Month: November 2011

Pictures from the Zuccotti Park Occupation

At first blush you may be thinking, “LSTB, the occupiers were evicted from Zuccotti Park, why did it take you this long to post all these pictures?”

And I will answer, “Because I finally got the film back on Thanksgiving.”


Yes folks, I toyed with my grandfather’s 1960s Yashica TL-Super, which–get this–is the first camera to have an electrical light meter. Y-A-Y! The battery I got for it doesn’t work well, which is why even after dorking them with Picasa they still look overexposed. Yeah, that’s the other thing: it’s fully manual. Focus, aperture, shutterspeed, film speed, it’s all (poorly) determined by me. The camera doesn’t really have anything better to offer than my far more recently imported Canon Powershot, except one of the lenses (it’s an SLR) is 50mm with an aperture ranging between 1.4-16 f-stops. That’s why everything in the background is Yashica TL-super blurry. Awesome, eh? I probably should’ve used the mid-range 35mm lens with 2.8-16 f-stops, but that’s actually effectively worse than my digital.

The most surprising thing was that I think more people were staring at my camera than viewing the occupation.

Oh, and did I mention developing film is like an f-ing coke habit? Sadly, I suspect the TL-Super will not make many more outings, except if I can trick a woman I’m dating into posing for portraits.

Occupiers have a sense of humor.

It’s just like the Brick Testament!

I’m sure the State Council was THRILLED with this guy.

As to the occupation itself: it was a low-energy day in the small space that is Zuccotti Park, so it wasn’t mobilized and protesting. Aside from the occasional “income inequality” chart plastered to the park walls, I think the biggest problem I have of #OWS was it’s lack of criticism of the Federal Reserve. The Fed ignored an $8 trillion land bubble, and it’s abandoned the first part of it’s dual mandate to ensure full employment and price stability (at least it didn’t raise rates like the ECB). If anything deserves an occupying it’s the central bank’s office a few blocks east.

NYT to Law Schools: Teach Harder!!

You’ve probably read the New York Times’ editorial about law schools, “Legal Education Reform,” in the Friday edition. It’s unimpressive, but to spare us both I’ll limit myself to one point.

After citing the economy, student loans, lawsuits, and irked Senators, it adds:

Yet, at the same time, more and more Americans find that they cannot afford any kind of legal help. Addressing these issues requires changing legal education and how the profession sees its responsibility to serve the public interest as well as clients … [S]ome law schools are trying to align what and how they teach to what legal practice now entails and what individuals and institutions need — like many more lawyers who can serve as advocates for the poor and middle class.

In other words, the Times is blaming law schools for failing to mint lawyers willing to affordably resolve poor people’s legal problems, which I suppose implies that they’re rejecting applicants who want to serve the poor in favor of greedy millenials who believe Congress/society/the Fed has some kind of responsibility to ensure full employment and widespread prosperity, and those public interest law society-types are all lying on their applications.

Maybe the problem with poor people unable to afford legal services is that they’re poor? Law schools are in need of reform, but the corps of attorneys specially trained to serve the needs of the poor envisioned by the Times isn’t going to work if they’ll be begging for cases and alms outside courthouses.

The Orthodox Assumptions in Amar’s and Ayers’ ‘Unorthodox’ Solution to the Law School Bubble

If only I had a dollar for every law professor who came up with a solution for saving the legal academy…

Akhil Reed Amar and Ian Ayres, “Paying Students to Quit Law School,” in Slate

At least from the descriptive title, we know this will be fun. The opener, though, starts us off on the wrong foot.

A crisis is threatening legal education. In constant dollars, tuition at private law schools nearly tripled over the last quarter century.

A nitpick: Private law school tuition has not “nearly tripled” over the last quarter century.

(Source: ABA, BLS)

2.38 times is not “nearly tripling,” it’s “more than doubling.” I think this is a fair criticism as it’s based on standard numeric rounding conventions, but let’s to the proposal:

[L]aw schools are engaged in a specific program of instruction, with a specific goal—passing the bar—as its purpose. Measuring and even predicting this dimension of success is more straightforward.

Really? Here’s the problem with law schools as bar prep schools: they’re ghastly inefficient. For example, the University of La Verne lost its accreditation because its students couldn’t pass it. At the other end of the spectrum, nearly all of Yale’s graduates pass the bar exam on the first try. Why? It’s not because La Verne’s professors were completely incompetent while Yale is exceptionally strict about doctrinal learning; rather, it’s because Yale accepts students who have the aptitude—yes, I believe that intelligence is mostly inherited—to pass the exam (and don’t say it’s because California’s bar is harder, etc.). That means that all Yale is really selling is prestige, for most of its students could probably pass a bar exam with about a year’s worth of self-study and not pay the law school a dime.

Anyone who starts law school with less than a 50 percent chance of passing the bar within three years of graduation should be required to sign a special waiver that he has been informed about the riskiness of his education investment.

“Your Honor, my client’s law school’s stated purpose was to train him to pass a bar exam that it knew or should have known he lacked the mental aptitude to pass based on extensive research documenting the correlation between LSAT scores and bar passage rates. It did not inform him of this risk, which is material knowledge for anyone considering purchasing a law degree. I have market experts standing by to testify as to the employment outcomes of bar-failure JD-holders as opposed to bar-passing ones, including a calculation of the differential lifetime income. Thus, we can determine the amount of compensation my client’s law school owes him. For these reasons the Court should deny the defendant law school’s motion to dismiss.”

There’s the lawsuit for you folks, and the best part is that I don’t have a stake in this one as I had diploma privilege from the state of Wisconsin, so I can opine on it to my heart’s content.

Now, to the meat of Amar’s and Ayres’ proposal:

Law schools might … offer to rebate half of a student’s first-year tuition if the student opts to quit school at the end of the first year. (If the student has taken out government loans, this rebate would first go to repay this debt.)  A half-tuition rebate splits the loss of an aborted legal career between the school and the student. Each has skin in the game, so students will not go to law school lightly, and law schools will have better incentives not to admit students likely to fail.

The idea is to mark the end of the first year, after students have received their grades, as a salient decision-making point. At that time, students will have learned more about their legal abilities and inclinations. Law schools will also have learned more about each student’s abilities, and schools could now disclose how previous students with similar first-year grades fared after graduation.

Excellent idea! … if we assume that the structure of law school grading correlates to successful practice (as opposed to intangibles like law school prestige), and there are a bunch of other flaws that flow from this assumption:

(1)  It does not take three years to teach someone how to pass a bar exam. Irrespective of what I said in my previous post, law schools could probably teach bar readiness in one year to a year and a half tops.

(2)  Almost every law school grades 1L courses on a curve. This means nearly everyone is average, and it distorts academic incentives in all kinds of ways. It rewards beating the herd over understanding the material for its own sake, and on some level it’s a crapshoot because law schools admit students of largely the same aptitude as measured in LSAT scores.

(3)  If we really wanted to see this work, we take a cross-sectional group of law students from schools of varying reputations, have them take the same 1L test, and grade it on an absolute scale. You’ll probably find that nearly everyone passes. Thus, in theory, few would take the rebate.

(4)  Law schools engage in rampant grade inflation to make everyone a winner. What good are 1L grades as a measure of career success when everyone gets B’s and B+’s? (Also, I seem to recall a law professor telling me that Yale uses only “fail,” “low pass,” “pass,” and “high pass” as grades. It may be just for the first year courses, but it tells you about the relationship between grading systems and prestige.)

(5)  Academic performance isn’t necessarily the best measure of lawyering. Much of law practice is now specialized, making a lot of the bar exam wasteful, and some abilities such as empathy or business acumen make people better lawyers than taking Professor Ayres’ contracts final and nailing the difference between a unilateral contract and a bilateral contract with acceptance defined as the offeree initiating performance.

(6) No mention of IBR? Who’s really paying for these bribed drop-outs?

In making this proposal, we might be accused of having an institutional conflict of interest.

Oh God yes. This proposal is biased towards protecting prestige machines rather than law schools that putatively prepare people for practice. That’s not a full-throated defense of them, but I really think the prestigious law schools are due a lot more criticism than they get. They’ve been the unintended beneficiaries of a significant upward redistribution of the wealth—even in the last few decades—and their one-percentish faculties obliviously believe they’ve done something to deserve it. Maybe not Elizabeth Warren, but I don’t think anyone’s asked her directly yet.

Another possible reform would oblige law schools to lend money directly to students—so that defaults hurt the school’s bottom line rather than taxpayers’. While educational lenders are legally allowed to insist on repayment even after bankruptcy, schools are free to renounce this option.

The best part is how at the last minute Amar and Ayres punt to forcing the law schools take on the financial risk of their graduates’ careers. I just doubt that any creditor would voluntarily waive the undue hardship exception, though.

Oh, and what does this proposal do for recent graduates? Nothing.

(Postscript: I must add that Ian Ayres does some good stuff; I especially his campaign finance reform proposal with Bruce Ackerman.)

How Switching to a Two-Year Law Degree Hoses Law Students

One common suggestion throughout legal ed reform discussions is reducing law school from three years to two. The argument is that the third year is useless, so dump it. I should say right now that I don’t think it’s a good idea, not because the third year is useful but because cutting legal education down is an arbitrary solution. We should ask the inverse question, “How long should law school be?” instead of “How much should we cut?” Law school has two urgent problems: over-enrollment and excessive cost. Reducing it by a year does not address the former at all, and the problem with tuition isn’t just that it’s too high but that it’s perpetually increasing over the inflation rate. Eliminating the third year treats law school tuition like kudzu: At some point, it’ll just grow back. That’s not the only problem though; allow this stylized animation to illustrate:

Notice how cutting a year out of law school automatically dumps an extra class of law graduates onto the market. The 3Ls in this situation paid the maximum value for the worst job prospects, adding to the already existing bottleneck that’s omitted here. Many of these grads are certain to never find work as attorneys, and tens of thousands of new solo practices are just not going to work.

The counterargument is, cynically yet intellectually honestly, “They weren’t going to get jobs as lawyers anyway, so it’s just accelerating the inevitable.” Fine, but that just demonstrates that eliminating the third year doesn’t really solve anything. The same number of law students go in, and the same number come out without any long term improvement to the graduates-to-jobs ratio. It just deflates some of the law school bubble without requiring anyone to make the very tough choices, i.e. how to reduce enrollments (hint, closing and consolidating law schools and laying off unneeded faculty) and what to do with those students already in the system. This is a reason current law students should start taking direct action instead of waiting for the ABA to come up with a solution.

How A Gallon of Spoiled Milk Made Me Angry at Robert Applebaum

Mark Gimein, “Yes, There Will Be A Student Loan Bailout,” in Bloomberg Businessweek

Matt Wirz, “Generation Jobless: What Hedge Funds Can Teach College Students,” in the Wall Street Journal

Brett Greene, “The $1 Trillion Student Loan Debt Bubble: An Interview with Robert Applebaum,” in the Huffington Post

“I was extremely frustrated by the terms of the debate over the proposed ‘Obama Stimulus Plan’ in January of 2009. A mere nine days after the inauguration of a man ushered in on a platform of hope and change, and there we were talking about more of the very same corporate welfare/tax cuts/trickle-down economics that anyone with the ability to read a graph knows full well has been an abysmal failure for the middle class … You want to stimulate economic growth? Great — here’s a better, more efficient way of accomplishing that goal rather than handing over trillions of dollars to the very financial institutions that cause the economic mess in the first place.” –Robert Applebaum

There are three things that deeply annoy me about Robert Applebaum’s arguments for forgiving student loans as stated in his interview with Brett Greene (I prefer Cryn Johannsen’s approach of calling it a “jubilee” since “forgiveness” makes student debtors sound like sinners).

(1)  ARRA was not TARP. How is giving $500 million to Indian reservations for health care or $53.6 billion to local school districts to prevent cutbacks “more of the very same corporate welfare/tax cuts/trickle-down economics that anyone with the ability to read a graph knows full well has been an abysmal failure for the middle class”? Was $40 billion to extend unemployment benefits until the end of 2009 “handing over trillions of dollars to the very financial institutions that cause[d] the economic mess in the first place”? $70 million for the education of homeless children? $150 million to refill food banks? True, a good chunk (too much) went to tax cuts, but a lot was a stopgap measure to prevent state and local governments from firing teachers, firemen, and police officers, and then filing bankruptcy. It did not re-TARP Citigroup as Applebaum implies. The stimulus was much too small to do any lasting good—and President Obama squandered an opportunity to be the FDR voters hoped he’d be—but canceling teachers’ student debts won’t keep them their jobs if there’s no tax revenue due to mass unemployment, especially if we need teachers irrespective of the economy. Indeed, many municipalities are now starting to file Chapter 9 bankruptcies, such as Harrisburg, PA, and now Jefferson County, AL, which is the largest municipal bankruptcy to date. Arguably, ARRA delayed these. It’s bad enough to have a lifetime of permanent student debt for a degree you won’t use, but it’s another thing if corrupt and incompetent local government mismanagement costs you your pension that you worked for and you’re too young to collect Social Security.

(2)  Applebaum provides no evidence of how much direct stimulus a student loan jubilee would have over what time period. Sure, existing student loan debt was north of $600-700 billion in 2009, but that was expected to be repaid over ten to 25 (to never) years. The $787 billion ARRA was mostly spent within the first few years after it was enacted. The amount people would save from monthly payments on student loans over three years would likely be less. Applebaum also doesn’t tell us what the multiplier effect would be, since that’s the standard for measuring the effects of a stimulus on consumer spending. I suspect it would be higher than that of the tax cuts in the ARRA, but without the numbers, Applebaum can’t say that his is a “better, more efficient way of accomplishing that goal.” Speaking of which…

(3)  Activists should not be dropping their trousers and bragging, “My single-issue stimulus idea is better than yours is.” (No, I’m not doodling that.) Doing so is really bad advocacy because it tells people who’ve also suffered from the same disastrous economic policies that their problems are secondary to yours when they need relief too. The goal should be building a coalition around unredistributing the wealth, not browbeating potential allies with your preferred stimulus package.


Reader: But LSTB, I scrolled through all 650,000,000,000,000 of Applebaum’s petition’s signatures, and your name (I’m guessing it’s yours) is on there.

LSTB: Yup. I signed it. That doesn’t mean I seriously believe a student debt jubilee would resurrect the economy overnight and usher in a permanent era of prosperity as the petition implied.

Reader: Fine, but that’s not what’s important. You are obviously on paper agreeing with student debt reform—up to and including ordering the Treasury to mint hundreds of billions of dollars in platinum coins to cancel out student debt—so why are you criticizing a student debt activist? Certainly you’d personally benefit from what he proposes, and it’s not like he’s completely wrong or making an eight-figure salary after dumping biotoxins into our drinking water.

LSTB: Those are good points, but there are a few reasons. (1) A student debt jubilee is not an easy sell, as we’ve seen. The Fundamental Attribution Error is strong in American political culture, and unless you’re morally pure (i.e. a rich boomer law professor like Elizabeth Warren who appears to favor restoring bankruptcy protections to student loans), anyone who points out student debt is a problem is considered an angry, bitter, unemployed, promiscuous, moronic hedonist who wants a free lunch. The arguments supporting it have to be better than good, and Applebaum’s strategy is worse than good because on paper it alienates almost everyone except other student debtors. Claiming, for instance, that student debt is morally fraudulent is a significantly stronger position, as is pointing out that unredistributing the wealth also benefits the “hard workers” who forewent student loans and worked twelve 190-hour-per-week part-time jobs to pay for their educations, etc. (2) As far as I’m personally concerned, I won’t say what my debt is or what repayment plan I’m on, but in the age of IBR, I’ve already been bailed out. At this time, I should add that I did zero work in college, never attended any classes, nearly pickled my liver due to alcohol overconsumption, proliferated bacterial VDs, sold overpriced, cut-to-whack heroin to my classmates, scammed the foreign students to pay off my gambling debts (I discharged the first batch when I was nineteen), and bribed the administration into letting me graduate with honors; while I was in law school, I served with distinction on the Campus Hookup and Acquaintance Rape (CHAR) House of Delegates, and in 2005 I cut my writing chops in an editorial titled, “Why Students Are Doing Themselves a Favor by Campaigning to Make Student Loans Permanently Non-Dischageable in Bankruptcy,” in the Rent-Seekers Digest. (3) As the Gimein and Wirz articles show, the long-term default rates are ridiculously high and cosigners will be stuck with a lot of student debt, and this problem must be—and will be—solved because the government won’t want to waste money on college administrators forever.

Reader: Ha ha, very funny, but if you’re already safe from permanent debt servitude, then you have no reason to be angry at Applebaum at all.

LSTB: Honestly, I bought a gallon of locally produced milk, and it was bad when I opened it. It didn’t even have the “NYC Sell By” date on it as it’s supposed to according to Title 24 § 111.33 of the New York City Rules. (No lawyers, I’m not Bluebooking that.) Dumping it down the drain brought me to the breaking point, and reading Robert Applebaum’s contempt for working class Americans put me over the edge. Happy?

Reader: No, I think you’re a hypocrite.

LSTB: *sigh* … Whatever. As a peace offering, here’s a milkshake.

Reader: Cheers mate, thanks … UNGH! GROSS! God! This is fucking rancid! You said you dumped it down the drain! I hate you!

The Law School Debt Blob

Many readers know of U.S. News’Graduate Debt Rankings” page, which contains crucial information on law graduate debt that for some reason is not published in the Official Guide even though the ABA is surely collecting it. Law School Transparency does us the favor of providing the same data from the previous two years on three separate spreadsheets, courtesy, I’m told, of U.S. News. The magazine uses the number of graduates for each law school from the previous year of its “graduate debt rankings,” but this is easily remedied by a quick trip to the Official Guide.

I filled in the gaps for the three-year period between 2008 and 2010 with the following assumptions. For 2008, I copied debt numbers from a similar school in the same state (e.g. using NYU’s numbers for Columbia) or copied the numbers from the subsequent year(s) (Florida A&M). In 2009, I filled in gaps by taking the average debt numbers from the previous and subsequent years (e.g. Cooley), or used the subsequent year’s numbers (Southern University). For 2010, I duplicated similar intra-state schools’ numbers or used the average private or public school “percent taking on debt” if that was the only missing number. For all three years, I duplicated Widener-Delaware’s numbers for Widener-Harrisburg. U.S. News excluded the three Puerto Rico law schools. Here’s what we learn.

2008 $45,826 $10,593,000 $5,110,000 $836,834,000
2009 $50,271 $11,305,000 $5,764,000 $893,088,000
2010 $53,714 $12,055,000 $5,866,000 $952,310,000
GROWTH RATE +17.2% (+$7,888) +13.8% (+$1,462,000) N/A +13.8% (+$115,476,000)


2008 $69,567 $19,746,000 $8,932,000 $2,310,250,000
2009 $73,926 $21,182,000 $9,148,000 $2,478,262,000
2010 $79,665 $22,807,000 $10,233,000 $2,668,474,000
GROWTH RATE +14.5% (+$10,098) +15.5% (+$3,061,000) N/A +15.5% (+$358,224,000)


2008 $87,761 $16,057,000 $8,323,000 $3,147,084,000
2009 $91,606 $17,201,000 $8,803,000 $3,371,350,000
2010 $97,310 $18,473,000 $9,480,000 $3,620,784,000
GROWTH RATE +10.9% (+$9,549) +15.0% (+$2,416,000) N/A +15.1% (+$473,700,000)

Note, these tables account for the fifteen percent or so of graduates who do not take on any law school debt. Though it may sound counterintuitive, “Debt-Revenue” is the term I use to characterize the amount of revenue the law school received from student debt for that graduating class. Also, I’m switching from standard deviations to mean absolute deviations because I deal with full populations that are not normally distributed, and I find mean absolute deviations more intuitive.

And now, to sate your unspeakable viewing desires, here’s the animated number of law schools by debt-revenue, aka the Law School Debt Blob. The blue line on the left is the median, the black line, the average.

This gives us an idea of the distribution of law schools by revenue over the last few years, and it’s what happens when you add nearly half a billion dollars onto law students’ backs. We can only imagine how far rightward it moved before 2008. Although, it’s important to note that all universities jacked their tuition in fall 2009 due to the damage the financial crisis did to their endowments.

Oh, and yes, Cooley is the one on the far right, receiving a princely $87.6 million in debt-revenue from the class of 2009.

And here’s the numeric growth in each five million dollar category.

I don’t like adjusting these kinds of numbers by the consumer price index, but we know it’s in excess of that. I also wish I could compare this to graduates’ starting salaries, but NALP data are short-term, too inaccurate in my opinion, and subject to cyclical swings. If you’d like more info on which law schools rank highest in debt-revenue, I listed them in this post.

Two Links on the Student Debt Bubble and Debt Reform

(1) Justin Pope, “Student Loans: The Next Bubble?” in the Huffington Post

“The hard part, of course, is that a bubble is never apparent until it bursts.”

Boy I hope Dean Baker never reads this one. I good indicator of a bubble is if borrowing for the asset increases faster than the economy. Unless the borrowing is for something that will provide a return a long time from now, then it’s probably not going to pay off.

The top line is all non-revolving debt, the next line is mortgage debt (right axis), the third line is credit card debt, and the bottom line is government-held non-revolving debt. It’s grown very rapidly in the last couple of years due to the Direct Loan Program. Here’s what we’ll see going forward.


That’s bad, and Pope is right that it’s not going to be as big as the housing bubble, which I’ve never argued, but come 2020 it won’t be a minor issue. Additionally, it will impede growth.

College affordability is a serious issue, but it’s a different one. Borrowing for college and borrowing for, say, a house, are fundamentally different in important ways … College enrollment has surged one-third in a decade. With rising demand, college tuition and fees have more than doubled over that time, outstripping inflation in every other major sector of the economy.

The money students borrow goes to tuition. If tuition were fifty bucks, then there would be very little problem if everyone were borrowing for it. If tuition were high and no one borrowed, then it’d be more like a fad like those slap bracelets we had in the third grade: it may not be a good purchase, but it doesn’t cause a societal maldistribution of debt. This is why I characterized the problem as a tuition bubble. No one said high stock or housing prices were different problems for those bubbles; I fail to see why it’s different for education.

Next, Pope’s supply/demand argument isn’t fully fleshed out. One thing sellers do in good times is find ways to minimize costs to capture more market share, and in this case, that means more distance learning due to better information technology. Yet that hasn’t really happened, mainly because accreditation authorities don’t like it, and the prestige of one’s education is a proxy for quality in a glutted market.

[I]t’s important to remember what actually causes a bubble to burst. It’s not simply a run-up in prices. What bursts the bubble is a liquidity crisis, when borrowers suddenly can’t get the money they need. Even during the depths of the 2008 financial crisis, when private student loans dried up, the government’s dominant role kept student loans flowing.

Yes, the government always has money—even if it needs to mint a bunch of platinum coins—but that makes the situation worse in a moral sense because government is nationalizing a credit market and taking the profits to pay for everything else regardless of graduates’ debt levels. It’s more like legalized Stalinism with a hardship program than engineering the repeal of Glass-Steagall.

Where Pope loses me is his discussion of the college wage premium.

All [measures] show the wage premium is substantial, though after rising steadily for years it appears to have slipped some lately. Wages for the median bachelor’s degree recipient are roughly $55,292, compared to $34,813 for those with only high school, according to the latest data from Georgetown University’s Center on Education and the Workforce.

The problem is that high school degrees have lost considerable value because the U.S. is run by people who think we’ll all create the next Twitter by the end of the decade.

(Source: Krugman)

Wages for college-degree holders has stayed flat in the 21st century, so Pope hedges this by saying:

Particular degrees may prove bad bets, but to imagine the premium on education itself dropping off a cliff is to imagine a world where things have gone so wrong that job skills no longer matter.

Actually that’s an easy world to imagine (Krugman says he did fifteen years ago), say, one in which there are fewer jobs for white collar workers or more people trained for those jobs than are necessary.

That suggests there isn’t one big bubble, but many smaller but significant ones stretching across different sectors – certain liberal arts grads, artists, lawyers who borrow six figures for law school and can’t find a job [we know them…], and students at for-profit colleges.

These “mini-bubbles” have the same origin, so why not address them as one big problem?

(2) Mike Konczal, “Two Steps Toward Tackling Our Current Student Loan Problems,” in Rortybomb

Konczal discusses our student debt problem and thinks it should be solved by bankruptcy reform and government subsidized refinancing.

Why not just undo the rules from the 1990s and 2000s? … We can keep nondischargeability for 5 years if people are very concerned about moral hazard. A lot of these concerns from the 1970s started with stories of doctors declaring bankruptcy the day after they graduated medical school. This will at least stabilize and formalize the system of indenture that is required for people to fully develop their talents and abilities in our country, instead of the system that currently keeps people for life.

I’d say lower it to three or two years if the government stays in the market, which is shouldn’t. I still don’t get why we’re worried about moral hazard for student loans when we’re not for impulse shoppers and gamblers. If banks are worried people will discharge their loans, then they can require cosigners on the debts. Moreover, Chapter 7 bankruptcies are now means tested, so doctors who have cushy jobs lined up won’t be able to discharge the loans. If graduate debt-levels drop, they may even be ineligible for Chapter 13. Thus, I think the safeguards against moral hazard are still excessive and deny people who’d need bankruptcy protection the most.

Next up, refinancing student debt at below-market rates.

[W]hy not symbolically declare regular Americans a bank too? Why not also do a “deathbed conversion” on those who are suffering under the burden of heavy student debts and low incomes and let them immediately refinance all their student loan rates at the current ultra-low discount window rate? Mass refinance all student loans into the current low rates the financial sector enjoys. This would give the 99% of Americans just a hint of the kind of total government support places like Goldman Sachs have gotten.

For federal loans, this would mean lowering the typical 6.8 percent interest rate to the 0.75 percent rate for primary credit. For those with $50,000 of debt at 6.8 percent, this lowers monthly payments on a twenty-five-year plan from $347.04 to $182.83. This would lower total interest paid from $54,110.82 to $4,849.48. Really. Now, I’m not sure if the rate would be fixed to the primary credit rate (otherwise inflation will wipe it out) or if it’s adjustable, but these are big savings. The problem, though, is that like refinancing as a solution for underwater homeowners, it only makes it easier to pay the existing debt off while the bank (i.e. ED) takes a loss, which vitiates the whole point of student loans as an income source for the government. If student debtors owe massive amounts (e.g. $250,000), then it won’t help a whole lot without a principal cram-down. If they lose their jobs, then they’re still going to face collection agents. Moreover, IBR would affect this greatly, so I’m guessing that if we enacted this, the actual savings would go to the capitalized interest for low-income high-debtors, and even then it’d only manifest itself in the income tax they’d pay on the forgiven loans.

I like these ideas, though.

Read My Essay on The Am Law Daily; I’m Helping Law Schools Avoid Lawsuits

“Dear Prospective Law Students, Do Not ‘Reasonably Rely’ on Cooley’s ‘Report One'”

Also, I’m off to see former Hüsker Dü and Sugar member, Bob Mould, play in Brooklyn. Hüsker Dü was from my home state, Minnesota, so here’s some of his music.

30 Years after They Graduated…

The law school transparency discussion is animated by the assumption that graduate employment data from nine months out reliably indicate the ROI of a law degree. Readers know I question the “reliability” in the assumption, yet such data are reliable because of the importance of first jobs after graduation and that meaningful employment in the legal profession for large numbers of graduates vanished long ago. It’s a pitiful set of circumstances when asking for increased transparency in the name of consumer protection amounts to twisting the law schools’ arms into admitting to the public that they’re over-enrolled, overpriced institutions, economic stagnation or no.

Nevertheless, for all you transparentists out there, this month’s ABA Journal has a blurb about the efforts of the Section of Legal Education’s changes to the All-Important Questionnaire. The Section got a good heap of hate piled onto it for appearing to self-servingly decide against distinguishing between various job types, especially professional and non-professional jobs.

[T]he section will add several more questions to a questionnaire about jobs held by 2011 graduates. As of late September, the questions still were being developed and new jobs categories still were being defined.

But a letter mailed to deans in August outlined the type of information the section is likely to seek. It includes how many graduates have jobs requiring bar passage or for which a law degree is preferred, how many are employed in another profession, how many hold non professional jobs, and how many are working full- or part-time. The results will be published online by about July 2012, an accelerated schedule that will get the information to the public nearly a year ahead of the usual time. [Emphasis LSTB]

So there. Since there wasn’t any hope of telling fall 2011 applicants before they enrolled how their distant predecessors fared, July 2012 seems a fair time to gently inform the next wave what they should already know by a visit to their friendly neighborhood scamblog. Since it doesn’t look like there will be any independent auditing, law schools may find ways to juke these numbers.

Whether this development (dis)satisfies transparency advocates is not today’s concern, for I’m busy resolving a contradiction: Candidly informing prospective students that large swaths of them will be worse off if they go to law school cannot be good for law schools’ bottom lines. Bad job numbers means declining applicants means smaller enrollments means less revenue means reduced spending means lower relative U.S. News rankings means reduced prestige means new dean, yet Section members appear unconcerned if their efforts ultimately encourage applicants not to buy their product; instead, they’re more concerned about image:

[Section chair and New England School of Law (NESL) dean John F. O’Brien] also expressed concern that the widespread media coverage of the issue has obscured perceptions of the overall job law schools are doing.

“The vast majority of law schools have been doing a tremendous job of training future lawyers, supporting pro bono work by students and alumni, and finding work for graduates in an extraordinarily difficult economic climate,” O’Brien said.

Readers should know that NESL’s current annual full-time tuition is $40,904, up from $22,475 in fall 2004, an astonishing growth. Moreover, New England has the worst ratio of law graduates to projected law jobs of any region in the U.S. Surely Dean O’Brien knows that if any law school shouldn’t expect to prosper in the coming transparency era, it’s NESL. Indeed, it’s the poster child for the tuition bubble, and with the dean of such an expensive, parochial law school chairing the Section of Legal Education it’s no wonder transparency advocates question if the Section is a captured agency whenever it declines to adopt a full transparency regime to their liking, even though it looks like it will by next year, not that it’s set in stone. Yet herein lays the contradiction, for as the block quote implies, rather than cynically manipulating the Questionnaire to shield his law school from Impending Doom as many expected, Dean O’Brien doesn’t appear to care. This indifference surprises me because I doubt law school deans are excited by the upcoming orgy in tuition, salary, and faculty cuts that will inevitably accompany applicants walking by law schools such as his, even if it means razing the building and telling the 3Ls to finish their degrees elsewhere in the name of The New Law School Order. Deans must be predicting a more modest outcome, meaning continued over-enrollment. (A much better example of Dean O’Brien’s pacific outlook appears on the National Law Journal’s site discussing legal education.)

(Note: this confusing, ubiquitous “sanguine law school” attitude is belied by the defensiveness found in Cooley’s “Report One: National Employment,” which portrays law schools’ critics as bullies intent on vengefully depriving the profession of its badly needed practitioners and by inference law schools’ accounts receivables.)

Assuming they’re not completely clueless, this “modest outcome” entails either (a) prospectives acknowledging the likelihood of underemployment but applying anyway, or (b) the short-term data correcting the situation … but for only the nine-month period, after which market forces take over and erode the long-term value of graduates’ law degrees. Law schools will view this through a lens of “proximate causation,” i.e. they believe the students bear the post-nine months market risk. “Law is not for everyone,” they’ll say, but they’ll deny systemic over-enrollment or that their schools are superfluous. Both options belittle transparency efforts, for the former means that law schools will continue to be over-enrolled, overpriced, and possibly gaming the transparency regime, while the latter means that the “reliability” in the transparency assumption is wrong and the effort wasted.

If the short-term data aren’t reliable (i.e. (b) above), what long-term knowledge of the value of a law degree is out there? There’s the After the JD project (AJD) and a paper on the LSAC’s Web site titled, “From 1L to 401(k): A Pilot Study of the Later Stages of Lawyers’ Careers.” AJD is a longitudinal survey of 5,000 year 2000 graduates sampled in 2002, 2007, and 2010. I’ve found only two relevant papers based on the data. Sadly both focus on lawyers’ careers rather than JDs’ careers, and it’s only in the LSAC paper that we find that the After the JD project used only people who’d already passed the bar, and that by seven years after passing the bar (2007) 5.1 percent of After the JD participants were unemployed, and 7.9 percent had left the law entirely. If only they were able to start it ten years earlier.

“From 1L to 401(k)” is much better written and more interesting than any of the AJD articles. It gives us a sample of the fates of the mid-1970s classes. Of particular interest is Table 2 on page 5 (PDF 9):

So I had to bust out my grad school research methods textbook, and I can tell you that the Chi-square tells us the likelihood that there’s a correlation between the type of law school attended and graduates’ career tracks. The author should’ve given us the raw numbers instead of just the percentages, and my textbook orders me to chide her for not telling readers that there’re ten degrees of freedom in the table. The number in parenthesis after the Chi-square is the probability of no correlation between the two variables. That it’s 0.000 means that there is a significant correlation, and to give you a comparison, here’re the expected percentages if these two variables were independent of each other.


It’s odd (statistically) that late 1970s “urban” law school graduates did not find their way into government or in-house positions and instead “stepped out” of the profession, which in the researcher’s definition means they maintained their law licenses despite not working as lawyers. “Other fields” means they aren’t licensed anymore, and the purpose of the distinction is to give an idea of how many graduates still identified as lawyers by maintaining their licenses (or would have had they not been disbarred). I should also add that she was concerned about over-counting in-house counsel based on the methodology.

This isn’t much to extrapolate on, but if 35.3 percent of 1970s urban law school grads left the profession within thirty years, that doesn’t say much good about the value of the degrees their law schools sold them as compared to those who went to state (22.6%) or elite schools (27%). Although, tuition was cheaper relative to elite schools and law jobs were more common back then, so recouping the investment wouldn’t’ve required as much time in the profession. The ten-year standard repayment plan could’ve been sufficient, and we should be more concerned about legal education’s ROI than whether graduates have long careers. Suffice it to say, though, the NESL of 1975 was more affordable and charged a lot less than 86 percent of what Paper Chase-era Harvard did.

Table 3 shows us gender’s impact on law careers:

Trusting the “unverified” numbers, fully 36.3 percent of women who went to law school in the mid 70s weren’t working as lawyers in the mid-2000s. For men it was 25.6 percent. Take from that what you will.

But Table 4 goes for the gold.

I like how the author didn’t bother printing the Chi-square, probably because it’s blatantly obvious there’s a correlation between school attended and size of practice.

Thirty years is a long time, but while it’s possible some subsequent classes kept with the law longer, we know that to the prestigious go the jobs. Brian Tamanaha has graphically demonstrated this pattern is alive and well and likely worse since then.

I won’t copy Tables 5 and 6, but they testify to the signaling value an undergraduate degree from an “elite” institution has on career tracks even more than thirty years ago. With this in mind, you can see how downward mobility affects the decision-making of young Americans. With a dearth of living wage jobs for high school and college-educated people, demand for graduate-level education increases, and using transparency to tell the public that law jobs are now McJobs (or non-Jobs) doesn’t address the fact that there are so many such jobs in the first place. We should give credit to the moral character of the large numbers of applicants who prefer downward-mobile McJobs to a legal profession that offers them no better.

There’s more to the study’s methodology than the pithy points I’ve brought up, but we know that today there are far fewer law jobs than in the late 1970s, they don’t pay as well as back then, there will be fewer jobs going forward, there are more law schools than necessary, and the total cost of attending law school is catastrophically higher than in the past, so the tendency of significant percentages of legally educated Americans “stepping out” of the legal profession has worsened since the 1970s. I further believe that law careers are shorter, accelerating the “stepping out” rate.

So, is it worthwhile today to throw down more than $120,000 for an NESL law degree when it basically guarantees a career in low-paying small practice work for the majority of graduates who manage to enter the legal profession? Put differently, are the transparency enthusiastic NESLs under the Section’s wing clueless, CYOA-ing, or callous as to the long-term value of their degrees? Are law school deans like John F. O’Brien counting the days until they can fire their faculty and abandon their state-of-the-art law school buildings for the forsaken ones relegated to humanities departments?

My thoughts on the long-term value of a law degree lead me to two points:

(a) Much depends on whether applicants really care if the degrees they’re buying are disastrous career-wise. Rather than blaming the media for this by glamorizing law practice, pundits should look at macro-level forces like downward mobility caused by income inequality, but this requires viewing the law school problem as a part of a political problem, which the profession’s elite prefer not to do.

(b) Even if the transparency era arrives, law graduate employment data will still conceal a very high long-term attrition rate they may not even know about. They’ll figure it belongs to the nebulous category of information applicants are supposed to obtain from existing practitioners to “find out if law is really right for them.”