Month: February 2012

Center for College Affordability and Productivity Study Calls Out Law Schools

The CCAP published its revision of the explanation—called the “Bennett Hypothesis”—of why higher education institutions increase tuition. Looking at CPI data, higher ed. costs have soared above inflation and other notable goods and services over the last 34 years:

(Source: BLS)

The original Bennett hypothesis is named for former Secretary of Education, William J. Bennett, after he claimed in a 1987 New York Times editorial that universities were capturing increases in federal financial aid. Despite the charts above, the evidence for the hypothesis is mixed, leading CCAP to conclude that it allowed other researchers to:

  • lump aid that went to poor students (like Pell Grants) with aid available to all (Unsubsidized Stafford Loans);
  • Ignore the effects of tuition caps at public universities and price discrimination in scholarships by others; and,
  • Most importantly, fail to note longitudinal effects of competition among universities.

Aside from easing university-wide subsidies, the obvious solution is to allow applicants better access to information on educational quality and net price, i.e. transparency, which would force universities to compete over outcomes.

The CCAP paper is a good read, and I recommend reform-minded types to read the PDF here, especially those who were horrified by law professor Jonathan Glater’s recommendation that we fully subsidize higher education. I’m curious what counterarguments it will engender, but seeing that higher education costs are growing faster than even medical care (aka “Budget’s Bane”) and prescription drugs, I’m guessing Bennett 2.0 is theory of the day.

But the fun part is towards the end, where author Andrew Gillen calls out America’s law schools.

“[Access to unlimited GRAD PLUS loans] allows law schools to all but ignore capacity concerns, focusing instead on revenue and selectivity considerations. Thus compared to undergraduate students, law school students have access to a massive amount of aid and according to Bennett Hypthesis 2.0, law schools will take advantage of this situation by increasing tuition. This is exactly what we see.

[M]any schools are making a ‘profit’ on law school students, using them as cash cows to fund other activities, and yet tuition is still rising faster at law schools. Bennett Hypothesis 2.0 offers one of the few explanations for this phenomenon: more generous financial aid for law school students allows law schools to raise tuition more.” (24, PDF page 32)

Gillen then provides a chart, taken from ED’s Digest of Education Statistics (presumably Table 348 and Table 345) and the CPI, to show annual increases in law school tuition.

Sadly, Gillen doesn’t distinguish between public and private institutions, so here’s the inflation-adjusted annual growth rate of law tuition by institution type.

Bear in mind two things. One, there are many more private law schools than public ones. Two, Grad PLUS loans are fairly recent, meaning many law students were using private loans to pay for their educations until then. This means we’re comparing the same phenomenon under differing underlying conditions. These concerns may mute Gillen’s point somewhat, but I’m still persuaded overall.

*****

Part of what I write about on this blog is the intersection between higher education finance policy and legal education. Unfortunately, the legal profession still doesn’t want to admit its relationship to these policies (save for a handful of law school professors who do care about the issue) and instead prefers to issue resolutions calling on Congress to protect law school debtors (which is good, but they don’t demand bankruptcy rights, aside from the National Association of Consumer Bankruptcy Lawyers) and law schools’ entitlement to endless taxpayer subsidies. This is why the Gary Munneke’s of the academy can write:

“What we need today is a cooperative dialogue among stakeholders in the legal market to forge a workable future. What we have is a stalemate, like two galleons firing broadsides in a Nathaniel Philbrick novel.” (11) [LSTB: This is a good line.]

…Yet expect us to believe that the legal academy is an equal stakeholder is this cooperative dialogue. However, the profession has nothing to gain by treating the legal education establishment as a stakeholder whose interests are worthy of protection. Indeed, it loses nothing by talking to legislators and demanding cuts to the subsidies, and it may regain some of the dignity it’s lost due to merciless poundings by scambloggers and media outlets. Hopefully “Bennett 2.0,” to say nothing of the NACBA’s report, will start playing a more prominent role in discussions about the future of the legal profession.

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.

Unload Your Law School Bonds. Now.

Reuters, “Fraud suits against law schools ‘credit negative’: Moody’s

I suppose I have something to gain by opening with that title, even though we all know it’s inevitable that law schools will close anyway. However, real estate bubble oblivious Moody’s thinks that declining enrollments are the harbinger of reduced revenue for standalone law schools.

In January, Moody’s revised its outlook on New York Law School from “stable” to “negative,” reflecting “recent enrollment volatility” — a 25-percent decrease in the size of the 2011 entering class — and uncertainty about the outcome of the pending lawsuit. (The agency affirmed an underlying “A3” rating on New York Law School’s bonds, the lowest grade of “A” bonds with above-average creditworthiness.)

The law schools adamantly maintain that the lawsuits are without merit, although the one against Thomas Jefferson School of Law in California is in discovery and analogous lawsuits against culinary schools have resulted in victories for student plaintiffs. I can’t imagine things going well if standalone schools lose their lawsuits, and I’m guessing applicants won’t flock to a law school that survived a Chapter 11 filing.

Does it surprise anyone that law schools have stronger bankruptcy protections than their students?

Bankruptcy Attorneys Publish Survey on the ‘Student Loan Debt Bomb’

National Association of Consumer Bankruptcy Attorneys (NACBA), “The ‘Student Loan Debt Bomb’: America’s Next Mortgage-Style Crisis?

The survey of 860 members finds four in five bankruptcy attorneys have seen “significant” (48 percent) or “somewhat” increases in potential clients with student debt. 39 percent of them saw potential student loan client cases grow by 25-50 percent in the last 3-4 years. 23 percent saw a 50 percent to >100 percent growth. The NACBA went to the trouble of publishing a report on the topic that compared the problem to the mortgage meltdown and recommended restoring bankruptcy protections to both public and private student loans.

Amusingly, Bloomberg, which ran the NACBA story, also uncritically discussed the increase in consumer credit in December. Apparently, Americans are buying cars and educations now, as if that’s something new. To give readers an overview of 2011, here’s how much nonrevolving credit grew. The bottom lines are nonrevolving credit minus the government’s share and the government’s share itself:

As expected nearly all the growth in nonrevolving credit was in the government’s share, which is mostly student debt, but there are a few million dollars in HUD loans and things like that thrown in. It’s also important to note that the private sector’s share includes private loans, so this isn’t an accurate cross section. By my calculations, total nonrevolving credit grew 5.55%, the private sector’s share contracted by 1.51%, and the government’s share grew by an incredible 34.36% ($316.4 billion to $425.1 billion). Here’s the ratio to GDP:

Two to three percent of the economy isn’t a whole lot, but (a) it’s growing faster than the housing bubble, and (b) consumer credit should be shrinking, not expanding. This will be a big problem over the next few years, not because it’s so difficult to solve but because the government (okay, B.H. Obama) is willfully ignoring it, even though the public is more aware of it than the housing bubble. At least, that’s my perception: the housing bubble had higher mass but lower acceleration; the student debt bubble has lower mass but higher acceleration.

Rumor in the bankruptcy world is that business is down generally, so I’m incredulous that the student debt meltdown will be as tumultuous as the housing bubble as the NACBA fears. Then again, homeowners can discharge mortgage deficiencies in Chapter 7. No business because the law hogties debtors doesn’t mean there isn’t a problem. The NACBA hastens to point out that bankruptcy reform isn’t the same thing as loan forgiveness, and because Chapter 7 is now means-tested according to median state income and family size, widespread abuse will be curtailed. The NACBA’s recommendation is one of the few I’ve seen that eliminates all waiting periods, which I think is bold move. I endorse its proposal.

Speaking of which, I should add that if you’re into petitions, there’s one created by Alan Collinge (I think) to restore bankruptcy protections to all student loans “With no qualifications, and no exemptions.” If you were into forgiveness last year, you should be into this.

The real question is whether enough momentum will build up in 2012 to force the Presidential candidates to take it seriously. As of now, a good summary of President Obama’s beliefs can be found in a post by Peter Wood on the Chronicle of Higher Education‘s blog, Innovations. I’d really like to see Obama grilled on student debt in at least one debate.

Will the ABA Law Student Division Respond?

On Wednesday, February 1, 2012, the Internet amused me, for on the same day, two items popped up.

(1) Joint Statement of ABA Law Student Division Chair Tremaine “Teddy” Reese and Young Lawyers Division Chair Michael G. Bergmann Re: ABA and Young Lawyers, Law Students, ABA Now

“Law students and young lawyers face more stress and uncertainty today than ever.  Today, the cost of legal education and average student loan debt loads are unprecedented, while job prospects for graduates are uncertain.  The ABA and its Law Student and Young Lawyers Divisions understand these realities, and are creating and leading initiatives to assist you during the initial stages of your career.”

And,

(2) “Eight Law Firms Sue Twelve Law Schools,” Inside the Law School Scam, more detail at Law School Transparency.

David Anziska, “[I]t is time for the schools to take responsibility, provide compensation and commit to transparency. These lawsuits are only the beginning.”

So “Young Lawyers and Law Students”…

Door #1: The Young Lawyers Division’s initiatives?

Door #2: Suing your law school for fraud?

Both?

Seriously, when will law students (who aren’t affiliated with the ABA) start organizing the way the ones suing their law schools are?

[Bonus reading at Anthony Urti.]