No Exit: Graduates of bottom-tier law schools have mountains of student-loan debt and little prospect of ever paying it off

You say you went to law school to pursue a better life. Your LSAT scores weren't so hot, so you were turned down by the top law schools. Harvard and Yale tossed out your application with its other junk mail and sent you an elegant rejection letter, complete with a genuine-looking robo-signature from someone in the admissions office.

But a lower-tier law school welcomed you with open arms. Let's say it's a for-profit school like Arizona Summit or Florida Coastal. Or maybe a nonprofit, private law school like Thomas M. Cooley in Michigan, Thomas Jefferson in San Diego, or McGeorge in Sacramento. Or maybe you received an acceptance letter from a bottom-rung public law school like Southern Illinois or Texas Southern.

And so you went to law school. You were vaguely aware that job prospects for people who graduate from bottom-tier schools aren't good and a high percentage of graduates fail the bar exam. But you're special. You'll study hard, you'll prepare for the bar exam, you'll  pound on doors until a law firm offers you a good job. 

And when you get that J.D. degree, your life will suddenly change for the better. You'll drive a nice car, get married, and buy a craftsman-style house like the happy people who inhabit television commercials.

And of course you took out student loans. To your surprise, back-of-the-pack law schools are just as expensive as Princeton and Stanford. Total costs, including living expenses turned out to be $40,000 a year, $50,000 a year, or even $60,000 a year.

But in for a penny, in for a pound. You realized you can't work your way through law school like in the old days because no one can make enough money from a part-time job to pay a $40,000 tuition bill. So you took out loans every semester and when you walked across the stage to receive your law school diploma, you owed $200,000.

You studied hard for the bar examination and paid for a bar review course. But you didn't pass the exam.

And then you realized--fully realized for the first time--you owe $200,000 in student loans and you will never get a good job as a lawyer.

What's your exit strategy?

There is no exit strategy. You must pay back those student loans whether or not you get a good job or pass the bar exam.  You can stall for time by getting an economic hardship deferment that excuses you from making monthly loan payments. But the deferment doesn't stop interest from accruing. In a few years, the $200,000 you borrowed will grow to $300,000.  

Maybe you were enticed to enroll in a crummy law school based on misrepresentations about the law school's employment rate. Can you sue for fraud? Yes you can, but so far at least, fraud suits against law schools have been unsuccessful. Thomas Jefferson and Thomas M. Cooley both beat that wrap.

Can you discharge your student loans in bankruptcy? Maybe. Michael Hedlund, a graduate of Willamette School of Law, won a partial discharge of his student loans after 10 years of litigation. But several law-school graduates have struck out in the bankruptcy courts. Mark Lilly, a McGeorge law-school graduate, and Mark Tetzlaff, a Florida Coastal graduate, lost their adversary actions in spite of the fact that their law degrees did not enable them to get good attorney jobs. Heather Coplin, a McGeorge law-school graduate working as a waitress, only obtained a partial discharge of her student loans, which totaled almost half a million dollars.

*****

Law schools once operated as professional schools with high ethical standards. Today, however, a great many law schools are nothing more than elegant con games designed to rake in federal student-aid money.

So before you enroll in a third-rate law school, do some research. Read Paul Campos' article in Atlantic. This article was the inspiration for John Grisham's recent novel The Rooster Bar, which tells the story of a young man who attended a dodgy for-profit law school.  And read some of the bankruptcy cases that have been decided against law-school graduates who were unable to find good jobs as attorneys. In particular, read the Tetzlaff case and the Lilly case.

And if you still want to enroll at Florida Coastal or Arizona Summit or Southern Illinois or Thomas Jefferson or Thomas M. Cooley, check yourself into a psychiatric facility--because you probably need to have your head examined.

References

Paul Campos. Don't Go to Law School (Unless). Createspace.com, 2012.

Paul Campos. The Law School Scam. Atlantic Magazine, September 2014. 

Coplin v. U.S. Department of Education,  Case No. 13-46108, Adversary No. 16-04122, 2017 WL 6061580 (Bankr. W.D. Wash. December 6, 2017) (unpublished decision).

Steven J. Harper. Too Many Law Students, Too Few Legal Jobs, New York Times, August 25, 2015. Accessible at: http://www.nytimes.com/2015/08/25/opinion/too-many-law-students-too-few-legal-jobs.html

Hedlund v.Educational Resources Institute, 718 F.3d 848, 851 (9th Cir. 2013). 

Lilly v. IllinoisStudent Assistance Commission, 538 B.R. 45 (Bankr. S.D. Cal. 2013).

MacDonald v. Thomas M. Cooley Law School, 724 F.3d 654 (6th Cir. 2013).

David Segal, Is Law School A Losing Game? New York Times, January 8, 2011. Accessible at: http://www.nytimes.com/2011/01/09/business/09law.html?_r=0

Tetzlaff v. Educational Credit Management Corporation, 794 F.3d 756 (7th Cir. 2015).

Joshua Wright. The Oversaturated Job Market for Lawyers Continues and On-the-Side Legal Work Grows. EMSI blog, January 10, 2014.

Staci Zaretsky. Verdict Reached in the Alaburda v. Thomas Jefferson Landmark Case Over Fraudulent Employment Statistics. Abovethelaw.com, March 24, 2016.

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.

Unemployed Lawyers with Student Loan Debt: The Law Schools Should Be Forced To Bear Part of The Cost of Law School Loans

Recently, I wrote about Anna Alaburda, who sued Thomas Jefferson School of Law, her law school alma mater. Alaburda spent  $150,000 to attend TJSL. After graduating in 2008, she was unable to find a remunerative law job; and her student loan debt grew to $170,000. She claimed she was induced to enroll at Thomas Jefferson by the law school's false assertions that most of its graduates got well-paying legal jobs.

Alaburda's case went to trial, and this week a jury ruled against her.  Alaburda's loss is the latest in a string of defeats by unemployed or underemployed law school graduates who sued their law schools for fraud or misrepresentation.

Some unemployed or underemployed lawyers have filed for bankruptcy to discharge their student loans, but they've had mixed success. Michael Hedlund, a graduate of Willamette Law School, succeeded in getting a partial discharge of his law-school debt, but he endured ten years of litigation before the Ninth Circuit Court of Appeals rendered a decision in his favor in 2013.

More recently, two heavily indebted law-school graduates were denied bankruptcy relief. Mark Tetzlaff, racked up thousands of dollars in debt to pursue post-secondary studies; and he eventually received an MBA and a law degree from Florida Coastal School of Law, a bottom-tier law school. Tetzlaff actually paid off his law school debt, which he was required to do in order to get Florida Coastal to release his transcripts. But he never obtained a good job as an attorney, and he was unable to pay off other student loans. When he filed for bankruptcy in 2012, he owed $260,000 in student-loan debt.

The Eighth Circuit was not sympathetic to Mr. Tetzlaff's plight and refused to discharge his student loans in a decision released last year. And the U.S. Supreme Court refused to hear his appeal.

Likewise, a bankruptcy court in California ruled against Mark Lilly in 2013. Like Mr. Tetzlaff, Mr. Lilly took on a massive amount of student-loan debt, including debt he acquired to obtain an MBA and a law degree from McGeorge School of Law in Sacramento, which is not a top-ranked law school. His request for bankruptcy relief was denied, but he never found work as a lawyer.

This is the tragic reality: the legal job market has imploded, but law schools have not reduced enrollments sufficiently in response to the shrinking demand for lawyers. Law schools continue to pump out far more attorneys than American society needs, and many law schools have lowered their admissions standards just to get students in the door. For people like Mark Tetzlaff and Mark Lilly, who graduated from mediocre law schools, there are virtually no jobs. In California, for example, there are now 2.5 law graduates for every job opening.

Thus far, law graduates have borne most of the suffering created by a shrinking job market, especially graduates who received their degrees from nonprestigious law schools like Florida Coastal, Thomas Jefferson, and McGeorge. On average, law graduates who borrow to finance their studies acquire $140,000 in student-loan debt. Graduates of Thomas Jefferson School of Law, where Anna Alaburda obtained her degree, now graduate with an average debt load of $180,000! Many simply can't find jobs that will allow them to pay off their student loans.

In my view, some of the suffering experienced by unemployed law graduates should be shifted to the law schools, which have charged students exorbitant tuition and are graduating more students than our economy can absorb. These schools purport to maintain the highest ethical standards, but in reality, many of them are making admissions decisions based on their revenue needs and not the welfare of their students.

Whether or not they are guilty of misrepresentation, as Ms. Alaburda asserted  against TJSL, many law schools are certainly guilty of behaving contrary to the public interest. Surely, these schools should help their unemployed graduates pay back massive student-loan debt that was acquired to obtain degrees that are virtually worthless.

References

Hedlund v. Educ. Resources Inst., Inc., 718 F.3d 848 (9th Cir. 2013).

Lilly v. Illinois Student Assistance Comm’n, 538 B.R. 45 (Bankr. S.D. Cal. 2013).

Elizabeth Olsen. Law Student Gets Her Day in Court. New York Times, March 6, 2016. http://www.nytimes.com/2016/03/07/business/dealbook/court-to-hear-suit-accusing-law-school-of-inflating-job-data.html?smid=fb-nytimes&smtyp=cur&_r=1

Tetzlaff v. Educational Credit Management Corporation, 794 F.3d 756 (7th Cir. 2015). Accessible at http://caselaw.findlaw.com/us-7th-circuit/1708687.html

Thomas M. Cooley Law School v. Kurzon Strauss, LLP, 759 F.3d 522 (6th Cir. 2014). Accessible at http://www.ca6.uscourts.gov/opinions.pdf/14a0139p-06.pdf

Gary Warth. Jury rejects fraud claim against law school. San Diego Union-Tribune, March 24, 2016. Accessible at http://www.sandiegouniontribune.com/news/2016/mar/24/thomas-jefferson-law-school-verdict/

Joshua Wright. The Oversaturated Job Market for Lawyers Continues and On-the-Side Legal Work Grows. EMSI blog, January 10, 2014. Accessible at: http://www.economicmodeling.com/2014/01/10/the-oversatured-job-market-for-lawyers-continues/

Thomas Jefferson School of Law is being sued for misrepresentation by Anna Alaburda, a TJSL graduate. Let's hope she wins

Thomas Jefferson School of Law in San Diego is a defendant in a lawsuit filed by Anna Alaburda, one its graduates. The case may go to trial this week.

Alaburda, who received her JD from TJSL in 2008, sued the law school in a California state court, claiming the school misrepresented the employment statistics of its graduates. Alaburda argues that she enrolled at Thomas Jefferson based partly on the school's representations about its graduates' job prospects, but that the school dispensed misleading information. Since graduating, Alaburda has not found a full-time attorney's job.

As a New York Times story reported, Alaburda is not the first law school graduate to sue her alma mater, but she is the first to get her case to trial. Judges in Illinois, New York and Michigan have dismissed similar suits based on the grounds that the plaintiffs enrolled in law school "at their own peril," and that they were sophisticated enough to realize that they might not find an attorney's job after they graduated.

Thomas M. Cooley Law School was sued under a theory similar to the one put forth by Alaburda, but a Michigan court dismissed the case. Less well known, however, is the fact that Cooley Law School lost a defamation suit against the attorney who brought the misrepresentation suit. The Sixth Circuit Court of Appeals ruled that Thomas M. Cooley was a public figure for the purposes of a defamation claim and could not prevail  unless the school could show the lawyer had communicated his accusations maliciously, which it had not done.

I hope Ms. Alaburda wins her lawsuit. As Paul Campos and others have written, the market for lawyers has imploded. There is now approximately one law job for every two law graduates. Law school admissions are down by about 20 percent, and many law schools have lowered their admission standards just to get tuition-paying students through the door.  Meanwhile, the average newly minted JD graduates with more than $100,000 in student-loan debt.

Many students at the second- and third-tier schools do not pass the bar exam after they graduate and are not able to earn an income that will allow them to pay back their student loans. Some have filed for bankruptcy.

Unfortunately, the bankruptcy courts have not always been sympathetic. A few months ago, the Seventh Circuit Court of Appeals ruled that Mark Tetzlaff, a graduate of  Florida Coastal School of Law, was not eligible for bankruptcy relief, in spite of the fact that Tetzlaff failed the bar exam, had serious health problems, and hadn't found employment as a lawyer.  In a 2013 decision, a California bankruptcy judge ruled against Mark Lilly, another law school graduate who never found employment as an attorney.

Job prospects for graduates of second- and third-tier law schools are terrible; and thousands of law graduates are burdened with six-figure debt.  In fact, in Don't Go to Law School, Unless, Paul Campos advised students attending down-market law schools to drop out after the first year if they don't excel academically rather than borrow money to continue their studies  In Campos' view, it often makes more sense for a law student to drop out rather than double down and acquire more debt to get a JD degree that won't lead to a high-paying job.

In my view, the law schools have acted irresponsibly to the deteriorating job market for attorneys. Many did not cut their enrollments in response to the plummeting demand for lawyers.  Instead, they lowered their admissions standards in order to keep generating tuition. And according to some law school graduates, at least a few law schools lured people to enroll by misrepresenting the job statistics of their graduates.

If Alaburda wins her case, Thomas Jefferson will appeal. But if she ultimately prevails and gets a money judgment, law schools all over the United States will quake with fear. The law schools have had a good run. They jacked up tuition prices unreasonably and raked in millions of dollars. And students went heavily into debt on the bet that they would get a good lawyer's job that would justify their investment.

But the party is over.  Thousands of unemployed and heavily indebted lawyers deserve some relief. If they are victims of fraud or misrepresentation, I hope they find relief in the state courts. And if they are unable to find remunerative employment as attorneys, I hope they find sympathetic bankruptcy judges who will relieve them of their oppressive student loans and give them an opportunity for a fresh start.

References

Elizabeth Olsen. Law Student Gets Her Day in Court. New York Times, March 6, 2016. http://www.nytimes.com/2016/03/07/business/dealbook/court-to-hear-suit-accusing-law-school-of-inflating-job-data.html?smid=fb-nytimes&smtyp=cur&_r=1

Lilly v. Illinois Student Assistance Comm’n, 538 B.R. 45 (Bankr. S.D. Cal. 2013)

Tetzlaff v. Educational Credit Management Corporation, 794 F.3d 756 (7th Cir. 2015). Accessible at http://caselaw.findlaw.com/us-7th-circuit/1708687.html

Thomas M. Cooley Law School v. Kurzon Strauss, LLP, 759 F.3d 522 (6th Cir. 2014). Accessible at http://www.ca6.uscourts.gov/opinions.pdf/14a0139p-06.pdf