October 30, 2015
...the first increase in six years (link now fixed). (Recall that June also saw an increase.) While enrollments will not return to 2010 highs (a good thing!), it's clear that we are arriving at a "new normal" for enrollments. This is already being felt in the hiring market for new law teachers, which is much more active this year than last.
October 29, 2015
Brooklyn Dean Allard: Legal Profession Should Challenge Slanted, Inaccurate Press Coverage (Michael Simkovic)
Dean Nick Allard of Brooklyn Law School writes:
[T]he New York Times editorial . . . “The Law School Debt Crisis,” . . . is symptomatic of . . . the continuing negative drum beat that is demeaning law schools, law students, and the entire profession.
The time has come for the legal community – and law schools in particular – to press the reset button on the reputation of our profession. As Deans, we should not stand silent as those with biases and outdated or inaccurate information recycle myths and tired, predictable versions of their “wisdom” about our profession, law schools and the quality of newly minted lawyers. Over and over again.
The overarching challenge facing lawyers and the law school community across the country is that there is virtually no effective public counterweight to offset the worn perceptions repeated by high visibility media and others. We must, together, come to the defense of the value of law and lawyers, and make the compelling case for lawyers’ contribution to society . . .
Let's stop the hand wringing, whining and the recycling of misperceptions. Let’s instead call attention to the positive value of our profession and the contribution we, our colleagues, and our students make. Let’s challenge ourselves and our institutions to do better. . . .
October 28, 2015
N.Y. Times is Mistaken: Law Student Loans are Safe and Profitable for the Government (Michael Simkovic)
This weekend, The New York Times Editorial Board published a sensationalist lead editorial, “The Law School Debt Crisis,” claiming that law student borrowing is harmful to taxpayers. The New York Times is mistaken.
The Times cited Florida Coastal School of Law, a for-profit institution, as its prime example of law schools “vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults.” Florida Coastal seems like an easy target—even a Federal Court which dismissed a fraud suit against Florida Coastal described it as having “some of the lowest admissions standards of accredited or provisionally accredited law schools in the nation.” The Times has repeatedly criticized for-profit colleges, which it deems “predatory” based on their unusually high student loan default rates. (See opinion, upshot, news and news again).
If the Editorial Board's accusations were true—if the “majority of law schools” really were running “a scam” in which they load down their students with “crushing amounts of debt” which “they can’t repay”—Florida Coastal and other law schools should have among the highest default rates of any institutions of higher education in the country.
They don’t and they aren’t.
For the cohort entering repayment in 2012—the most recent year of data available*—the national 3-year cohort default rate on federal student loans was 11.8 percent. The comparable figure for Florida Coastal was only 1.1 percent—more than 10 times lower.
Other measures tracked by the Department of Education, like repayment rates, also show law school borrowers performing as well or better than most.
We see the same pattern across law schools and going back decades for which data is available.** Even low ranked law schools with allegedly “outrageously high” tuition generally have much lower student loan default rates than either the national average, or the average for institutions that grant bachelor’s or advanced degrees.
Law students not only have higher debts than most student loan borrowers; as professional students, they also pay higher interest rates on government loans than undergraduates.
Law students rarely default because the financial benefits they receive from attending law school are usually far greater than the costs.*** Law school typically boosts annual earnings by around $30,000 (median) to $60,000 per year (mean) compared to a bachelor’s degree.**** Even at the 25th percentile, toward the low end of the distribution, the annual boost to earnings is around $20,000 per year—more than enough to repay typical law school loans over the course of a career.
Taxpayers also benefit. For every extra dollar a law graduate earns, the federal government receives an extra 30 to 40 cents in payroll and income taxes. The federal government charges far more in taxes than most law schools charge in tuition.
But the government isn’t paying for most law graduates’ education. In fact, loans to law students are among the most profitable in the federal government’s student loan portfolio, thanks to high interest rates and low default rates. Many law graduates are such good credit risks, and are overcharged so much by the government, that private lenders have offered to refinance law graduate loans for substantially lower interest rates.
There are cases in which particular individuals have unusually bad outcomes and struggle to repay their loans. Thankfully, these situations are relatively rare among law graduates.
Incomes for law graduates may seem low when they first graduate, but typically climb rapidly over the next several decades. Education loans exist precisely so that borrowed money can be repaid later in life, when employment is more stable and incomes are usually higher.
The New York Times is right that many law school graduates—around 40 percent—do not practice law. But law graduates do not have to practice law or earn spectacular salaries to benefit financially from their degrees and repay their loans over their careers. They need only earn roughly $10,000 per year more than they would have earned without a law degree. The overwhelming majority of law graduates, including those not practicing law, receive substantially larger boosts to their earnings.
Thanks to income based repayment programs with debt forgiveness and progressive taxation, the overwhelming majority of successful law school graduates can offset the risks of investment in education for those rare unfortunate individuals who do not benefit as much from their educations.
It would be a mistake to let the small tail of defaults wag the much larger dog of public benefits.
Scaling back access to federal student loans to law students will not benefit taxpayers. To the contrary, the loss of revenue would mean larger deficits for the government, and eventually higher taxes for the rest of us.
October 25, 2015
Frank Pasquale responds to a very poorly researched editorial by The New York Times Editorial Board. My own response is forthcoming and I'll link to other responses in the coming days.
Update 10.25.2015 8:30pm: Pasquale places the student loan debate in the broader context of privatization efforts.
October 23, 2015
October 16, 2015
Federal Court dismisses another suit alleging misleading law school employment statistics (Michael Simkovic)
The Wall Street Journal reports that a Federal District Court recently dismissed a lawsuit alleging that Florida Coastal School of Law defrauded its students through misleading employment statistics. (hat tip Paul Caron) As noted in the Journal, this is the latest in a long string of victories for defendant law schools in these cases.
The legal issues and relevant facts of many of the suits against law schools are substantially similar because of standardized data collection techniques and methods of disclosure. Although courts thus far have either denied class certification or dismissed these fraud suits on the merits, the language of opinions has tended to be somewhat more sympathetic toward plaintiffs when the defendant law school admitted students with lower undergraduate GPAs and standardized test scores. (For example, compare the decision in Brooklyn to the decision in New York Law School (especially the more plaintiff-friendly appellate opinion)).
Given Florida Coastal's admissions standards--described by the Court as among "the lowest . . .of accredited law schools . . . in the nation"--Florida Coastal may have been among plaintiffs' attorneys best chances for success. Failure in this case does not bode well for future lawsuits against law schools based on similar legal theories and fact patterns.
The Florida Court explained that Florida Coastal students were college-educated and therefore sufficiently sophisticated that they were unlikely to be misled, but rather would have reasonably understood the limits of the data disclosures or requested additional clarifying information.
The Court's detailed reasoning follows:
October 08, 2015
Student loans are more difficult to discharge in bankruptcy than most consumer or business debts. Discharge is only available if repayment “would impose an undue hardship on the debtor and the debtor’s dependents.” 11 U.S.C. § 523(a)(8).
These restrictions on discharge are controversial. Supporters note the possibility of strategic filings by student debtors with low assets and high expected future incomes and the danger of such defaults driving up the costs of credit. Skeptics argue that such concerns are empirically unsupported and that bankruptcy discharge provides an important mechanism for spreading the risks of investments in higher education.
In policy circles, momentum seems to be building for at least some relaxation of the restrictions on student loan discharge. The Department of Education recently released a report supporting discharge of private student loans in bankruptcy. The report argues that federal student loans should be treated differently from private loans because federal loans are not underwritten and because income based repayment with debt forgiveness is available for federal loans. Adam Levitin made similar arguments in the Wall Street Journal several months ago.
Access Group announced its support for discharge of student loans after a 7 year waiting period, as long as the loans are not already eligible for income based repayment with debt forgiveness after at most 25 years. The proposal also calls for restricting discharge for those who have previously discharged student loans in bankruptcy.
Access Group’s proposal appears to leave open the possibility of private student loans retaining current protection against discharge in bankruptcy by offering income-based repayment terms similar to those available from the federal government.
October 07, 2015
My colleague Omri Ben-Shahar asked me to share the following (I wonder if other empirical scholars will follow suit?):
Testing legal ideas by looking at data is a welcome growing trend in legal scholarship, but it is also known to carry risks of according authority to dubious and poorly tested claims. Many consumers of published empirical scholarships are not trained in empirical sciences to read the reported results critically—results that often pass only lax peer review (if at all). The enterprise is not helped by studies showing that more than a few empirical results cannot be replicated, or that there is a publication bias in favor of “surprising” results, or that empirical papers often conform suspiciously to their authors’ ideology or previously published predictions. Empirical legal scholarship is understandably in search for ways to enhance its credibility.
A new paper by myself and Adam Chilton offers a new strategy to achieve credibility — circulating the paper before the results are known to the authors. We are writing a paper for a Journal of Legal Studies conference on Contracting Over Privacy which will be held in Chicago on October 16-17. Our paper seeks to test the effectiveness of privacy disclosures on websites — specifically, whether requiring websites’ privacy notices to adhere to some commonly advocated “Best Practices” in their design and presentation style has any measurable effect and whether it leads people to behave more cautiously and to reveal less personal information. But we have a credibility problem. I (Ben-Shahar) recently published a co-authored book (More Than You Wanted To Know) arguing that mandated disclosures are useless and that attempts to improve them by using various best practices would be futile. Can I be trusted as an author of empirical work that merely confirms my predictions in the book?
To overcome this credibility problem, we are writing and circulating the paper before running the experiment and before knowing what the results are. The circulated draft describes the experiment and has (for now empty) boxes and charts for the results, which will be filled once the experiment is run. To strap ourselves to the mast before the data sirens sing, and to make sure that we cannot back out if the results turn out to embarrassingly refute our prior predictions, we are advance-posting the paper on SSRN with everything but the results in it. A subsequent revision will then include the results, but coming in the heels of the advance posted version it would appear more credible. Pending IRB approval, the experiment will be run next week, and the results will be reported at the conference next weekend.
October 06, 2015
MOVING TO FRONT FROM OCTOBER 2--UPDATED
Glenn Reynolds (University of Tennessee) leads the way as usual. President Obama is disgusted, as well should we all be. Reynolds's disgraceful irrationality on this subject is of longstanding. He really is "part of the problem."
UPDATE: A reader sends along this apt 2012 article about gun control. He writes: "This is an issue where there aren't really two sides to the debate that should be seriously considered. This is an issue where there are the facts about gun control and mass killings, and then there are awful rationalizations for the carnage offered by the likes of Glenn Reynolds. As someone who fills out the U.S. News surveys, I am factoring in to my assesment of the reputation of the University of Tennessee the "disgraceful" as you said antics of this facilitator of murder."
ANOTHER: William Page (Florida) sends along another apt piece, noting the utter insanity of thinking that it would contribute to public safety to have armed civilians in the middle of an unfolding crime scene.