Staggering Law School Debts Will Lead to Exploding Debt Disaster for Graduates and Taxpayers
Federal financial aid policies have encouraged law students to borrow increasing amounts to attend law school, despite the glut of lawyers (oddly, government policies encourage more people to go to law school, driving up law school tuition, even as the Obama administration seeks to cut back on vocational education aimed at training the skilled blue-collar workers who are in desperately short supply in much of the country). The result, says law professor Brian Tamanaha, is a “Quickly Exploding Law Graduate Debt Disaster” in which most recent graduates of many law schools will never be able to pay off their staggering student loan debt. At the liberal Balkinization blog, Tamanaha notes that the average student has over $100,000 in debt just from law school at many schools:
This year 17 law schools are above $135,000. Last year the highest average debt among graduates was $145,621 (Cal. Western); this year the highest average debt is $165,178 (John Marshall). Below are the 20 schools with the highest average law school debt among graduates (these figures do not include undergraduate debt).
John Marshall Chicago $165,178
California Western $153,145
Thomas Jefferson $153,006
New York Law School $146,230
Catholic (DC) $142,222
Pace University $139,007
Atlanta’s John Marshall $138,819
Pacific (McGeorge) $138,267
St. Thomas (FL) $137,721
Univ. San Francisco $137,234
Vermont Law School $136,089
Golden Gate $135,645
Florida Coastal $134,355
What’s remarkable is that the majority of graduates from these law schools–with the exception of Northwestern–do not obtain jobs with salaries sufficient to make the monthly loan payments due on the average debt. At some of these schools 90% or more of graduates with debt do not earn enough to make the loan payments on this level of debt (not all indebted students will carry the average debt). . .
Thousands of 2011 law graduates across the country will not earn enough to manage the debt they incurred to obtain their law degree. . .
This financial insanity will not stop until significant changes are made to the federal student loan program.
As one commenter noted earlier, federal financial aid and student loans have driven up law school tuition and student loan debt: “education loans . . . often have implicit government guarantees,” even those not explicitly backed by the government. As a result, “like the GSE’s, the supply of credit for education loans has continued to expand. So in a way colleges and universities, public and private have been in a bubble akin to the housing bubble. The benefits to the institutions are irresistible and so there is no way they will try to rein in costs and thus tuition. Not as long as students are willing and able to borrow.” When the bubble pops, taxpayers will be on the hook for countless billions of dollars (many graduates already are not repaying their student loans). “Why is college so expensive? A new study points to a disconcerting culprit: financial aid,” notes Paul Kix on page K1 of the March 25 Boston Globe. I and professors and education experts commented earlier on that study at Minding the Campus. Other studies also have concluded that increased federal financial aid, such as student loans, drives up college tuition, and you can find links to some of them here.
As the American Bar Association’s ABA Journal notes, “Law students . . . are treated generously as future professionals and able to borrow, with virtually no cap, significantly more money than undergrads. . . For several decades, most higher education loans were made by private lenders with the federal government providing guarantees against loss—and, in some cases, interest rate subsidies.” As I explained earlier, cutting law school subsidies would help the economy. Links to additional commentary about the high cost of law school can be found here.
When law school graduates are unable to pay off their student loans, lenders will come after their elderly parents who co-signed for the loans. As the Washington Post notes, “Americans 60 and older still owe about $36 billion in student loans . . . Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.”