Thomas Jefferson Law School won't admit new students next spring: Ask not for whom the bell tolls; it tolls for the legal profession

Thomas Jefferson School of Law (TJ) announced it will not admit new students to enroll this spring. Why?

Linda Keller, Thomas Jefferson's new dean, gave this explanation (which was probably drafted by a public relations person):

The Law School is committed to providing the best environment for our students. We've decided to forego the revenue that a spring entering class would provide because a proportionally smaller spring entering class might not provide the vibrant, collaborative atmosphere for our new students that is an essential part of the first-year law student experience.

My cynical interpretation of this cheery blather is that Thomas Jefferson didn't recruit enough students to make up a decent cohort for spring 2019. Indeed, TJ's student enrollment dropped from more than 400 in 2010 to less than 300 in 2017.

Thomas Jefferson School of Law should close--period. By almost any measure, the school is not producing lawyers who can find decent jobs in the legal profession. According to Law School Transparency, which reports important metrics for law schools, TJ's 2017 graduating class had an employment rate of only 21.3 percent. Graduates' under-employment rate was 42.3 percent.

Not a single 2017 graduate got a judicial clerkship, jobs that go to the most able law graduates. And none went to work for large law firms,  which generally pay the highest salaries.

And most shocking of all, TJ's 2014 entering class had a 2017 bar passage rate of only 26.5 percent! That's right, only a little more than one in four of TJ's 2017 graduates passed the bar.

Why do students enroll at a law school with such a dismal record? Is it cheaper than more prestigious schools? No, it is not. The non-discounted cost to get a law degree from Thomas Jefferson is $280,000! That's right, it costs more than a quarter of a million dollars to get a law degree from Thomas Jefferson, and only one out of four 2017 graduates passed the bar.

This country has too many law schools. There simply are not enough jobs for the newly minted attorneys coming out of the nation's lawyer factories. The American Bar Association, which accredits law schools, has done a poor job and allowed too many schools to operate. Based on their bar passage rates and poor job-placement rates, at least 20 schools should be shut down immediately.

Some of Thomas Jefferson's graduates sued the school awhile back for fraud, but TJ beat the wrap. But enrollment is dropping, bar pass rates are awful, and the time has come for TJ to close its doors.

Thomas Jefferson School of Law

References

Scott Jaschik. Thomas Jefferson Law Won't Admit Students for Spring. Inside Higher Ed, October 18, 2018.

Staci Zaretsky. Struggling Law School Will Not Accept New Students This Spring. Above the Law, October 17, 2018.

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

Hofstra Law School Graduate incurs nearly one million dollars in debt: Dufrane v. Navient Solutions

Who holds the record for accumulating the most debt while going to college and law school? I don't know, but it might be Scott Dufrane.

Mr. Dufrane attended Thomas Jefferson Law School and graduated from the Maurice A. Deane School of Law at Hofstra University in 2009. He financed his undergraduate and legal education with student loans, and by the time he received his law degree, he had incurred debt of nearly a million dollars--or more specifically, $900,000.

Dufrane filed for bankruptcy in 2015. At that time  he owed the U.S. Department of Education approximately $400,000; and he owed various private creditors about $500,000. 

A short time after filing his bankruptcy petition, Dufrane filed an adversary complaint in an effort to discharge his private loans. In his complaint, he argued that the private loans fell outside the protection of the "undue hardship" rule and were dischargeable.

Dufrane owed SunTrust Bank about $90,000, and SunTrust moved to dismiss Dufrane's adversary complaint on the grounds that the SunTrust loans were protected by 11 U.S.C. sec. 523(a)(8) and could not be discharged unless Dufrane met the "undue hardship" standard.

But Dufrane had an answer to SunTrust's argument.

He argued that the private loans were not "qualified student loans" under 11 U.S.C. sec. 528(a) (8) and could be discharged like any other nonsecured debt.  Dufrane said that the private lenders had solicited him to borrow money while he was in school without any inquiry "regarding need, cost of tuition, or cost of any other education-related expense." In addition, the private lenders' solicitations "generally stated that the money could be used for anything, and that it would be disbursed directly to [Dufrane]" and not through any school.

Moreover, Dufrane alleged, all the private loan money was disbursed directly to him "without any input, knowledge or approval of the Financial Aid Office . . ."

Judge Peter Carroll, a California bankruptcy judge, agreed with Dufrane and ruled that the private loans were not the type of loan that Congress intended to exclude from bankruptcy relief.   Judge Carroll acknowledged that federal courts were divided on this issue, but he agreed with courts that interpreted the law in harmony with Dufrane's position. Therefore, the judge denied SunTrust's motion to dismiss. Under the rationale of Judge Carroll's ruling, it seems possible that all $500,000 of Carroll's private loan debt will ultimately discharged.

What is the significance of the Dufrane decision?

First, as Judge Carroll pointed out, the federal courts are in disagreement about whether some private student loans are subject to the "undue hardship" rule, and this controversy may ultimately go to the Supreme Court. For now, however, student borrowers who responded to bank solicitations by taking out private loans and who received the money directly have an argument that those loans are dischargeable in bankruptcy like any other consumer loan.

Second, the Dufrane case illustrates the recklessness of student-loan creditors--both the federal government and private banks.  It was insane for the Department of Education to loan Dufrane $400,000 for college and lawschool studies.  And of course it was insane for private lenders to loan Dufrane $500,000 while he was in law school.

Almost no one who accumulates nearly a million dollars in debt to get a college degree and a law degree will ever be able to pay back that amount of money.  Hofstra's law school is ranked 118 on the list of best law schools published by U.S. News & World Report. But even if Hofstra had graduated from Yale Law School at the top of his class, it is unlikely he would have obtained a job that would allow him to pay back $900,000.

Millions of Americans are struggling with  student-loan debt. Last year, student borrowers were defaulting at an average rate of 3,000 a day. 

The Department of Education is urging borrowers to enroll in income driven repayment plans (IDRs), but the Government Accountability Office reported last December that about half of a sample of people who signed up for IDRs failed to recertify their income as the program requires (p. 36). It seems obvious that IDRs are no magic bullet for the student-loan crisis.

Bankruptcy relief is the only viable option for people whose student loans are out of control. Last month, Congressmen John Delaney (D-Maryland) and John Katko (R-New York) filed a bill to make student-loan debt dischargeable in bankruptcy like any other nonsecured loan.  This bill is unlikely to become law in this Congressional session; but someday, Congress will be forced by reality to pass some form of the Delaney-Katko bill.

References

Dufrane v. Navient Solutions, Inc. (In re Dufrane), 566 B.R. 28 (Bankr. C.D. Cal. 2017).

Representative John Delaney press release. Delaney and Katko File Legislation to Help Americans Struggling with Student Loan Debt, May 5, 2017.

Representative John Katko press release. Reps. Katko and Delaney File Legislation to Help Americans Struggling with Student Loan Debt. May 8, 2017.

The Wrong Move on Student Loans. New York Times, April 6, 2017.

US. Government Accounting Office. Federal Student Loans: Education Needs to Improve Its Income-Driven Repayment Plan Budget Estimates. Washington, DC: U.S. Government Accountability Office, November, 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/