Day: 2011/12/13

Here’s Hoping Michael Olivas’ Views Are Not Widely Held by the AALS

Not that I care about the AALS, but, ya know, just sayin’.

“‘We have never guaranteed that our graduates will have jobs,'[said Association of American Law Schools President Michael Olivas.] “Olivas, a law professor [and dean] at the University of Houston, makes a persuasive case that letting law school students escape their debts is a bad idea. After all, he notes that people have to pay off their car loans even if they grow tired of their vehicles.”

So editorializes Jonathan Berr, contributor to the “Motley Fool” segment of Daily Finance, in a piece called “Should Law Schools Pay Some Students to Drop Out,” a reference to the recent Slate article by Akhil Reed Amar and Ian Ayres.

I declare this Michael Olivas quote gold.

I do so because it so concisely presents the attitude scam bloggers, student debt activists, mainstream journalists, legislators, and increasingly the public, impute towards legal academics. Before I go further, readers should recall Michael Olivas as the same AALS president who successfully wrote a ten-page argument from incredulity claiming that there can’t possibly be legal education without highly paid, tenure-track faculty because they provide “selfless public service.” The above paragraph implies the following:

(1)  Law schools are run by callous businesspeople. All the blather about the “noble profession,” “public service,” and being a “gateway to the profession” masks the fact that it’s merely an arm’s length transaction between sophisticated parties. Law school overenrollment and tuition increases? The applicants forced them to increase enrollments and tuition because law schools operate in a free market in which they take on no risk. Law schools’ contribution to ballooning student debt is the public’s problem. Isn’t that the same public tenured faculty selflessly serve? Whatever. I’ll spare you the published employment statistics.

(2)  This is my favorite: Underemployed law grads (and drop outs) are just “tired” of their law degrees. It’s not the oversupply, depression, or transformation in the profession but graduates’ fickleness that makes them want to discharge their student loans.

(3)  Speaking of which, Olivas does not make a “persuasive” case comparing student loan debt to auto debt. That’s Berr’s poor editorializing. There are several reasons:

  • Auto debt is secured. Student loan debt is not. The reason unsecured debts are (and should be) dischargeable in bankruptcy is that we don’t want the courts to play Santa, deciding which debtors have been naughty and which creditors are morons for loaning money to people who are clearly credit risks. Thus, the bankruptcy code by default shifts the risk onto the creditor: if someone discharges a $60,000 gambling debt owed to you, that’s your problem. Not because we hate banks but because it’s the best we can do. Since 2005, Chapter 7 is means tested, meaning you can’t make six-figure salaries and discharge your unsecured debt at will. Hogtying the bankruptcy courts into siding with creditors turns debtors into debt peons who default, stop paying income taxes, work in the $1.4 trillion underground economy, flee the country, or kill themselves. So no, neither Berr’s nor Olivas’ attitude is “persuasive.”
  • As a secured debt, debtors can always surrender the car to the bank/repo man and then discharge the deficiency in Chapter 7. There are ways around that, such as locking your car in your garage where the repo man can’t reasonably go without committing burglary and negotiating a refinancing plan in the meantime, but at the same time you won’t be able to drive to work or the cinema without risking your car getting towed.
  • Debtors can redeem their vehicles in Chapter 7. This means they pay the lender the fair market value of the vehicle and keep it. Many people filing Chapter 7 don’t have that kind of cash on them, so they either forgo this option or find a redemption lender (who probably charges high interest).
  • Debtors can also reaffirm their auto debt, which is a slightly more complicated process (lots of signatures), but it allows them to keep their cars.
  • They can also include it in a Chapter 13 repayment plan.
  • Lastly, there’s the cramdown option in Chapter 13. This is similar to redemption in Chapter 7 in that the debtor is paying only the fair market value of the vehicle if it’s more than 910 days old, and the interest rate is judicially adjusted (called the “Till rate,” after the Supreme Court case by that name).

Point is, even if you get sick of your car, you can get out of the debt. More importantly, without unlimited loans and state subsidies, Michael Olivas would not be making $183,240 per year. (For all you OWSers, that’s between the top 1.5 and 5 percents and probably higher in Texas.)

“Though there may be surpluses of lawyers in parts of the country, some areas don’t have enough of them. ‘There are counties in the state of Texas that have fewer than a dozen lawyers in them,’ Olivas said.”

(4)  Those counties probably don’t have many people at all, and they’re likely much too poor to afford substantial legal services. And medical services. And everything else. Like many of his peers, Dean Olivas believes that there are Shangri-La legal markets in the U.S. that will pay lawyers a living wage if only they’d overcome their laziness to uproot themselves and move there. No such place exists in the U.S., and the reason new lawyers in particular are unwilling to take the risk is that a subsistence income outside the legal profession (even if it’s an imputed income from living with family unemployed) is still higher than moving to rural Texas to practice cactus law. There is no such thing as “voluntary unemployment” in the legal profession. Nor any other economic sector for that matter.

I’m of the opinion that people like Michael Olivas are going to stand at the front line when Congress decides to open hearings on law schools. That’s unfortunate for organizations like the AALS because there’s been every indication of rare bipartisan consensus about law schools’ problems. That’s not to say I have a high opinion of the AALS. Honestly, I couldn’t care less, but advocates such as Dean Olivas will have few allies and will not foster a positive view of the AALS in legislators’ hearts so long as they believe they are entitled to receive high incomes as “selfless public servants” while actually impoverishing their students at taxpayer expense.