Two links for you:
After teasing us into the topic of student debt with the “Ethan Haines” hoax (which I luckily chose not to post on), Vedder memorably identifies our problem:
The rapid growth in [student] debt is not sustainable indefinitely. All of this is going to soon lead to a real debate on how we finance higher education, as well as far greater scrutiny of higher education costs.
Here’s the answer:
What is needed is a radical reformation of our inefficient and costly higher-education delivery system, one that radically limits third party payments that have contributed to the cost explosion. The problem is NOT that there is too little federal money in higher education, but rather that there is too much. [My emphasis, sans all-caps]
You know, rereading the article, it’s full of memorable quotes.
[H]igher education will muddle along in its high-cost ways, the Rentiers of Academe collecting their oversized (in relation to what they do) salaries…
Ouch. Recall SALT’s analysis of rising faculty salaries at law schools.
Vedder’s solution is “Human Capital Contracts,” which he compares to indentured servitude. A patron pays for the student’s education, but the student repays a percentage of his or her income back to the investor for a certain number of years. The only problems are (1) enforcement, and (2) adverse selection caused by those who want to enter into low-paying jobs or those who can fool investors into thinking they’re productive when they aren’t (or drop out).
The benefit of human capital contracts is the fixed time-frame. Adjustable interest rates and nondischargeable student debt ensure what critics call “debt slavery” until payment or death. Vedder’s colleagues pointed out that the income repayment may discourage employment in certain fields if the repayment percentage were too high. However, compared to the potential future of people whose nondischargeable debt disincentivizes them to work at all, I think human capital contracts would work better. Ultimately, it shifts the risk of a poor labor market to investors who then shift it to education institutions who in turn admit fewer students. Sure, some graduates would exceed their investors’ expectations giving the patrons a windfall, but this would be balanced by failures. The greatest problem I see is that switching to such a system won’t be profitable until the loan system is done away with entirely. Speaking for myself, as of today I wouldn’t give anyone a penny towards their higher education degrees at current prices, and oh-God-no to law students.
Vedder also outlined a progressive voucher system for college education that isn’t quite as innovative. Personally, I’d prefer removing the undue hardship exception and seeing what happens on that front first. While the banks’ fears are based on an inability to securitize student debt (something human capital contracts avoid), I simply don’t think a large number of Americans are so dishonest that they’d unfairly discharge their student debt in bankruptcy only to go on to six-figure jobs two months later. It’s really no different than the enforceability problems found in human capital contracts.
Remember Dean Farmer’s largely incoherent exegesis on the “real value” of a legal education? Consider Crichton’s response the clear, sober opposite. His post is the first attempt (outside a quick one I did in my head a few weeks ago) I’ve seen that estimates market trends in the legal profession based on legal education outputs. 43,518 JDs conferred in 2008 (I was one of ‘em!) means at least 435,180 newer JDs by 2018.[i] Crichton notes the BLS predicts 857,700 legal practitioners working in the U.S. by 2018 as well. On the bright side (by bright, I mean what the sun looks like from the Kuiper Belt) the juris doctor is versatile in one respect: judges, who currently hold a whopping 51,200 jobs nationwide. Judgeships aren’t going to increase much according to the BLS (53,100), so the more accurate number is 910,800 legal practitioners in 2018. Crichton’s numbers are accurate enough nonetheless, and he calculates 19.6 years for a complete “turnover” in the legal market. Now I’m not sure how the BLS factors retirees into its projections, but most of today’s attorneys plan to work until they’re 65, especially given their student debts.
The question arises at this point: why are these numbers skewed? My answer, like most bloggers on this topic, is the American Bar Association, which has been all-too-eager to accredit new law schools despite these numbers. These new schools may increase the quantitative power of the ABA, but it is doubtful that such a strategy is a smart one for that organization.
I’d like to refocus here. I don’t want the legal labor market oversaturated anymore than any other market; I couldn’t care less how many attorneys there are in the country. I care that in a regulated labor market, JDs receive salaries that make the investment worthwhile. Given that legal educators now assume that one practices where one goes to law school, we should be equally concerned about regional oversaturation as much as national oversaturation. Thus, I don’t strictly care about the number of law schools the ABA accredits, just the aggregate number of law students schools admit. Sadly, I think the ABA would be more willing to alter accreditation standards so dozens of schools fail to qualify rather than enact national and regional law student caps, even though that’d be the wiser option.
As demoralizing as these numbers can be, the legal profession should not be written off haphazardly.
The ray of hope for comet-riders in the legal profession’s Oort Cloud is that I think everything will turn out all right for today’s law students and new practitioners. We will have stunted careers compared to the class of 1980, but as Vedder above points out, current higher education funding methods are not sustainable. Crichton is also right that juris doctor output is similarly unsustainable. The quicker everyone gets this, the quicker it will end, but oh will it end.
[i] Crichton apparently used the ABA’s 2009 graduate figure of 43,588 JDs. His argument remains valid.