November 24, 2015

Thankful for the Financial Times (Michael Simkovic)

This Thanksgiving, I'm thankful for the Financial Times.  

While some leading business and financial newspapers have adulterated their coverage to appeal to a mass audience or reduce costs, the Financial Times continues to produce high quality, fact-based reporting about serious business, financial, and economic issues.  The FT's target audience continues to be legal and financial professionals who are prepared to pay a premium for reliable information.  The FT includes a minimum of hyperbole and fluff.  It also offers a more global perspective than most U.S. papers, while still providing strong coverage of important U.S. issues.  

For the last 5 years, I've routinely recommended the FT to students in my business law classes, who are generally more familiar with U.S. papers.  The FT is available on Lexis (with a few days delay), but is well worth the cost of a subscription.  

If you're not a regular reader of the FT, but have been following U.S. newspapers' higher education coverage, you can get a sense of the differences between the FT and U.S. newspapers' approach across subject areas by reading this article about fees at public UK universities exceeding those at U.S. universities.  The article is entirely focused on costs and benefits of education and how those costs and benefits are distributed between students, government, and employers.  There are no unrepresentative anecdotes, no histrionics, only summaries of data.  When advocacy groups are cited, their interests are noted.  This is what journalism can and should be.

Pearson recently sold the FT to Nikkei.  Hopefully the new owners maintain the FT's high quality. 

November 24, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Professional Advice, Student Advice, Weblogs | Permalink

November 16, 2015

Against student-edited law reviews, once again

Lawyer/philosopher Ken Levy (Louisiana State) comments.

My impression is that many of the student-edited law reviews are now seeking faculty input into acceptance decisions, though not generally at the initial screening stage.  What are the impressions of others?  (I do not submit very often to student-edited law reviews, so my sample size is small.)

November 16, 2015 in Of Academic Interest, Professional Advice | Permalink | Comments (2)

November 03, 2015

Failed the Bar Exam? Try Again (Michael Simkovic)

Noah Feldman recently argued that law schools are not helping students with low standardized test scores by denying those students the opportunity to attend law school simply because those students might find it challenging to pass the bar exam.*  According to Feldman, denying people an opportunity to try to improve their situation in life is “paternalism that verges on infantilization.” Moreover, “A standardized test score, taken alone, shouldn't determine your future.”

Feldman’s perspective is bolstered by an important feature of bar exams:  People who fail an exam can study harder and then retake it.

Standardized test scores might predict the likelihood of passing the bar exam on a single try.  But a more important question is arguably whether an applicant can eventually pass a bar exam.  Delays in bar passage can have short-term financial costs, entail logistical challenges and stress, and in rare instances where employers require recent hires to practice law without supervision, even result in the loss of a job.  But most law graduates won’t lose their jobs for retaking the bar exam, and an individual who passes after multiple attempts will have the same license for the rest of his life as one who passes on the first try.** 

Many law schools maintain exclusive admissions, not necessarily for the benefit of the students to whom they deny admission, but rather for the benefit of prospective employers and clients—in other words, to maintain a brand that suggests certain qualities above and beyond the ability to pass a bar exam.  Different law schools have different brands. 

The probability of eventually passing the bar exam is a function of how many times an applicant is willing to try.***  A bar exam taker with only a 50 percent chance of passing on any one try has an 88 percent chance of passing the bar exam if he is willing to retake the bar exam up to two times, and a 94 percent chance of passing if he is willing to retake it up to 3 times.

Probability of Eventually Passing the Bar Exam as a Function of Number of Tries


Probability of Passing on Each Try






Number of Tries

Cumulative Probability of Passing


























These model-driven calculations seem to map well to the real world.  For example, Florida Coastal—which admits many students with very low LSAT scores—reports that although its first time bar passage rate is much lower, 93 percent of its graduates eventually pass the bar exam. 

How motivated is a particular law school applicant?  This is something an applicant is likely to know better than a law school admissions officer.  For those with grit and determination, failure is often temporary.  And anecdotally, law graduates have failed bar exams and gone on to have successful careers.

It would be strange if newspapers claimed that those who fail a road test on the first try are doomed to never obtain a drivers license, will never be able to hold down a job, and should never have enrolled in high school in the first place.  But in the world of legal education, members of the press too often make comparably misinformed claims about law students and the bar exam. 

Continue reading

November 3, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Weblogs | Permalink

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.

This isn’t a one-time fluke.  In 2010 and 2011, Flordida Coastal's 3-year Default rates  were 1.6 and 5.2 percent, respectively, compared to much higher national rates of 13.7 and 14.7 percent.

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. 

Continue reading

October 28, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Rankings, Science, Weblogs | Permalink

October 21, 2015

How Long After "Meat Market" Before Candidates Hear from Schools?


A rookie job seeker writes:

A question about the law teaching market, which I suspect will be of interest to a number of candidates who read your Law School Reports blog:  When can we expect to hear from hiring committees we spoke with at AALS?  Do the better schools tend to wait longer to make their calls?  And do schools tend to notify candidates that they *won't* be inviting them for a job talk, or do you only hear from them if they're interested?

If you think this is a worthwhile topic, perhaps you could open a post for comments so that hiring committee members could say what their procedure is.

My impression is that schools will contact the candidates they are most interested in within the first two weeks after the AALS hiring convention, and, more often than not, within the first week.  Schools will often have some candidates "on hold" beyond this period of time:  e.g., because they are reading more work by the candidate, or collecting references, or waiting to see how they fare with their top choices.  So it is quite possible to get call-backs beyond the two-week window.  Schools tend to be much slower in notifying candidates they are no longer in contention (you might not hear for a month or more). 

Schools higher in the "food chain" in general do move at a somewhat more, shall we say, "leisurely" pace, and schools lower in the "food chain" are more likely to have tiers of candidates they remain interested in, on the theory that they are likely to lose their first-round choices.

Those, to repeat, are my impressions, based on a decent amount of anecdotal evidence.  But I invite others to post their impressions and/or information about their school's practices.  No anonymous postings.  Post only once, comments are moderated and may take awhile to appear.

October 21, 2015 in Advice for Academic Job Seekers, Professional Advice | Permalink | Comments (16)

September 01, 2015

Student loan borrowers with the highest debt levels have the lowest default rates (Michael Simkovic)

August 28, 2015

"Timing Law School" in The Washington Post (Michael Simkovic)

August 10, 2015

Newspapers’ negative law school coverage, 2010-2015 (Michael Simkovic)

In a recent column, the New York Times’ Nicholas Kristof confessed, “One of our worst traits in journalism is that when we have a narrative in our minds, we often plug in anecdotes that confirm it.”  The quote is timely, given recent controversy surrounding New York Times’ coverage.

Newspapers tend to emphasize anecdotes over data.  This gives journalists, editors, and their sources tremendous freedom to frame a story.  A few individuals can serve as ostensible examples of a broader phenomenon.  But if those examples are unrepresentative or taken out of context, the news story can be misleading by omission and emphasis.  If you get your information from the newspaper, you might worry more about stabbings and shootings than diet and exercise, but you are roughly 38 times more likely to die from heart disease than from violent crime.

Similar qualitative problems—sensationalism, reliance on extreme and unrepresentative anecdotes, lack of context, and omission of relevant data and peer reviewed research—characterized press coverage of law schools and the legal profession.  (See New York Times; The Wall Street Journal; New York Times again)

Newspapers conflated a generally weak labor market—in which law graduates continued to have substantial earnings and employment advantages over similar bachelor's degree holders (see The Economic Value of a Law Degree; Timing Law SchoolCompared to What? (here and here); Recent Entry Level Outcomes and Growth in Lawyer Employment and Earnings)—with a law-specific problem.  They criticized law schools—and only law schools—for practices that are widespread in higher education and in government. (see competitive scholarships; school-funded jobs, measuring employment / unemployment)   And they uncritically reported research, no matter how flawed, that fit the anti-law school narrative. (see Failing Law Schools' problems with data and citations; a free education as a hypothetical alternative to student loans; and other inapposite comparisons (here, here and here)).

Newspapers' sensationalist law school coverage may have helped their circulation—negative coverage attracts eyeballs—but it mislead students in harmful ways.  Recent research suggests that each year of delaying law school—for example, to wait until unemployment declines—is counterproductive.  Even taking into account the potential benefits of graduating into a better economy, these delaying strategies typically cost the prospective law student more than $30,000 per year because of the high opportunity cost of lower earnings with a bachelor's degree instead of a law degree.  The longer the delay, the higher the cost.

So which newspapers and journalists provided the most negative coverage?  And how has the news slant evolved over time?  For an explanation of methodology, see the footnote at the bottom.*

Net-negative newspapers ranked

The most negative newspapers were the Wall Street journal, the Chicago Tribune, and the New York Times, in that order.  The Wall Street Journal was exceptionally negative—more than 7 times as negative as the average newspaper.  A few newspapers, such as the Orange County Register, were net positive.

Net-negative stories by year

2011 to 2013 were exceptionally negative years, with dramatic reductions in negativity in 2014.

Did negative press coverage cause a decline in law school applications, independent of the events being covered?  Differences in press coverage can move financial markets, according to research exploiting variation in local coverage of identical national events and local trading patterns, so perhaps press coverage can also affect other markets.  (The leaders of Law School Transparency apparently believe that negative press coverage can reduce law school applications.  One of them explained his efforts to pitch negative news stories in specific parts of the country where he thought law school enrollments were too high.) (PDF here)**   

The New York Times and WSJ both went negative early, but the Wall Street Journal remained more negative for a much longer period of time.  Most of the uncredited (no byline) stories in the NY Times and WSJ about law school were negative.  

The WSJ had an unusually deep bench of anti-law school journalists.  By contrast, most newspapers had a few very negative journalists and otherwise a fairly even mix of slightly negative and slightly positive journalists.  The most anti-law school journalist was Ameet Sachdev of the Chicago Tribune, whose coverage was about twice as negative as either David Segal of the New York Times or Jennifer Smith of the Wall Street Journal.

Net negative journalists

Geographically, the hardest hit areas were New York, Illinois (Chicago), and Washington D.C.  (This is counting the New York Times and Wall Street Journal as New York papers).  Ohio was the only state that saw net positive coverage.  

Net negative stories by state

The pattern of coverage does not seem to have much relationship to the strength of the local legal employment market, but rather seems to turn more heavily on idiosyncratic editorial policies at particular newspapers that happen to be headquartered in certain states.  


*  I asked my research assistant (a third year law student) to gather articles about legal education and the legal profession from the top 25 U.S. newspapers by circulation for which data was available from Proquest back to at least 2010.  My RA then rated each article as "positive", "negative" or "neutral" depending on whether the article would have made him more or less likely to attend law school if he had read it while deciding.  For each newspaper or journalist, the number of positive articles was subtracted from the number of negative articles to arrive at a net-negative count, and newspapers were ranked on this metric.  There are some obvious limitations of this approach--it doesn't measure how positive or negative each article is, it assumes that one positive article can balance out one negative article (negative articles probably have a bigger impact than positive ones), it relies on the opinion of a single third year law student.  It also lacks context—perhaps newspaper coverage about all topics is generally negative.  Perhaps newspaper coverage of all higher education was negative during this period.  Nevertheless, this approach may provide some useful insights.  All editions of the Wall Street Journal and New York Times tracked by Proquest are combined, but identical articles published in different editions are counted only once.  The WSJ blog is included as part of the WSJ.

** Contrary to popular belief, there is little evidence that larger law school graduating class sizes predict worse outcomes for law school graduates, nor is there evidence that smaller graduating class sizes predict better outcomes.  See (Timing Law School and a summary).  In a recent robustness check considering many alternative definitions of cohort size (but not yet reported in the draft paper), McIntyre and Simkovic continued to find no evidence that smaller graduating cohorts predict higher earnings premiums for recent graduates.

August 10, 2015 in Guest Blogger: Michael Simkovic, Legal Profession, Of Academic Interest, Professional Advice, Science, Student Advice, Weblogs | Permalink

August 05, 2015

Do increases in the cost of college pay for themselves? (Michael Simkovic)

College costs more than it used to.  It's also worth a lot more than it used to be worth.  The increase in value of a college education exceeds the increase in the cost of a college education by a very wide margin.

How much has the cost of college actually increased?  It may be less than you think.   

According to the Department of Education and the National Center for Education Statistics, at 4 year institutions, average college tuition is up about $1,900 in real (inflation-adjusted) terms in the five years from 2008-09 ($21,996) to 2012-13 ($23,872).  This is an average increase of less than $500 per year. The real increase during this 5-year period has been higher at public colleges ($2,100) than at private non-profit and for-profit colleges ($1,400).  

That's before taking into account scholarships and grants.  

After subtracting scholarship and grants, according to the College Board, real net tuition and fees at 4 year private non-profit institutions have actually gone down.  Real net tuition and fees increased at 4-year public institutions over the last 6 years by about $1,000, or about $170 per year.

So how much would the value of higher education need to increase to justify this increase in cost?  The increases at public institutions come to around $5,000 more for a bachelor's degree.* 

That extra $5,000 will pay for itself if 4-year colleges spend the extra money in a way that boosts their former students' real annual earnings relative to high school graduates by $220.**  When we take into account increases in college completion rates over time and longer life expectancy, the required increase in annual earnings could be even lower.

So yes, improvements in the quality of education can easily pay for increases in the costs of education.   If the rising earnings premiums and increase in completion rates within race over the last three decades are caused by increased college expenditures, tens of thousands of dollars in increased expenditures per bachelor's degree have more than paid for themselves so far, and by a very wide margin.***

Slide1 Slide2

The labor economics literature generally suggests that the marginal rate of return to higher education is high, whether the "margin" is defined as upgrading individual education from high school to 4 years, from 2 years to a bachelor's, or from a bachelor's to an advanced degree.  Within a given level of education and category of institution, those with more resources can generally do more to boost their students' earnings.  A high marginal rate of return to education means we should invest more in higher education if we want the economy to grow faster, and invest less in things with lower marginal rates of return. (See here).

Investing more in education without increasing taxes means that tuition will likely increase.  When we consider the benefits education provides, more investment in education is a good thing.  When we consider our political system's allergic reaction to tax increases, increasing tuition may be the only realistic way to get there.  

* Multiplying $1,000 by 5 years (assuming it takes 5 years to complete a bachelor's degree), we get an increase of $5,000 at public 4-year institutions (and a decline in cost at private institutions).  For an individual, the aggregate increase in real net-tuition during 5 years of college might be less.  The idea of the estimate is to compare the aggregate cost of college for individuals who completed college 5 years apart.

** This assumes a 40 year career and nominal (real) discount rate of 6 (3) percent.  The $220 figure is before taxes and represents the aggregate social benefit to the government as tax collector and to the graduate, who will earn higher wages.  If the entire cost is placed on the student, assuming 35 percent tax rates on the earnings premium, real annual earnings premiums would need to increase by $340 to make the student better off after taxes.

*** The differences in earnings in the column charts are raw differences by level of education rather than estimates of causal differences.  However, the change in the raw differences over time may provide a good proxy for the change in the causal earnings premium over time.

August 5, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Professional Advice, Science, Student Advice, Web/Tech, Weblogs | Permalink

August 03, 2015

Public versus Private Student Loans (Michael Simkovic)

John Brooks (Georgetown) and Jonathan Glater (UC Irvine) argue in today’s Los Angeles Times that the Federal Government should raise the borrowing limit on federal student loans so that college students can borrow more from the government and less from private lenders.*

“Banks and other lenders offer so-called private loans, which often have higher interest rates and less flexible repayment terms [than Federal Student loans]. . . Private student loans are usually much more costly for students; a government report from 2012 found interest rates in excess of 16%, and nothing has improved since then. By contrast, the rate on the most widely used federal student loan currently is 4.29%.

[B]ecause federal loan caps have not budged even as tuition has increased, private lending is rising . . . borrowing is going to happen in some form anyway. This is not about whether college is a good investment (although it is), it is about whether students should be forced to take out loans that put them at greater risk of repayment difficulty and possible default.”

Brooks and Glater have effectively framed the student loan debate.  Federal Student loan policy is not a question of how much students should be allowed to borrow, but rather only a question of who they should borrow from, how much they should pay, and when they should pay.  Any government imposed loan limit is the point at which the borrowers will shift to expensive private sources of credit. 

In other words, private student lenders have a strong incentive to scale back public student loan programs.  The less available and less generous public programs become, the larger the market opportunity for private lenders.  (It is possible that higher or lower interest rates could affect the amount that students ultimately borrow—i.e., the quantity of credit demanded may respond to the price of credit—but Brooks and Glater are clearly correct that a federal student loan limit is not a hard cap on borrowing). 

The idea that increases in federal student loan availability or other public higher education funding programs will increase tuition is sometimes called the “Bennett Hypothesis,” and those who wish to scale back public investment in higher education frequently tout it.  However, there is little evidence in the peer-reviewed literature that increases in the availability of public student loans drive up tuition net of scholarships and grants at non-profit and public institutions of higher education (there is some evidence that this might be the case at for-profit trade schools).  The evidence of harm to students is even slimmer when one considers the potential benefits of tuition increases, which can fund better instruction, better administrative support, more modern facilities, and more generous scholarships, and the possible role of public funding in increasing enrollment and completion rates. By contrast, higher interest payments will generally only benefit student lenders, unless higher rates convey useful information about risk to which students respond. For a review of the literature, see here and here.**

Those advocating scaling back federal student loans argue that it is theoretically possible that income based repayment with debt forgiveness could lead to an explosion of tuition growth because, for some students, the marginal cost of additional borrowing will be zero and these students will not be price sensitive.  (See here

However, federal student loan critics have not shown that the introduction of IBR with debt forgiveness, or changes to the terms of these programs, has actually affected the rate of tuition increase net scholarships and grants.  (Indeed, tuition increases, less scholarship, have been relatively mild in recent years).  And this is not surprising—most students do not know in advance whether they will need or qualify for debt forgiveness, and will not know for sure until 10 or 20 years after they graduate.  Most of them will likely ultimately repay their loans in full.  Ex ante and in expectation—when they are shopping for a college or professional school—student borrowers do not face zero marginal cost. 

Similarly, think tank arguments about high costs to taxpayers from income-based repayment and debt forgiveness rely on dubious assumptions such as:

  1. Starting salaries for recent college and professional school graduates will grow at an extremely low rate (much lower than one could reasonably forecast after examining the historical data)
  2. Every single dollar of debt forgiveness is a cost of the debt forgiveness program, because if not for debt forgiveness programs, no borrower would ever fail to repay their loans and the government would collect every last dollar on time
  3. A loan in which the government recoups partial payments with a present value exceeding the amount of the original loan is not a profitable loan; it’s actually a loss
  4. The cost of lending $100,000 and receiving partial payments over the next 10 or 20 years is somehow much higher to the government than the cost of giving away $100,000 today and receiving no payments in return (this is related to assumptions 2 and 3 above, as well as  inappropriate uses of discount rates and growth rates).
  5. Income based repayment plans have no impact on enrollment and provide no benefits to the government in the form of a more educated workforce that pays higher taxes and depends less on taxpayer funded social services

* Brooks and Glater also praise income based repayment plans as a progressive-income-tax-like system of higher education finance in which those who earn more pay more.  These arguments will be familiar to those who have followed Brooks and Glater’s research. (here  and here)

**The Wall Street Journal publicized a recent working paper that claims to have found a possible link between federal student loan availability and tuition growth at undergraduate institutions. While some of the nuance may not have been reflected in the WSJ's coverage, the authors of that working paper note that: (1) They do not have good data that can distinguish an increase in borrowing from a shift between public and private loans; (2) They are only looking at sticker tuition, not actual tuition paid less scholarship and grants; (3) There are many ways in which public funding can benefit students even if it does increase sticker tuition; and their findings do not demonstrate that public funding is a harmful policy; (4) Variables omitted from their analyses could be driving tuition increases and introduction of additional controls dramatically changes their results.

August 3, 2015 in Guest Blogger: Michael Simkovic, Of Academic Interest, Professional Advice, Science, Student Advice, Weblogs | Permalink