Thinking About Going to Law School? Read ABA's Report on the Impact of Student Debt on Young Lawyers

 If you are thinking about going to law school, you should read a recent report titled "Student Debt: The Holistic Impact on Today's Young Lawyers."

According to the ABA's Young Lawyers Division, 90 percent of young lawyers who responded to an ABA survey said they had taken out student loans to finance their legal education. On average, these young attorneys reported taking on $108,000 in student debt.

The debt level for young Black lawyers was even higher--on average, young African American attorneys had accumulated student debt totaling more than $200,000.

Did any of these young lawyers feel regret about their indebtedness? You bet. 

Ninety percent of the respondents said that "their debt impacted their advancement toward major life milestones, and a majority of borrowers said they are anxious, stressed, regretful or guilty due to their loan debt" (as summarized by Insider Higher Ed's Alexis Gravely).

Did these young lawyers feel like they got good value for their law school tuition? Less than half (47 percent) said that their legal education was worth the cost.

How many respondents would still go to law school if they had the opportunity to live their lives over? Only about 6 in 10.  And only a little more than half of the lawyers surveyed (55 percent) said they would attend the same law school.

 In fact, more than half of the survey respondents who were dissatisfied with their law school said they wished they had chosen a school that charged lower tuition. About three out of ten said they wished they had chosen a school located in a better job market.

In essence, the ABA uncovered a high level of regret and dissatisfaction among young lawyers, feelings associated with their student debt.

Does the ABA have any suggestions for solving the problems that were identified by their survey? Not really. 

Here are the ABA's recommendations, which are mostly bullshit:

• "Expand access to and awareness of, free financial and mental health resources for recent law graduates . . ." In other words, free psychiatrists and debt counselors!

• "Continue to lead, sponsor, and support initiatives that holistically foster financial wellness and professional development of young lawyers."  I have no idea what that means.

• "Improve the Public Service Loan Forgiveness Program . . ."  Lots of luck!  

• "Improve financial literacy and awareness of the legal job market and the cost of law school attendance . . . ." In other words, law students should wise up.

• "Reform the federal student aid programs . . . ." Again, lots of luck.

The ABA had some more vacuous suggestions, but I won't bore you with them.

Note, however, the ABA did not advocate shutting down all the second- and third-tier law schools that are charging their students out the butt for their law degrees and then turning them out into a lousy job market.

Nor did the ABA advocate lowering law-school tuition rates, which are north of $50,000 a year at many schools.

So--thanks for nothing, ABA.

Nystrand v. Kingdom of Sweden: Another underemployed lawyer seeks bankruptcy relief

A common saying when I was young (in the last century) was the old adage that lawyers are people who wish to make a lot of money but are risk-averse. 

That observation certainly rang true when I went to law school in the 1970s. I graduated from the University of Texas School of Law with a class of 500 students, and nearly all of us found decent jobs as lawyers.

Even better, my classmates and I finished law school with little or no debt. Tuition was only $500 a semester. Working part-time as a law clerk for the Texas Attorney General's Office, I avoided student loans. I started my legal career debt-free, and  I quickly found a good job practicing law.

But law school tuition has shot up dramatically since the days I went to law school. Tuition at UT's School of Law is now $36,000 for in-state students--36 times what I paid. 

And the job market for lawyers is terrible. Many people now leave law school with enormous debt and little prospect of finding employment in their field.

And this brings me to the case of Nystrand v. Kingdom of Sweden, filed last spring in a Tallahassee bankruptcy court. 

Anneli Nystrand, a Swedish immigrant, graduated from the University of Miami School of Law in 1995. In my opinion, she did everything right. 

Nystrand attended a respectable law school and paid off her student loans, although it took her 15 years. She passed the Florida bar exam and landed a job with the Florida Department of Banking and Finance, probably a pretty good gig.

Unfortunately, as the years rolled by, Ms. Nystrand's financial situation deteriorated.  In 2013-2014, approximately 18 years after graduating from law school, she was on the job market. Although she applied for more than 200 attorney positions, she did not get a single interview.

In 2016-2017, she found a law job that paid only $39,000 a year. In 2017-2018, she worked for a law firm and made $50,000 a year.

In 2019--more than 20 years after graduating from law school-- Ms. Nystrand began accepting court-assigned cases for a flat fee. If she took a juvenile delinquency client, for example, she only received $377, which is less than the hourly rate of a corporate lawyer in a top-flight firm. 

Her total income for 2019 was only $20,000. In 2020, Nystrand did a little better, earning $46,000 before deducting expenses.

In April of this year, Ms. Nystrand filed an adversary complaint in a Florida bankruptcy court against the Kingdom of Sweden, seeking to discharge student loans owed to that Scandanavian country.

I have no idea what that is about. Nystrand's complaint does not state the amount of the debt or how it was incurred.  

Nevertheless, I am on Ms. Nystrand's side. I hope she is successful in clearing her debt to Sweden.  

Anneli Nystrand is one among hundreds of thousands of underemployed or unemployed attorneys who left law school with enormous debt. Now they are trying to build their careers in a soft job market--particularly for lawyers who attended second- or third-tier law schools. 

Florida has 11 law schools--far too many. Ms. Nystrand is forced to compete in a job market for attorneys saturated with people looking for work. 

All these unemployed or underemployed lawyers deserve reasonable access to bankruptcy courts. Senators Durbin and Cornyn's bill would allow distressed student-loan debtors to get bankruptcy relief ten years after their student loans become due.

If that bill becomes law, people like Anneli Nyastrand would immediately benefit.

But one more thing needs to be done. The American Bar Association, which allegedly regulates legal education, needs to get off its ass and close down some law schools. 

References

Nystrand v. Kingdom of Sweden, Case No. 21-400006-KKS (Bankr. N.D. Fla. Apr. 16, 2021 (adversary complaint).

 

Arizona Summit Law School sues the American Bar Association, claiming ABA accreditors treated it unfairly: Showdown in "Death Valley"

Earlier this month, Arizona Summit Law School sued the American Bar Association after the ABA's accreditors put the school on probation. Don Lively, Arizona Summit's president, claims the ABA's accrediting standards are "vague, indeterminate, and subject to manipulation"; and Penny Wilrich, the law school's interim dean, accused the ABA of creating a "false narrative" about the school.

False narrative? Without a doubt, Arizona Summit is a lousy law school. Last February, only one out of five Arizona Summit graduates passed the Arizona bar exam (25 out of 126 test takers).  Among repeat exam takers, only one out of seven passed it (11 out of 81).

And Arizona Summit is an expensive school to attend. According to Law School Transparency, the total non-discounted cost of getting a JD degree from this crummy law school is $248,000. Wow! A quarter of a million dollars buys a graduate a one-in-five shot of passing the Arizona bar exam.

No wonder one student thinks the school is misnamed. "It's not a summit," the student observed. "It's Death Valley."

Arizona Summit is one of three law schools owned by a for-profit company named Infilaw, and all three schools have sued the ABA claiming they were treated unfairly. I gather the law schools' main argument is that other law schools are even crappier and the ABA isn't sanctioning them.

Unfortunately, the Infilaw schools may be right. Law School Transparency's reports on law-school quality consistently show a number of schools with very low admission standards and poor pass rates on bar exams--including some historically black law schools.  ABA may find it hard to explain why it is sanctioning the for-profit law schools and not the HBCU law schools.

Without a doubt, legal education is in shambles. Inferior law schools are charging students obscene tuition rates and graduating too many students who cannot pass their bar exams.

But the solution is not for the ABA to ease up on regulating dodgy schools, which is what the Infilaw schools apparently want it to do. On the contrary, the ABA needs to crack down harder. In my estimation, at least 20 law schools should be closed.

References

Arizona Supreme Court. February 2018 Examination Results.

Anne Ryman. Arizona Summit Law School sues American Bar Association, claims abuse of power. The Republic, May 24, 2018.

Staci Zaretsky. Law School Completely Wrecks State's Bar Exam Pass Rate, As Usual. Above the Law, May 15, 2018.

The Rooster Bar: Why Won't the ABA Shut Down Bottom-Tier For-Profit Law Schools ?

John Grisham's latest novel, titled The Rooster Bar, tells the story of Mark Frazier, a law student who attends a for-profit institution called Foggy Bottom Law School. By the time he is a senior, Mark has accumulated $195,000 in student loans and concludes he made a bad investment.

FBLS's bar pass rates are embarrassing low, and few of its graduates obtains jobs that justify their enormous student-loan debt. By the time FBLS students are seniors, their morale has plummeted, and some even spare verbally with their professors in class. In fact:

To varying degrees, almost everyone Mark knew believed that (1) FBLS was a sub-par law school that (2) made too many promises, and (3) charged too much money, and (4) encouraged too much debt while (5) admitting a lot of mediocre students who really had no business in law school, and (6) were either not properly prepared for the bar exam or (7) to dumb to pass it.

Foggy Bottom Law School is a fictional for-profit law school, but it closely resembles the real ones. Infilaw, owned by an equity group out of Chicago, runs three for profit law schools; and all three are in trouble. Charlotte School of Law closed in August after it lost its license to operate. Arizona Summit Law School was placed on probation last March by the American Bar Association, and the ABA warned Florida Coastal School of Law in October that it was "significantly out of compliance" with the ABA's accreditation standards.

Not surprisingly, Infilaw wants to sell its two law schools that are still open. But why did the American Bar Association ever accredit these schools in the first place? The answer is illusive, but here is a key fact. In the 1995, when Bill Clinton was president, the U.S. Justice Department sued the ABA, claiming it was in violation of federal antitrust laws.  The suit was settled in 1996, and the ABA agreed not to deny accreditation to a law school solely because it was a for-profit entity.

That same year, a law professor named Don Lively started Florida Coastal Law School in Jacksonville, Florida. In 2004, Lively sold out to Sterling Partners, a Chicago-based private-equity firm. According to the Wall Street Journal, Sterling created Infilaw as a holding company for the law schools and lined up additional investors, allegedly including Harvard University's endowment fund.

By almost any measure, all three Infilaw law schools are sub-par institutions. If you want to see the data, visit Law School Transparency's web site.  All three schools charge high tuition rates similar to reputable law schools like Harvard and Yale. Yet these three schools have low bar pass rates and very few graduates find law jobs that justify the enormous student-loan debt they accumulated to get their law degrees.

The for-profit advocates say schools like the Infilaw trio offer opportunities to minority students who are often rejected by reputable schools because of mediocre undergraduate GPAs and low LSAT scores. But the top-tier schools bend over backward to attract minority students and have plenty of scholarship money to recruit them. Too often the people who enroll at for-profit law schools are not academically prepared to study law and often fail their bar exams.

As has been often reported in the media, the job market for recent law graduates is terrible; and the bottom-tier law schools are producing lawyers who run a high risk of failing the bar while facing dismal job prospects.

In short, the integrity of legal education has been seriously undermined by a herd of poor-quality law schools, including the Infilaw schools and several public law schools as well.  Apparently, even Harvard University contributed to this train wreck, although Harvard wouldn't confirm that its endowment fund invested in Infilaw's schools.

The American Bar Association is primarily responsible for this disaster, but is it taking steps to shut down the bottom-feeding law schools? No it is not. In fact, the ABA is considering a measure that would allow law schools to make LSAT scores an optional criteria for law school admission. The purpose of that action, perhaps, is to make it harder to measure just how low some law schools' admission standards really are.

References

John Grisham. The Rooster Bar. New York: Doubleday, 2017.

Andrew Kreighbaum. ABA Backs Testing Choices on law Admissions, Inside Higher Ed, November 7, 2017.

Andrew Kreighbaum. Report: For-Profit Looking to Sell 2 Law Schools. Inside Higher Ed, November 29, 2017.

Josh Mitchell. The Rise and Fall of a Law School Empire Fueled by Student Loans. Wall Street Journal, November 24, 2017.

Law School Transparency web site.

Angela Morris. GRE or LSAT? ABA Council's Latest Move Could Nix Tests Altogether. Law.com, November 3, 2017.

United States v. American Bar Association, 934 F. Supp. 435 (D.D.C. 1996).

 

The Department of Education Fumbles the Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program: The Best Option for Student borrowers With Six-Figure Debt

A few years ago, law professor Paul Campos wrote an advice book for people thinking about going to law school. If you borrow a lot of money to go to a second- or third-tier law school and graduate in the bottom half of your class, Campos warned, you probably won't make enough money to pay back your loans.

In such event, Campos advised, your only viable option is to get a job in the public sector and enroll in the Public Service Loan Forgiveness Program (PSLF). If you go that route, you will make monthly payments on your student loans for ten years based on a percentage of your income. When you've made 120 payments, the balance of your loan debt will be forgiven.

Campos's advice is good for anyone who is buried by student loans. If you racked up $100,000 or more in student loans and can't find a good job in the private sector, the PSLF program may be your only viable option. It is the financial equivalent of the last train out of Paris in the movie Casa Blanca. If Rick doesn't get on that train before the Nazis arrive, he's doomed.

The Department of Education Fumbles the PSLF Program: Is Betsy DeVos Out of Her Element?

Congress created the PSLF program in 2007, and the Department of Education has been promoting it ever since. DOE has instructed  PSLF participants to send their Employment Certification Forms (ECF) to FedLoan Servicing, DOE's approved PSLF processor, on an annual basis to verify they are in fact employed by a public service organization. More than half a million people are enrolled in the PSLF program, confident that their indebtedness will be cancelled after 10 years of public service employment..

But now it seems DOE may be reneging on its PSLF obligations. The American Bar Association sued DOE for not living up to its PSLF commitments, and DOE recently answered that law suit. In essence, DOE denied it had any obligation to honor FedLoan Servicing's decision to certify public service employment.

This is shocking. As Steve Rhode said in his blog about this development, "People who have worked ten years in jobs assuming their loans would be forgiven are potentially going to get some nasty surprises."

I don't know what to make of DOE's response to the ABA's lawsuit. If the PSLF program collapses, Betsy DeVos's credibility as the Secretary of Education, already compromised by her ties to the for-profit industry, will be completely destroyed.

To paraphrase  Walter Sobchak's remark to Donny in The Big Lebowski, "Betsy, you may be out of your element." DOE may come to its senses and straighten out the PSLF mess; in fact, I think that will probably happen.  But the political consequences of this episode will reverberate for a long time.

"Donny, you're out of your element."

References

Stacy Cowley. Student Loan Forgiveness Program Approval Letters May Be Invalid, Education Dept. Says. New York Times, March 30, 2017.

Steve Rhode. Public Service Loan Forgiveness Program Teeters With Unmitigated Disaster. Personal Finance Syndication Network, PFSyn.com, May 2, 2017.

American Bar Association begins cracking down on mediocre law schools: Too little, too late

After waking from a long slumber, the American Bar Association is finally cracking down on mediocre law schools. A few days ago, the ABA censured Valparaiso University School of Law and placed Charlotte School of Law on probation. According to the ABA, both schools had violated ABA standards requiring law schools to only admit students who are likely to pass the bar exam.

This is not the first time that ABA has censured a mediocre law school. Last summer, the ABA's accrediting unit recommended against  accrediting the newly organized University of North Texas School of Law and cited Ava Maria Law School for failing to comply with ABA quality standards. Like Charlotte and Valparaiso, UNT and Ava Maria received ABA raspberries for low admission standards.

But the ABA's sanctions against four mediocre law schools is too little and too late. The job market for lawyers has imploded; and law chool admission applications have plunged. Many second- and third-tier law schools have had to lower their admissions standards just to fill empty seats; consequently, a lot of law schools are graduating a high number of students who will have difficulty passing their bar exams.

Law School Transparency (LST), a watchdog organization that monitors law school admission standards and bar pass rates, identified a great many law schools that have very low admission standards. LST constructed a model for determining when law school admission standards are so low that students run the risk of failing the bar, and it found a high number of law schools with dicey admission standards.

These are some of LST's most startling findings from its 2015 report on law schools' admission standards for their 2014 entering classes:

• Seven law schools had admitted students with qualifications so low that 50 percent of their freshman classes ran an extreme risk of failing the bar exam. Those schools included Southern University Law Center, a historically black institution; and Arizona Summit and Florida Coastal, two for-profit law schools.

• Twenty-six law schools had admission standards so low that 25 percent of their entering classes were at extreme risk of failing the bar.  Texas Southern, another historically black law school, is on that list, along with several regional public institutions, including North Carolina Central University, Ohio Northern University, and Southern Illinois University.

• Twenty-nine law schools had admission standards so low that 25 percent of their entering classes ran a very high risk of failing the bar exam. Among this number were John Marshall Law School, a for-profit institution; Widener University, a private school; and University of Arkansas at Little Rock, a public institution.

It is the ABA's responsibility to monitor law schools' quality standards, and it fell down on the job. In fact, an advisory panel for the Department of Education recently recommended that the ABA's authority to accredit more law schools be suspended for a year--an astonishing rebuke to a very powerful professional organization.

But even if the ABA gets serious about enforcing quality standards at the nation's law schools, thousands of law-school graduates have already been seriously injured. On average, an individual graduates from law school with $140,000 in student-loan debt; and there are now two newly minted attorneys for every available law job.

Some law graduates have sued their law schools for misrepresentation, arguing they were lured into enrolling based on misleading job placement rates that the law schools disseminated. So far, these suits have been unsuccessful. Thomas M. Cooley Law School and Thomas Jefferson Law School, for example, successfully defended lawsuits filed by their graduates.

A number of law school graduates have filed bankruptcy in an attempt to discharge their student loans. Some have been successful or at least partly successful--the Barrett case and the Hedlund case. Others have lost their adversary lawsuits: Mark Lilly and Mark Tetzlaff.

In my view, people who graduated from second- and third-tier law schools with mountains of debt and no law job should seriously consider filing bankruptcy. But if they pursue this course, they must educate the bankruptcy judge about the terrible job market for lawyers and the high debt load that most law graduates now carry.

As the crisis in legal employment becomes more evident, I think bankruptcy judges will become more and more sympathetic toward law school graduates who are burdened by heavy debt loads and don't have law jobs. I think judges might be particularly sympathetic to debtors who graduated from second- and third-tier law schools given the terrible job prospects for these people.

As I said, educating the bankruptcy judge is critical. The data collected by Law School Transparency is a good place to look for data that will help bankruptcy judges understand the absolutely desperate plight of many recent law scool graduates.

References

Barrett v. U.S. Department of Education, 545 B.R. 645 (Bankr. N.D. Cal. 2016).

Paul Fain. Federal panel votes to terminate ACICS and tightens screws on other accreditors. Inside Higher Ed, June 24, 2016.

Andrew Kreighbaum. ABA Censures Law School. Inside Higher Ed, November 22, 2016.

Andrew Kreighbaum. ABA Tighens Up. Inside Higher Ed, August 31, 2016.