Spontaneous Exclamations: The loan repayment situation (Part One)

Examining the Yale Professors’ Solutions to the Law School Loan Repayment Problem 

Adam Katz is a senior associate at Harrison & Held LLP.  He concentrates his practice on federal & state tax matters, mergers & acquisitions, entity structure and formation, commercial finance, and non-profit law.  Adam can be reached at (312) 753-6110 or akatz@harrisonheld.com.  Comments on this post are welcome!

Just before Thanksgiving, on Friday, Nov. 18, slate.com posted a remarkable article proposing significant changes to how students pay for law school written by two unlikely authors.

Two Yale Law School professors proposed, among other items, that law schools should report bar-passage, employment, and salary data that doesn’t mislead students.  Also, law schools should dangle a fat carrot in law students’ faces and offer the less interested students money to quit after their first year.  When I read this article a week after it was posted, I nearly spit out my most recent bites of delicious turkey and mashed potatoes in surprise.  Such intriguing proposals about fiercely debated topics— law school loans and tuition— require some blog-worthy analysis!

This week we’ll examine the proposal about curbing the misleading graduate data.  Next week we will examine the proposal to dangle that fat carrot.

The authors propose that law schools give applicants detailed reports on how many graduates passed the bar exam upon graduation and their annual salaries for the first 10 years after graduation.  The authors suggest that law schools disaggregate the data to prevent misleading figures.  This feat of statistics would be accomplished by requiring all students who took federal loans to report the same.

I imagine that almost everyone with a heart agrees that, in an ideal world, not misleading applicants is a good thing.  When applying to law schools in the past decade, how many of you recall the figures indicating employment of near 100 percent of the class upon graduation?   For those of you graduating in 2007 or later, did you believe those numbers?  In an ideal world, supplying the proposed statistics to applicants would be wonderful.  I would be delighted if each law school’s statistics were transparent and comprehensive.  However, at countless law schools, and good ones at that, I fear reporting such statistics would decimate the number of worthy applications coming in because, if the rumors are correct, large proportions of 2Ls and 3Ls do not have law jobs and collective hope is low on finding positions.  Smart and able students would avoid such schools or law school all together.  Now, is this a good thing?

Pushing people away from law school who perhaps have genuine talent and desire to become an attorney?  Not necessarily, but perhaps there is a happy medium in which law schools can report certain accurate data that will turn away the students who go to law school because they don’t know what else to do while still keeping the serious applicants. Additionally, the schools would convey the message that taking on hefty debt is no small matter. Because, really, who would go to any graduate school that costs over $150,000 in loan principal and interest with few positions available upon graduation?  Only those applicants who truly want to be attorneys and understand the monetary burden?  Would reporting such data in turn lead to classes containing significantly less lower income individuals while increasing the concentration of students who can pay tuition out of their bank accounts?

Then again, other than for tuition being so outrageously expensive, did anyone really care about these statistics when the economy was booming?  In an ideal world, the cyclical economy will cycle on back to the boom times when jobs are plentiful and I wonder if so many people will care about these statistics.  However, does it make sense that these questions all lead to a root of the problem: the incredible expense of law school and the ridiculous interest rates on student loans that cannot be discharged after bankruptcy?  I’d like to say we wouldn’t be asking these questions about any graduate school if tuition were reasonable and loan interest rates weren’t at times reaching a flabbergasting 8 percent.

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