Next debt bomb: law school student loans
Posted: 12:13 pm Fri, April 27, 2012
By Edward Poll
A spate of recent news stories suggests trouble for America’s 200-plus accredited law schools. It’s summed up in the title of the cover story in the January 2012 issue of the ABA Journal: “The Law School Bubble: How Long Will It Last if Law Grads Can’t Pay Bills?”
Here are some facts from a variety of stories:
• The Associated Press reports that, at more than $1 trillion, U.S. student loan debt has surpassed the volumes of credit card and auto loan debt.
• The AP quoted the head of the National Association of Consumer Bankruptcy Attorneys as calling this “the next debt bomb for the U.S. economy. As bankruptcy lawyers … we were warning of mortgage problems in 2006 and 2007. Nobody had it under control. Now we’re seeing the same signs of distress … huge defaults on student loans and people driven into financial difficulties because of them.”
• The ABA Journal story referenced above stated that in 2010, 85 percent of law graduates from ABA-accredited schools had an average debt load of $98,500. At 29 schools, that amount exceeded $120,000.
• Not surprisingly, the Law School Admission Council reported that only 22,000 people took the Law School Admission Test (LSAT) in February 2012, the lowest number since 2001. And this contrasts to the 44,000-plus graduates that law schools churned out in 2010.
I recently wrote to a law school dean that today’s legal environment is quite different from what it was only a few short years ago. For the first time, ROI on tuition is not assumed in making a decision whether to go to law school.
It is a discussion that includes the cost of education, the mental challenges and the economic benefits of going to law school. This return on investment analysis includes whether one can likely find employment, either with a firm or solo, and whether the law school provides the preparation to succeed, both academically and economically. As these columns have said many times, too few law schools address the second aspect.
Facing the prospect of an unsupportable student debt, increasing numbers of potential law students and recent alumni are concluding that the law school is failing in its responsibility to educate the whole lawyer.
In interviews for a West LegalEdcenter program that I conduct monthly, several recent graduates from around the country were quite angry with their alma maters for not providing even a hint of the law practice management education they perceive would have enabled them to be successful.
Each of these folks is now engaged in other, non-legal employment. The result is the rising number of lawsuits filed against law schools by firms representing students who say the schools actively mislead them about the ROI on a J.D.
I fully agree that getting a law degree should not guarantee a good-paying law firm job to cover a student debt load. Not even senior partners are safe in their careers these days. Yet who among us would have thought just a few years ago that lawyers would successfully represent people who simply walked away from an insupportable mortgage debt? Are student loans next?
Edward Poll, J.D., M.B.A., CMC, is a law practice management thought leader and contributor to this publication. His website is at www.lawbiz.com.