Friday, May 01, 2015 Questioning the Law School Debt Narrative Given the strong feelings that discussions about the value of legal education triggers, I have been reluctant to blog about the so-called law school scam. But a story about a recent law school grad and his debt that is making rounds in the national media has me truly puzzled. This story, which has been picked up by the New York Times, among others, reports about a 2010 graduate from Ohio State’s law school who graduated with $ 328,000 in student debt. As someone who financed her own education through a combination of student loans, work study, and other financial aid, I am puzzled how this individual accumulated so much debt.
A quick search of Ohio State’s webpage tells me that an out-of-state student should expect tuition and other expenses to total just under $ 65K a year, and so three years of law school education and other expenses should result in approximately $ 195,000 in debt. Yet media outlets are repeating this $ 328,000 number without questioning why a student would incurred an amount of educational debt that is so much higher than the cost of attending law school for three years. The New York Times, for example, reports that this particular law school graduate’s $ 328,000 debt “includes some undergraduate loans,” yet the story is clearly focused on the high cost of legal education. But, in light of the information that is readily available from Ohio State, one presumes that this student’s debt from law school should make up no more than 60% of this overall educational debt.
Don’t get me wrong, legal education is expensive. At many schools it is probably more expensive than it needs to be. And I can’t imagine how devastating it must be to incur significant debt to obtain a law degree, and then find yourself unable to obtain employment as a lawyer. But I really wish that the media’s reporting on this issue were more nuanced. Many reporters seem so devoted to the narrative that legal education is not worth the sticker price, that their reporting on this issue no longer seems objective.
Comments Might they be including deferred interest payments?
Posted by: BDG | May 1, 2015 12:43:20 PM
No clue, BDG. If so, they certainly didn't mention it. Nor do I think that's what an average NYT reader would assume.
Posted by: carissa | May 1, 2015 12:45:27 PM
If I had to guess, it's some combination of UG + Law + interest + penalties/late fees. Possible that he had some private loans if he is a 2010 JD too, which apparently carries it's own set of problems. Anyway, the number is out there, but plausible. There's usually someone at the extreme end of the distribution.
Posted by: The Most Interesting Breh in the World | May 1, 2015 1:00:12 PM
It is a lot but not surprising – 20 years ago I had classmates who went to a top law school and were already $ 100k in debt. Borrow for undergraduate and perhaps do a masters degree or PhD and then go to law school and $ 328k including interest is pretty easy. In fact some people use the graduate/law school deferral as a strategy with dealing with an already high debt.
Posted by: Lurker | May 1, 2015 1:03:11 PM
My domestic partner was 65,000 in student debt when she graduated from journalism school.
She defaulted and the penalties alone were 15% of the principal, plus the interest (the juice is always running). This was with private lenders before IBR.
65,000 turned into 100,000 real quick.
Posted by: terry malloy | May 1, 2015 1:03:35 PM
Oh, an it is infamous that law schools are low-balling the cost of living in law schools on their estimates of the CoA – as well as doing things like counting 8-9 months rent because of the summer, ignoring the fact that landlords lease for 12 months. The cost of living component of the stated CoA is usually around ⅔ to ½ of the actual for a single person.
Posted by: Lurker | May 1, 2015 1:05:54 PM
To be clear — I do not doubt that this individual graduated from law school with $ 328,000 in debt. I am simply questioning whether this is an appropriate individual to profile in a story about the cost/benefit analysis associated with attending law school.
Posted by: carissa | May 1, 2015 1:06:22 PM
A lot of people in legal academia don't have a good sense of how fast debt piles up. An out of state 1L student at OSU paying sticker this fall and debt financing the amount won't graduate with $ 195K in debt: he or she will graduate with $ 241K in debt, per Georgetown's very useful online calculator, which assumes a 3.5% annual COA increase, and which, crucially, takes into account interest accrual, and origination fees.
Also, the estimated COA leaves out nine months of living expenses between matriculation and taking the bar three years later. It also doesn't include the cost of a bar review course, nor does it include other educational debt, or consumer debt, etc.
It's true that $ 300K+ in debt is still an outlier, but the debt-financed sticker cost is already over $ 300K at a few schools (Columbia and NYU are at $ 317K), and $ 250K debt-financed sticker is commonplace.
Posted by: Paul Campos | May 1, 2015 1:21:05 PM
carissa -
No but most of those criticising law schools use average and median debt levels and then note that there is often additional pre-law school debt. Journalists tend to latch onto the outliers, a bit like latching onto one talk at the Cato institute, because it is much more dramatic.
However, if you are going to discuss this, it would be better to discuss the actual data. So USN&WR reports the average law student indebtedness – for those members of the Ohio State Law Class of 2010 who incurred debt for law school – as $ 84,408 – that would be the amount borrowed without interest and undergraduate debt. Clearly no where near $ 328,000 but not ideal either . (and probably not a true figure, it was 2010, it was USN&WR and the scandals over cooked data had not broken.) Last puts full cost of attendance at $ 188,385 for a non resident, so $ 180-200,000 in debt would not be unusual.
Posted by: Lurker | May 1, 2015 1:32:50 PM
I don't know what "a lot of people in legal academia" do or do not have good sense about. The apparent inconsistency between the amount of educational debt and the school's estimate for attending law school struck me as an important part of the story for the reporter to not mention.
I remember in my own days of taking out student loans to finance my law school education that, in order to live within the cost of living estimates provided by the law school, I had to live in a modest apartment and stick to a budget. It certainly made law school less fun, but it was not overwhelmingly difficult to do. Perhaps law schools have changed how good they are at making those estimates, or maybe some schools are better than others. But if I were reporting on the amount of debt that a person accumulates while in law school, I would spend more time trying to understand the source of that debt. I don't see how the Georgetown calculator tells us anything about a student at Ohio State. I just used the calculator, and it gave me the tuition and room & board costs of attending Georgetown. I don't know much about Columbus, but I'm assuming it is less expensive to live there than it is to live in Northwest DC.
Posted by: carissa | May 1, 2015 1:33:27 PM
I am surprised at the backlash to this post–it seems fairly obvious to me that this student has far more debt that would be expected considering the presentation of this story. It seems to me that either the student is grossly financially irresponsible or the news media simply is not portraying the facts in an honest light.
This student attended Liberty University for his undergraduate education. Liberty University is somewhat expensive, costing roughly $ 30,000 a year for tuition and housing. This totals $ 120,000 for a four year education, not including other miscellaneous expenses. However the New York Times says that "some" of his debt is from undergraduate loans–use of the word "some" indicates a small portion in my eyes, certainly nowhere near $ 120,000. Either his undergraduate loans do not total much of his debt, in which case he is incredibly financially irresponsible and that fact has been ignored. Or, if so much of his loans are from undergraduate, that fact has been deliberately left out. Either way, the article deserves serious critique.
I'm with you, these articles need far more detail and nuance if they want to prove a point about legal education just not being worth it.
Posted by: CJR | May 1, 2015 2:26:57 PM
"I don't see how the Georgetown calculator tells us anything about a student at Ohio State. I just used the calculator, and it gave me the tuition and room & board costs of attending Georgetown."
Carissa, the calculator lets you enter the total cost of attendance; the Georgetown COA is a changeable field. You can find the TCA for OSU here:
Posted by: twbb | May 1, 2015 2:39:15 PM
I see — it's the beta calculator, not the calculator that Georgetown has on its financial aid site. So I've typed in the relevant OSU numbers, and it comes to less than $ 240,000. That still leaves almost $ 90,000 unaccounted for. That is more than 30% of the graduate's total educational debt . . . (And for a student who graduated in 2010 there would have been an even bigger discrepancy, assuming a +3.5% increase each academic year.)
Posted by: carissa | May 1, 2015 2:54:43 PM
CJR:
Perhaps you have heard the aphorism "[w]hen a dog bites a man, that is not news, because it happens so often. But if a man bites a dog, that is news."
Well when a law student graduates with an unmanageable debt, indeed any graduate student, that is not news because it happens so often .. so journalists look for extremes.
Indeed the scambloggers in the early days of the debate were afflicted by an attention seeking individual known as J.D. PainterGuy (John Koch) who was genuinely an outlier – he had gone to a truly atrocious law school in New York (Touro), with singularly awful outcomes, but had make really awful choices. Yet in every story about the problems with law schools, J.D. Painter showed up as the epitome of students who had been harshly treated by law schools – see for example http://www.abajournal.com/news/article/law_grads_ballooning_student_debt_will_exceed_1.5m_by_the_time_he_retires/ Eventually, it became apparent to all that JD PainterGuy was undermining the debate, in part because he presented himself as the typical person for whom law school had failed. Admittedly he might be an indictment of Touro, but he was atypical (and inter alia, by all accounts Campos tried to get him some help.)
One of the problems of the law school debate is that outliers are presented as the norm, be they Harvard or Yale graduates who get a job at Cravath, or JD PainterGuy. The typical graduate, the middle 80% are the ones that we really need to consider. They need to be the core of any analysis, not the T-5 graduate going to BigLaw or a Federal Clerkship.
And while we are at it, it would be nice if at least some law school professors would agree that the bottom fishing end of the law school system should without question close their doors. One JD PainterGuy was enough, dozens is ludicrous.
Posted by: Lurker | May 1, 2015 3:00:44 PM
Is the problem that they didn't disclose that this bro's situation was not typical? I mean, I thought that was kind of the whole point of mentioning him, i.e., as an outlier of sorts. Just how I read it.
Posted by: The Most Interesting Breh in the World | May 1, 2015 3:02:25 PM
I graduated from law school in 2011 with $ 160,000.00 in law school debt. I have been on IBR since that time, and the last time I checked my balance (which I dont do often due to the minor heart attack it gives me) is over $ 200,000. My monthly IBR payments have never once touched the principal. That's how fast the debt grows.
Posted by: Disney Store Esq. | May 1, 2015 3:03:59 PM
Hmm. So we wish that that the New York Times (or any major media source, for that matter) would exhibit more reasoned analysis and nuance with respect to a controversial topic? Nothing new there. I am not trying to troll or hijack a thread, but this is almost always the case, especially for those who advocate an unpopular position.
I actually graduated from law school in 2010, and the $ 328k number seems very high to me. However, debt in excess of $ 200k (just from law school) was not uncommon for people in my class, even though my law school was "only" about half as expensive as the $ 65k per year for the OSU tuition. As others have noted, most students also need to take loans to cover the cost of living in a big city, fees for bar exam(s), and bar prep.
Part of me doesn't have any sympathy for the student who simply goes to the highest ranked law school that accepts them. I took a much different tack when I chose my school, and I rejected any school that accepted me but would not give me a scholarship. At some point, people who are 22 years old (or older!) need to understand that it is real money.
The other part of me still finds the cost of legal education outrageous, and the strategies that law schools are using to be downright deceptive. Even if only $ 240k of the $ 328k is from law school, it begs the question of whether law school should cost $ 240k.
Posted by: TJM | May 1, 2015 3:12:37 PM
It's interesting that so many people are discussing the high debt figure from this article. The reporter did cite the average amounts borrowed by 2010 graduates of public ($ 77,364) and private ($ 112,007) law schools; in fact, she noted them before going on to the Shirkey story. Why didn't those averages make readers ignore the Shirkey debt as an outlier?
The answer lies in human psychology. Big numbers are memorable, and so are numbers attached to an individual story. So most readers come away from the story remembering Shirkey's debt, but not the much lower averages. Be honest: how many of you remembered that the averages were in the story?
The same principles apply to law school applicants. When law schools tell a story about a single grad earning a high salary, applicants are much more likely to remember that figure than to recall the average salaries for that school. This is one reason why LST, the ABA, and others have worked so hard to make the full range of job outcomes more apparent to potential students. It's very hard to fight the natural tendency to focus on big numbers and/or numbers attached to individual stories.
Food for thought. And, in a little bit, some more observations about the debt figure here.
Posted by: Deborah Merritt | May 1, 2015 6:58:50 PM
Ah but DJM – and yes I know that you are aware of this fact, indeed that you have discussed this as important – average means many things – median, mode, mean at least. And each of these averages matter – because there is a real group of law students that incur no debt, so the average=mean fails to tell you about the proportion of seriously indebted. Similarly median tells you that half are more indebted than the others, but do you know how much over the median line the worst owe, or how many at each debt level. And mode – well hmmm
Just as the outlier on the high end tells us less than the New York Times thinks, so does discounting all of the numbers. Mean, median and mode tell you part of the facts.
Posted by: Lurker | May 1, 2015 7:15:39 PM
Deborah is entirely correct that the NY Times story included the average debt figures. (Notably, the ABA story — which is the first hyperlink in the blog post — did not include those numbers & included the $ 328K number in its headline.) That portion of the Times article was one of several reasons that prompted me to check the OSU webpage for their tuition and cost of living figures. But the Times story (and to a greater extent, the ABA story) don't dig into the 328K number at all. And they certainly don't offer any information of the costs associated with attending OSU.
TJM — I would like more nuance and balance in a news story about the cost of legal education. I'd like more nuance and balance in reporting, period. But I completely agree with you that any discussion of that topic should ask whether law schools should charge $ 195K for a law degree and whether students should be asked to pay $ 240K for the degree. And to be quite clear, I consider those to be two separate questions.
Posted by: carissa | May 1, 2015 8:42:13 PM
TJM- re this comment you made:
"Part of me doesn't have any sympathy for the student who simply goes to the highest ranked law school that accepts them. I took a much different tack when I chose my school, and I rejected any school that accepted me but would not give me a scholarship. At some point, people who are 22 years old (or older!) need to understand that it is real money."
I agree and I took a similar approach, but (a) my lordy I still ended up owing a metric ton of money, and (b) pretty much every older person giving me advice on how to approach the issue was going with the "Absolutely go to the highest ranked school, regardless of cost" method of choosing where to attend.
Posted by: The Most Interesting Breh in the World | May 1, 2015 9:04:46 PM
Lurker, I agree with you about averages. In fact, I had planned to mention that in this follow up, so here goes:
Statements about educational debt are confusing for several reasons. First, law schools only know the "amount borrowed" by each of their graduates; they report the percentage of grads who borrowed and (for that percentage), the mean amount borrowed. At some point, schools and media began referring to this number as the average amount "owed at graduation." But it wasn't: the figure didn't include accumulated interest. So the average amount owed at graduation is higher (often substantially higher) than the numbers you see in ABA reports, US News, and elsewhere.
Second, as Lurker suggests, the mean (for those who borrowed) can give a misleading impression at some schools. There are some students who are able to finance most of their legal education without loans but who nonetheless borrow a modest amount (say $ 10,000) to tide them over the first year or through the bar exam. These amounts bring down the average.
Finally, some thoughts about the particular amount owed by Hyatt Shirkey. I suspect he told the reporter the amount that he currently owes, not the amount that he originally borrowed. Her reference to "accumulated" debt is somewhat ambiguous for a 2010 grad in 2015.
I know Hyatt Shirkey–he was a student in my clinic as well as a research assistant. I know nothing about his debt or finances, but he never gave me the impression of living high or of being financially irresponsible. (Hyatt, by the way, was not a member of my research population; the reporter found him through other means.)
I can't speak to Hyatt's debt, since I don't know any of those details. But I can say this: If there ever was a class that bought high, it was the Class of 2010. They entered law school in 2007, when all of us wore rose-colored glasses. Our non-resident tuition was about $ 40,000 a year and students were willing to pay that; we gave fewer and smaller scholarships back then. (In contrast, Carissa, Yale's tuition was $ 29,800 when you graduated in 2002. Tuition just went up and up during the years before 2010.)
Most students needed at least $ 15,000 for reasonable living expenses in 2007-2010; that was just 150% of the poverty line. They could earn some money during the summers and school year, but the amounts were limited outside of BigLaw. Some students worked for free (and still do) in order to make connections that might lead to a job. Assume about $ 5000 per year income, and that leaves 10,000 per year that a student might have borrowed for living expenses.
Those figures yield $ 150,000 borrowed by graduation. But by November, when the student entered repayment, the debt would have already grown to $ 178,000 with accumulated interest–without counting any college debt.
For students who entered IBR, there was another danger: negative amortization. If salaries stay low for several years (or the grad experiences periods of unemployment), the loan balance can grow very fast.
Again, I can't speak to Hyatt's situation and I suspect his current balance (if that's what the figure reflects) is near the high end for public school grads from that era. But I suspect there are quite a number of public-school graduates from the Class of 2010 who owed $ 178,000 when they entered repayment in November 2010. And some of them (as well as private school grads who might have owed even more) are experiencing negative amortization. It's very troubling for them and for us as a profession.
Posted by: Deborah Merritt | May 1, 2015 9:17:23 PM
Carissa, that's a good point about the ABA Journal. When my paper was first posted on SSRN, they dug through it to find a brief reference to a small percentage of grads working in non-professional positions. As real examples, I mentioned in the paper lingerie sales and pest control. The ABA headline was: "25% of Ohio's 2010 bar admittees aren't practicing law; some work in pest control, lingerie sales." There was an accompanying photo of a fancy mouse (wearing lingerie?) staring at a mousetrap. Do you think the ABA Journal is trying to outdo Above the Law? An interesting cultural trend.
Posted by: Deborah Merritt | May 1, 2015 9:28:36 PM
Deborah: "The ABA headline was: "25% of Ohio's 2010 bar admittees aren't practicing law; some work in pest control, lingerie sales." There was an accompanying photo of a fancy mouse (wearing lingerie?) staring at a mousetrap. Do you think the ABA Journal is trying to outdo Above the Law? An interesting cultural trend."
My personal feeling is that the media likes to make fun of stories which are uncomfortable (to those in power). The outcomes from 75% or more of ABA accredited law schools are rather uncomfortable; making fun of them lessens the impact.
Posted by: Barry | May 1, 2015 9:56:22 PM
DJM writes:
"But I can say this: If there ever was a class that bought high, it was the Class of 2010. They entered law school in 2007, when all of us wore rose-colored glasses."
Careful, DJM, this sound perilously close to an admission that law schools were not at fault for failing to predict the collapse that was to come.
Posted by: Anon | May 1, 2015 11:09:10 PM
Carissa,
"I remember in my own days of taking out student loans to finance my law school education that, in order to live within the cost of living estimates provided by the law school, I had to live in a modest apartment and stick to a budget. It certainly made law school less fun, but it was not overwhelmingly difficult to do."
The times, they are a'changin.
NYU puts room and board at $ 23,000. Try living in a modest apartment in New York City on that budget. The cheapest dorm room is nearly $ 1,500 a month. Some people accuse schools of low-balling their student budgets, but I don't know about that… I remember working as a research assistant at NYU and earning less per month (pre tax) than what the student budget called for, so I say they're high balling it! (Or else the school is just ridiculously stingy with its student employees.)
American University puts it at $ 15,686. That's significantly less than you'd have if working minimum wage. After paying for parking on campus, there's not going to be much left over to pay your rent with. You certainly won't be able to afford the 89 cent bananas at the Eagle's Nest (you'll have to walk all the way to Whole Foods where they're 89 cents per pound, not per nanner. A banana weighs more than a pound, right?)
Now, I don't know a whole lot about how much it costs to live at Ohio State, but the school says it takes just $ 10,066. Maybe that pays for a modest apartment? Maybe that isn't overwhelmingly difficult to live on? I don't know. What I do know is that it's $ 1,600 less than what OSU says an undergrad needs to live on. I also know it's below the poverty line.
Posted by: Derek Tokaz | May 2, 2015 2:45:56 AM
What nuances escaped the Times reporter that would have strengthened an argument for paying sticker price at any law school?
Posted by: Morse Code for J | May 2, 2015 11:06:59 AM
Anon, of course law schools couldn't predict the collapse–I've never said we should have. But we *did* make large tuition increases even after the recession hit and our graduates were losing jobs. And, as I recall, we were pretty smug about it. The theory was that students would flock to law school as the recession closed other avenues to them, so we could raise tuition prices.
During those years, we also kept remarkably outdated employment statistics on our websites. Even now, these stats are a year out of date but back then two years was more typical. In 2009, as law firms were shedding lawyers, you would find stats from 2007. And in 2010, as our own grads were desperately looking for jobs, you would find stats from 2008.
The Class of 2010 wasn't the only one that bought high and got low; the same happened to the classes of 2011, 2012, and 2013. The Class of 2013, the largest one ever enrolled, entered law school in 2010. We in the academy knew what was happening, but the students largely didn't. College students don't actually read the NY Times all that much–and that's not a slam at the Millennials. I grew up with the Times in my home and went to an Ivy League college. But read the Times? Who did that?
Anyway, the first of these points (raising tuition) could be called good business sense: we knew that demand was increasing for our product, and we could raise prices. That's our spirit in higher education today, and a certain amount of business-like approach is a good thing. But law is also a profession, and we are an integral part of that profession. It seems we should have a somewhat different attitude toward future members of our profession, not just treat them as consumers to be charged the highest price the market will bear. Otherwise, what does it mean to be a profession? That's not a rhetorical question, it's real. Seriously, does being a profession imply certain obligations to educate new members of the group? If so, the obligation obviously extends to practitioners as well as educators. Have any of us been taking these professional ties as seriously as we should?
Posted by: Deborah Merritt | May 2, 2015 2:10:00 PM
If, as TJM suggests, students are choosing between a wide range of law schools at a wide range of prices, doesn’t that complicate the lawschoolsbad narrative. Doesnt it matter that Ohio State student could have gone to law school for much less – maybe even free — at a lesser ranked school, but chose to pay more to go to OSU full price? If the price of law school is the problem, can't it be fixed by going to a lowranked school at a steep effective discount?
Posted by: Ignoring Price Differential? | May 2, 2015 2:28:55 PM
Ignoring Price Differential?
Actually, until recently there was very little price variation at private law schools and for the out-of-state state. Pretty well every school charges within about 10% plus or minus what all the other did – so HarvardYale might be £50k, but private schools ranked 100 below them would be $ 40-45k or even the same price within a dollar or two. That is of course a huge aspect of the problem – graduates of the T-5 have a strong likelihood of getting a job paying $ 100-160k p.a., in the T-14 a good possibility (say up to 50%-70%), but outside the T-20 the likelihood of such a job drops dramatically, to maybe 5% or worse. So the problem is that many law schools are charging vastly more than the earning potential that a JD from that law school will secure.
Posted by: Lurker | May 2, 2015 2:51:30 PM
@Ignoring Price Differential/2:28 p.m.:
It can be "fixed" for somebody who gets offered a full ride at a school that meets their needs for the market in which they want to work. This solution falls short for anybody else, particularly the two or three others who are paying sticker price to make up for the 1L with high numbers and better job prospects than they will have.
This also ignores the incredibly high absolute cost of law schools generally. Per LST, there are two schools where, if you borrow the entire COA for three years, you will owe less than $ 100k at graduation. Is it really so comforting to owe a mere $ 145k out of the University of Georgia instead of $ 285k out of Emory, when you're a personal injury or insurance defense associate making $ 60k with loads of underemployed competition keeping salaries down? Or when you can't actually find a big boy job in the law to pay off that debt?
It goes without saying that I don't have a pat answer for what law schools should do, but I don't think it's bad advice to avoid any situation where you will owe twice or more your starting salary in debt appreciating at 7%+.
Posted by: Morse Code for J | May 2, 2015 3:03:04 PM
I thought law schools were steeply discounting nominal tuition based on entering credentials. A student who goes to Ohio State for 100% nominal tuition could go to Case Western for 60%, Dayton for 30%, etc. Or is that not right?
Posted by: Ignoring Price Differential? | May 2, 2015 3:42:42 PM
Ignoring Price Differential?
First, discounting is a new phenomenon – it only became prevalent in the last 2 years or so, as law schools tried to buy better students to keep their data up. Second, no one really knows how much discounting is going on. Third, as Morse Code for J points out, in any school the discounting is for the better credentialed applicant – who has better employment prospects – subsidised by the weaker, with poorer prospects.
Posted by: Lurker | May 2, 2015 3:59:33 PM
