loan reform on the table, but there are two false dilemmas in this passage. One, the choice is not between transparency and student debt reform. Both are necessary. Two, LST is offering the legal academy a Biblical ultimatum: Reform or close, which assumes there’s a face-saving option for law schools. There is none. Law schools will close, regardless of what reforms they choose to implement and especially if they essentially admit to the public that they are nonperforming institutions wasting Direct Loan dollars, or worse, wasting Direct Loan dollars and redirecting them to other university programs.

Contrast LST’s internal reform belief with Brian Tamanaha’s suggested transparency proposal:

The law school funny number problem is out of control. And it won’t stop on its own. Anyone who thinks the fix will come from the current ABA efforts to provide greater transparency is deluded.

There is only one possible solution in the short run. The deans at the top 20 law schools must sit together in a room, agree on the standards, and personally guarantee the veracity of what they report. All the other law schools will follow (or be embarrassed by continuing to post ridiculously implausible salary numbers). This must be done soon, before the next cycle of numbers comes around.

Tamanaha’s solution is realistic, but it comes with two costs. One, he knows full well that the transparency trickle-down effect will wipe out the unranked law schools because no one will take U.S. News’s rankings seriously if the Ivy League law schools all suddenly dropped into the middle hundred. Second, look at who’s in charge here. The most reputable law schools potentially have more power than the ABA Section of Legal Education, which is nominally superior to them. It would be quite a rebuke of the Section indeed.

Tamanaha’s proposal, though, is the limit of what some law schools can do to save themselves. Mandating or shaming law schools into disclosing that their graduates have poor career prospects is all but asking them to commit suicide as well as potentially open themselves up to more lawsuits.

A Hypothetical Class of 2014 Law Student’s Journey into Debt

[UPDATE: Unpaid interest on IBR does not capitalize onto loan principal. Calculations below are, regrettably, mistaken.]

Recently, Inside the Law School Scam’s LawProf discussed the amount of law school debt a student may expect to take on and provided NALP figures of starting salaries as a comparison. LawProf used some research I provided, and I’m grateful for his linkback to the LSTB. Unfortunately, some of what I sent him was inaccurate due to my own error (esp. how much Stafford Loan borrowing is possible), so I’ve decided to create a detailed hypothetical of law school loan repayment based on current, applicable law. To that end, I taught myself the dark art of loan amortization—something they should teach in junior high school, not that I blame mine. This post will show us how much law school debt a class of 2014 student might reasonably take on given a few assumptions. They are:

1. No undergraduate debt (ha!)
2. No scholarships
3. No savings, job, income, work-study, family connections, etc.
4. Full-time status maintained throughout law school and graduation within three years
5. Eligibility for all relevant loans
6. Attendance at New York Law School. Why? Not to beat up on it, but because its tuition guarantee program removes the tuition increase variable from the calculation. Indeed, I freely admit that NYLS’s unusually high price tag and high cost of living skew the results towards significantly more debt than a typical 1L will start taking on this year. That said, accuracy is important to this project, and as you’ll soon see, the interest and repayment rates are so high that it doesn’t really matter.
7. Interest accrues monthly, which in reality is not true. Interest on student loans actually accrues daily, but it won’t cause too much inaccuracy in the hypothetical.
8. …And every other common sense assumption required to make this work.

Law students are eligible for three types of loans: Subsidized Stafford Loans, Unsubsidized Stafford Loans, and Grad PLUS Loans (for professional students). Subsidized Stafford Loans are limited to $8,500 per year, though this will change next year when provisions of the Debt Ceiling Bill go into effect and make law students ineligible for Subsidized Stafford Loans. Unsubsidized Stafford Loans cover an additional $12,000 of tuition, up to $20,500 total. Both types of loans have an annual interest rate of 6.8% and a fee of 1.0%, which is taken out of the loan at the time of origination. Interest does not accrue on Subsidized Stafford Loans while the student is enrolled at least part-time. Unsubsidized Stafford Loans accrue interest immediately. Both loans can be deferred until graduation, after which they are eligible for a six-month grace period during which interest accrues but payments are not demanded. The grace period means that from the time of the last set of disbursements (we’ll assume in August before the 3L year begins and graduation is in May) until repayment first occurs, fifteen months will transpire. This means the grace period ends in the November after graduation, and the first payment will be due in December.

Grad PLUS loans are similar to Unsubsidized Stafford Loans except their annual interest rate is 7.9% and the origination fee is 4.0%. Grad PLUS loans now make it possible for law students to finance not only their full law school tuition minus available Stafford Loans but also to provide for living expenses. The government’s rationale behind this is that professional education is rigorous, so students shouldn’t have to work outside of class. Its heart is in the right place but the results are grotesque.

Because there’s a limit to the amount one can borrow in Stafford Loans each year ($20,500), we’ll go through three scenarios of Grad PLUS Loan borrowing based on how much the student borrows for living expenses: living alone, with family, and not using Grad PLUS loans for living expenses at all. I’ll also include repayment plans except the graduated repayment plan (10 years) and the extended graduate repayment plan (25 years) because I have no idea how to calculate them. You can use ED’s website for that if you are interested. Student debtors are ineligible for extended repayment plans (fixed or graduated) if the principal on their debts is below $30,000, which will pose a problem for the Subsidized Stafford Loans in our example.

I will also give two examples for each scenario placing our graduate on Income-Based Repayment (IBR). IBR calculates a monthly payment based on gross income, family size, total loan principal, their average interest rate, and cost of living. I do not know when the repayment rate is calculated or recalculated each year. After 25 years, the government cancels the loans, leaving the student debtor to pay income tax on the forgiven sum. Thanks to the Health Care and Education Reconciliation Act of 2010, new borrowers in 2014 will have their loans forgiven after only 20 years. I interpret this to mean that people who begin borrowing in 2014 will have the shorter IBR time frame. The government covers interest on subsidized loans for the first three years of repayment if the graduate’s monthly repayment rate does not. I am fairly sure this applies to three years of payments and excludes the grace period. While the monthly payment is partly determined by the average interest rate of all the loans, I believe the payments are distributed among the loans in proportion to the loans’ share of the total remaining principal, and interest on the loans accrues according to their listed rates, not the average.

In the first sub-scenario, our hero will live alone, earn the mythical Biglaw $160,000 starting salary at month zero, and live within the continental United States for cost of living purposes. In the second sub-scenario, our hero will be married to a spouse with no IBR-eligible debt, file jointly, have two children, earn a combined gross income of $70,000 to start, and also live within the continental United States. Yes, I’m assuming the kids will live with their parents for at least 25 years (unless our hero had some combination of two kids and parents living under the same roof over that time period). It won’t save them a whole lot of money, but it is a perverse incentive to keep kids at home just to have cheaper IBR payments.

I will not use IBR’s complementary program, Income Contingent Repayment, which cancels loans after 10 years for graduates who work in the public interest (though income tax on the forgiveness isn’t required). In normal economic times, incomes grow, so I will give our hero a two percent raise every year.

Here’s an outline of what happens to our hero.

I. Grad PLUS Goes to Living Expenses (Alone)

A. Standard Repayment Plan: 10 Years

B. Extended Repayment Plan (Fixed): 25 Years

C. IBR

1. Biglaw ($160,000)

2. Middle Income ($70,000)

II. Grad PLUS Goes to Living Expenses (w/ Family)

A. Standard Repayment Plan: 10 Years

B. Extended Repayment Plan (Fixed): 25 Years

C. IBR

1. Biglaw ($160,000)

2. Middle Income ($70,000)

III. Grad PLUS Goes to Tuition Only

A. Standard Repayment Plan: 10 Years

B. Extended Repayment Plan (Fixed): 25 Years

C. IBR

1. Biglaw ($160,000)

2. Middle Income ($70,000)

IV. Conclusion

I. Grad PLUS Goes to Living Expenses (Alone)

TUITION	YEAR	TOTAL SUB’D STAFFORD LOANS	TOTAL UNSUB’D STAFFORD LOANS	GRAD PLUS (TUITION)	GRAD PLUS (LIVING EXPENSES)	TOTAL GRAD PLUS LOANS (w/FEES)
$47,800	1L	$8,415.00	$11,880.00	$27,505.00	$23,323.00	$48,794.88
$47,800	2L	$8,415.00	$32,982.84	$27,505.00	>$23,323.00	>$101,444.56
$47,800	3L	$8,415.00	$55,520.67	$27,505.00	>$23,323.00	>$158,253.56
	GRACE	$8,705.19	$60,431.80			>$174,622.22

*****

YEAR	TOTAL
1L	$69,089.88
2L	>$142,842.40
3L	>$222,189.23
GRACE	>$243,759.22

A. Standard Repayment Plan: 10 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$695.45	$23,022.40	$83,454.20
GRAD PLUS	$174,622.22	7.9%	$2,109.43	$78,510.04	$253,132.26
GRAND TOTAL →	$243,759.22		$2,905.06	$104,848.78	$348,608.00

B. Extended Repayment Plan (Fixed): 25 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$419.44	$65,400.42	$125,832.23
GRAD PLUS	$174,622.22	7.9%	$1,336.22	$226,239.37	$400,861.59
GRAND TOTAL →	$243,759.22		$1,855.84	$294,956.14	$538,715.36

C. IBR

1. Biglaw ($160,000)

Here, our hero’s income grows to the point that after nine years of IBR, he or she is kicked into a standard repayment plan. Moreover, the original minimum payment, $1,795, covers the interest on the Subsidized Stafford Loans for the first three years, meaning our hero does not benefit from the government’s IBR interest subsidy.

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST	TOTAL PAID
$243,759.22	7.35%	$1,795.00 – $2,173.03	$233,502.37	$229,099.26	$472,858.47

2. Middle Income ($70,000)

In this scenario, our hero’s family’s income never grows to the point of kicking them off IBR. Consequently, the government saves $1,212.26 by subsidizing the interest on Subsidized Stafford Loan for three years. Nevertheless, the Department of Education stands to lose more than a million dollars by financing our hero’s legal education and living expenses. The term for this? “Negative amortization.”

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST PAID	TOTAL PAID
$243,759.22	7.35%	$455 – $995	$115,170.51	$211,380.00	$211,380.00

*****

AMOUNT OF INTEREST SUBSIDIZED	REMAINING SUB’D STAFFORD LOAN PRINCIPAL (REMAINING SUB’D STAFFORD LOAN PRINCIPAL W/O SUBSIDY)	GOV’T SAVINGS DUE TO 3-YEAR INTEREST SUBSIDY	FORGIVEN PRINCIPAL AFTER 25 YEARS	TOTAL GOVERNMENT LOSSES
$1,212.26	$27,074.69 ($31,174.55)	$2,887.60	$1,063,628.12	$1,064,840.39

II. Grad PLUS Goes to Living Expenses (w/ Family)

TUITION	YEAR	TOTAL SUB’D STAFFORD LOANS	TOTAL UNSUB’D STAFFORD LOANS	GRAD PLUS (TUITION)	GRAD PLUS (LIVING EXPENSES)	TOTAL GRAD PLUS LOANS (w/FEES)
$47,800	1L	$8,415.00	$11,880.00	$27,505.00	$10,474.00	$36,459.84
$47,800	2L	$8,415.00	$32,982.84	$27,505.00	>$10,474.00	>$75,800.01
$47,800	3L	$8,415.00	$55,520.67	$27,505.00	>$10,474.00	>$118,248.05
	GRACE	$8,705.19	$60,431.80			>$130,478.82

*****

YEAR	TOTAL
1L	$56,754.84
2L	>$117,197.85
3L	>$182,183.72
GRACE	>$199,615.81

A. Standard Repayment Plan: 10 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$695.45	$23,022.40	$83,454.20
GRAD PLUS	$130,478.82	7.9%	$1,576.18	$58,663.15	$189,141.96
GRAND TOTAL →	$199,615.81		$2,371.81	$85,001.90	$284,617.70

B. Extended Repayment Plan (Fixed): 25 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$419.44	$65,400.42	$125,832.23
GRAD PLUS	$130,478.82	7.9%	$998.43	$169,048.72	$299,527.53
GRAND TOTAL →	$199,615.81		$1,518.05	$437,381.30	$237,765.49

C. IBR

1. Biglaw ($160,000)

Same results as I.C.1., except this time, our hero’s lower starting debt level means that he or she will be kicked off IBR after only four years.

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST	TOTAL PAID
$199,615.81	7.35%	$1,795.00 – $1,973.63	$211,299.27	$126,412.61	$326,028.42

2. Middle Income ($70,000)

Readers will note that our hero pays the exact same amount living with family as living alone, though the government still loses three quarters of a million dollars.

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST PAID	TOTAL PAID
$199,615.81	7.35%	$455 – $995	$115,170.51	$211,380.00	$211,380.00

*****

AMOUNT OF INTEREST SUBSIDIZED	REMAINING SUB’D STAFFORD LOAN PRINCIPAL (REMAINING SUB’D STAFFORD LOAN PRINCIPAL W/O SUBSIDY)	GOV’T SAVINGS DUE TO 3-YEAR INTEREST SUBSIDY	FORGIVEN PRINCIPAL AFTER 25 YEARS	TOTAL GOVERNMENT LOSSES
$1,081.86	$24,168.33 ($27,445.98)	$2,195.79	$753,381.79	$754,463.64

III. Grad PLUS Goes to Tuition Only

TUITION	YEAR	TOTAL SUB’D STAFFORD LOANS	TOTAL UNSUB’D STAFFORD LOANS	GRAD PLUS (TUITION)	GRAD PLUS (LIVING EXPENSES)	TOTAL GRAD PLUS LOANS (w/FEES)
$47,800	1L	$8,415.00	$11,880.00	$27,505.00	$0.00	$28,651.04
$47,800	2L	$8,415.00	$32,982.84	$27,505.00	$0.00	>$59,565.52
$47,800	3L	$8,415.00	$55,520.67	$27,505.00	$0.00	>$92,922.23
	GRACE	$8,705.19	$60,431.80			>$102,533.47

*****

YEAR	TOTAL
1L	$48,946.04
2L	>$100,963.36
3L	>$156,857.91
GRACE	>$171,670.47

A. Standard Repayment Plan: 10 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$695.45	$23,022.40	$83,454.20
GRAD PLUS	$102,533.47	7.9%	$1,238.60	$46,099.02	$148,632.49
GRAND TOTAL →	$171,640.47		$2,034.23	$72,437.77	$244,108.23

B. Extended Repayment Plan (Fixed): 25 Years

LOAN	PRINCIPAL	INTEREST RATE	MONTHLY PAYMENT	TOTAL INTEREST	TOTAL PAID
SUB’D STAFFORD	$8,705.19	6.8%	$100.18	$3,316.35	$12,021.54
UNSUB’D STAFFORD	$60,431.80	6.8%	$419.44	$65,400.42	$125,823.23
GRAD PLUS	$102,533.47	7.9%	$784.59	$132,843.24	$235,376.71
GRAND TOTAL →	$171,640.47		$1,304.21	$201,560.01	$373,230.48

C. IBR

1. Biglaw ($160,000)

By using Grad PLUS loans for tuition only, our hero is kicked off IBR after only two years.

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST	TOTAL PAID
$171,640.47	7.35%	$1,795.00 – $1,807.50	$203,020.87	$88,649.12	$260,319.58

2. Middle Income ($70,000)

Readers should take note of this scenario because in better economic times and less severe law graduate oversupply, it would probably be the one most similar to graduates from $45k/year law schools on IBR. Again, the graduate pays the exact same amount as if he or she had borrowed the full amount of Grad PLUS Loans. Despite our law graduate’s frugality, the Department of Education will lose more than half a million dollars after 25 years.

PRINCIPAL	AVERAGE INTEREST RATE	MONTHLY PAYMENT	END INCOME	TOTAL INTEREST PAID	TOTAL PAID
$171,640.47	7.35%	$455 – $995	$115,170.51	$211,380.00	$211,380.00

*****

AMOUNT OF INTEREST SUBSIDIZED	REMAINING SUB’D STAFFORD LOAN PRINCIPAL (REMAINING SUB’D STAFFORD LOAN PRINCIPAL W/O SUBSIDY)	GOV’T SAVINGS DUE TO 3-YEAR INTEREST SUBSIDY	FORGIVEN PRINCIPAL AFTER 25 YEARS	TOTAL GOVERNMENT LOSSES
$962.80	$21,441.58  ($24,049.84)	$1,645.45	$558,587.96	$559,550.76

IV. Conclusion

I have five points:

(1) Much rending of garments and gnashing of teeth accompanies the notion of 21 year-olds taking on law school debts without understanding their implications. Although law students have only one set of circumstances on which to base their repayment decisions rather than the twelve the hypothetical depicted, I found this particular project unusually difficult, and this comes from a guy who enjoyed doing integration by parts problems in his high school calculus class. In other words, calculating loan repayment plans, total interest, types of loans available, interest on loans in school or after a grace period, subsidized interest for three years on IBR, projected income increases, etc. to within one month of repayment is hard even for adults who don’t blush at math and spreadsheets. At least with cars or mortgages, borrowers already have an income and know what they can afford (to say nothing of at least some bankruptcy protections). However, as I’ve written on several occasions in the past, even if law graduates were required to be implanted with graduate employment tracking chips in the bases of their skulls to receive their diplomas, there is still almost no way a prospective law student can know ex ante what his or her income will be starting out, much less over the course of a law career—except that it’s certain to be far less than what’s necessary to cover a monthly payment on a Standard Repayment Plan. Additionally, the fact that Congress can and does capriciously change the terms of student loans throws a wrench into current students’ borrowing plans.

(2) There is nothing remotely standard about the Standard Repayment Plan. In all three scenarios, our hero was paying at least $2,000 per month. That’s $24,000 per year and would require at least $160,000 in income to constitute only 15% of his or her gross income. Congress and the Department of Education must know that most law graduates do not make this kind of money, yet they allow the lending to go on. How can university administrators not know either? It shocks my conscience. Even without using Grad PLUS loans for living expenses, an NYLS 1L can expect to cough up $1,304.21 each month (15% of a $104,338.40 salary) for 25 years on an extended repayment plan, which at least will be somewhat eroded with 25 years of inflation.

(3) It occurred to me that Grad PLUS loans are the government’s way of trying to help grad and professional students avoid taking on private loans. The changes to the bankruptcy law made private student loans death traps in 2005, and Grad PLUS loans came into being soon afterwards. It may’ve been part of the BAPCPA too, but it only just now occurred to me. As you can see with green blobs on the graphs, Grad PLUS loans were by far the largest component of law school debt. Not as bad as private loans, but certainly not as good as the lower interest Staffords.

(4) The most surprising thing I found is that unless a law graduate gets a Biglaw starting salary—which I believe will soon deflate rapidly—how much they borrow ultimately won’t matter. Once a fledging lawyer’s initial salary fails to produce a payment that covers the monthly interest, he or she might as well have borrowed as much money from the government as possible and spent it. That’s not to say I condone it, and I absolutely discourage people from taking on this kind of debt just because IBR exists. Not only does Congress flip-flop on student lending laws, but borrowing that kind of money is simply irresponsible for those who know better. The moral hazard IBR creates is even worse than I imagined.

(5) Speaking of which, don’t get me wrong, IBR is far better than loan repayment without it. Although, once a lawyer fails to make Biglaw or a Biglaw salary, the government has already made a bad loan. What does all this mean exactly? Not that the government literally spends an extra million dollars on high-cost law degrees when it cancels their debts but that it could’ve spent that money on something more practical. Under the current system, the Department of Education stands to lose roughly one billion dollars per 1,000 to 2,000 law students who attend law schools charging $45,000 in tuition per graduating class when the loans are canceled. As I wrote at the beginning, using NYLS’s tuition guarantee program does mean using a law school whose tuition is unusually high, just outside the first standard deviation of average private law school tuition, so in hindsight it’s not the best case for broad analysis, even if the purpose of the hypothetical is accuracy. However, the tuition bubble pauses for no one, even when incoming enrollments are dropping, and today’s second standard deviation will be the average in four years according to my projections. As a footnote, law schools charging what is now below average private school tuition, $35,000 per year, cost the government one billion dollars in “middle income” IBR cancellations per 4,500 to 5,000 students per graduating class, and yes, the law graduate will still pay the same $211,380 as everyone else.

While these analysis didn’t account for inflation and increased income tax revenue from lawyers, if any, legal education will cost the republic tens of billions of dollars for far less value than it provides.