California Students Answer if Law School is Worth the Cost

CalBar.org (well, its e-journal for Cal. law students) asked the question whether law school was worth it to six California law students.

Two gave respectable answers. Four failed. Yes, I get that these are opinions, but they failed.

Three of them give some variation of "law is what I want to do, therefore it's worth the cost:

• Brandon Lewis (Chapman): "Law school is worth the cost to me because I want to do the type of work that lawyers do."
• Elisa Gibellini (U.S.F.): "[L]aw school is necessary to my goal and thus worth the cost."
• Onell Soto (San Diego [listed as "San Diego University School of Law"]): "[L]aw school is worth the cost because it's the path to doing what I've set out to do."

The fourth gives an even more ludicrous answer:

• Kuscha Hatami Fard (Cal-Western): "Law school has given me the opportunity to become part of an elite group who are some of the highest educated people in the country."

False and poorly-written is no way to go through life or present one's "high educated" status.

Going back to the reasoning of the first three, we as a society need to come to grips with the idea that career dreams can be overpriced such that the cost makes them unworthy of pursuit. People have no problem abandoning other dreams when the cost becomes too high. Why is it so difficult to understand that being a litigator or doing "lawyer work" may cost too much? Is it because if we acknowledge that some professions are just out of reach to non-wealthy people that the Emperor's merito-democratic clothes come flying off?

Look, folks, I really want to eat lobster every week and spend my afternoons banging a trophy wife. I really want that. But right now? It's not worth the cost. "But wait!" you say. "Those are 'things,' not investments. A law license gives you earning power!" Okay - sure - I really want to own a restaurant in the middle of New Mexico called China Ye-Haw! that'd be just like Casa Bonita only with a Chinese-meets-Western USA theme. There'd be a railroad running through it and everything. It's a dream, but there's no way in hell I should actually embark on it due to the high cost and low return on investment. Happy now?

Debt. I really don't think my generation understands debt, and why should they? Their parents obviously know jack shit about it, having lived their entire lives beyond their means to keep up with the imaginary Joneses in the advertisements, all while their public representatives piled liability on top of liability. And of course, most people, places, and things can get out of their ridiculous debts with bankruptcy, so people have been trained that erring on spending is acceptable, socially-beneficial even, as we just gotsta keep the economy going skyward, so you can screw up buying clothes or furniture or cars or houses or vacations or hookers or utilities and can generally scratch it out if you have to. In the select group of people where errors are discouraged is student lending. Try to figure that one out.

Which brings me, in a rambling fashion, to the Los Angeles Dodgers' bankruptcy filing. Here, Frank McCourt is using the United States Bankruptcy Court as a tool to maintain his stranglehold on a beleaguered, but still profitable, franchise, play white-collar chess with MLB, screw up his divorce proceedings, and correct a cash flow problem caused in part by his own abuse of the company (i.e., withdrawing money from the business for his lavish lifestyle).

While there's little risk that salaries and contracts won't be paid, I find it egregious that the moneyed elite can use a bankruptcy court to fix their multimillion dollar mistakes with asset-rich, profitable companies to better subsidize their swanky lifestyles while a college graduate who, for whatever reason (illness? honest miscalculation?), cannot pay back an education loan is deemed unclean and unfit for court.

Worse - you address these injustices to people and they say things like "well, it's too big to change" or they pretend that student loan debt is something it isn't, or that the risk of nonpayment is higher than with other unsecured claims. Much like the standard responses to the law school bubble, they're ground in complete fiction or a wholly pessimistic attitude towards reform and a callous disregard for social injustice.

Finally, looking over these students answers, I'm mildly bothered that many of the same people who think law school is a good investment now are the ones who may, in the future, be weighing possible settlement values against the cost of trial or further proceedings. Think about it. Are these the same type of people who will overvalue a trial victory in court? Ones who force their vision of the future, come hell, high water, or six-figure debt?

Introducting a Hot New Practice Area - Move Quickly!

From, of all places, the ABA Journal, it appears that 2007 Quinnipiac graduate Joshua Cohen has developed a solo legal practice around doing nothing but student loan debt counseling and negotiations, all in an attempt to help him pay off his $160k in student loan debt.

Lawyers make up 30 percent to 40 percent of Cohen’s clients, and all of them graduated from law school in the last five to 10 years. “The fact that I have a practice based on student loans is ludicrous,” Cohen told the Hartford Business Journal.

No kidding, but when you think about it, someone had to do it. And frankly, I'm kind of happy it was a TTT/TTTT graduate and not some BigLaw layoff from NYU or a veteran boomer whose real estate practice crashed.

Debtors helping debtors work with the monied elite. Is there a better fact situation to explain today's America, or tomorrow's legal reality? And as an aside, anyone want to partner with me to open a student loan counseling service?

Law Grads: You Can Be Just Like Justice Thomas, Too! Just Follow Your Glimmers

It's graduation season, meaning another wave of 40,000 are told they can fit into a shrinking job market that has little use for half of them.

Up first we have Justice Clarence Thomas, who spoke at Nebraska Law School's graduation ceremony last Saturday. Even though Thomas went to Yale Law School almost forty years ago, he attempted to find relevance for today's graduates:

His attempts to get a job at a law firm resulted in numerous rejection letters, stirring anxiety in the future justice who had a young child at the time and staggering student loans. His lone job offer came from the state Missouri attorney general for meager pay and a long distance from his hometown of Savannah, Ga.

"Getting on the bottom rung would have been enough for me, but I couldn't even do that," Thomas said. "But I got to sit where you are today with that solitary job offer as my tenuous lifeline to that glimmer of hope. Little did I know what was in store for me."
...
"As will be the case for each of you, the people who really mattered were supportive," he said. "But many others were not the least bit encouraging, and some even chose to pour salt in the wounds of disappointment and despair. Whether it was those who looked at me with pity, or those who assured me that my one job offer was a waste of a Yale Law School education, many were just plain unhelpful, unsupportive and mean."

What the article (and presumably the justice) left out is that he got his job at the Missouri ADs office because he networked with the sitting attorney general of the state, John Danforth, who wound up being an influential Republican Senator and who was a Yale law alum himself. And on his oyez biolgraphy, it states that he had ample offers and chose to go to Missouri because the AG would left him work on tax and antitrust stuff. And according to a New York Times column, Thomas has previously mischaracterized his past for his own motives.

But all that murky stuff aside, the point is the message, right? That these graduates may be spat on, rejected, or be greeted with people who tell them their education was a waste, but they can really make it if they just follow that "glimmer of hope?"

Yes, kids, if you just happen to be the right color, make the right ally at Yale, finagle your way into the Reagan administration and land a judicial appointment just in time for Thurgood Marshall to retire, you can have great things in store for you, too! Even if you have Anita Hill speaking against you! And when your opinions are mocked by TTT law professors who point out your numerous errors, you get the last laugh!

I'm not going to deny that Clarence Thomas had a rough childhood that he persevered through it all towards success (and I don't question that southern law firms refused to hire blacks at all), but for most of those kids graduating today, their "glimmer of hope" is that a weird disease immobilizes 1/3 of the attorneys in Omaha, or that they win the lottery, or that their student loans are forgiven via an accounting error. Something tells me their networking at Nebraska did not land them in the company of many future Senators.

Frankly, hearing Thomas talk of "staggering student loans" and dim job prospects to this generation is insulting, almost like a celebrity complaining because their double-platinum card's APR rose from 0.7 to 1.2% or because they can't get their custom Mercedes for another month. Thomas' starting salary in Missouri in the early 70s was the equivalent of about 45k today. If you offered that job - which, remember, Thomas got because he was a Yale graduate with connections - 85% of the students in the audience would take it in a heartbeat. And Thomas' student loans from Yale couldn't have been that bad compared to what today's average graduates face. Yale tuition in 1976 was 4150 a year. Assuming it was slightly lower when Thomas was there, his total debt-to-salary ratio would have been manageable, especially since Yale offered him generous financial aid on account of his race. And his student loans were dischargable in bankruptcy. Today, it's become routine for students to try to pay back debt with a 3-1 debt-to-salary ratio, if not higher.

The overall appearance here is one of a condescending, out-of-touch buffoon who thinks his overstated struggles and extremely good fortune can somehow furnish sound advice to people cruelly disabled by a system rigged against them. What these students really need to hear is exactly what Thomas told them to ignore. They need to have a realistic viewpoint and not rely on "glimmer[s] of hope." They need to confront the fact that law is an oversaturated field and that other areas may provide them with better success. For many of them, they need to embrace the fact that their education might have been a waste. If you don't take that view, you wind up with a bunch of people continuing to try and find nonexistent jobs for years.

What really matters to these kids is exactly what mattered to Justice Thomas: finding remunerative work and a healthy role in society. Your family can be supportive, but if you can't find a decent job, all the "you can do it, Billy, we love you, don't despair" in the world isn't going to help you put bread on the table and pay debts. It's a one-way ticket to depression and deep feelings of personal failure where there was very little chance to succeed.

What really galls me is that people like Justice Thomas are in a position (well, at least in theory) to really change things, get people to think differently about education and young adulthood and debt and finding work. And yet they all talk about working hard and fighting through rejection and turbulence and valuing your support system and blah blah blah. I'm not arguing that life should be rejection- and hardship-free (on the contrary, both are necessities), but central to having success in the world are knowing when to fold your cards and knowing when you're being screwed over. If something is more or less impossible, there's no point wasting further energy trying it. We're quickly approaching an age where restaurants, the notorious "look before you leap" business, will have more of an economic life than JDs.

I would love for just one speaker to get up this graduation season and say something like this:

"I'm mad as hell and you should be, too, because 1/2 to 2/3 of you are never going to really work as attorneys. Many of you would be better off finding a restaurant gig and writing your Congressmen daily. Sorry, kiddos, we abandoned professionalism a while back and the law schools decided to exploit the lack of youth jobs, the popular image of the Perry Mason attorney, and the myth that they're all rich. Have fun paying your non-dischargable debt working at the Gap."

Graduation ceremonies are supposed to be a welcome to the next world, right? And in many cases, isn't honesty the best possible virtue you can give to these graduates? It sickens me that the majority of law school students and recent graduates still seem to sit on their hands, waste two years of their life, and have a Pollyanna view of the world that they'll land a high-quality job if they're just tough enough.

Ultimately, that's the sort of passive egocentric optimism that needs to stop. It has nothing to do with you, whether you land a job or not. It's the system. It needs to change, and shame on Justice Thomas for apparently looking away and preaching the same old garbage. You'd think with his background he would be sensitive to social systems that screw people regardless of their merit, hard work, or character.

Journalist of the Day: Brad Kane

Today I want to feature two articles from the Hartford (CT) Business Journal, both written by Brad Kane.

First, we have Lawyers' Debt Hits All-Time High:

Today’s law school graduate has more debt than ever before, and is facing a market where getting a job is an extensive, grueling process. First-year lawyers are leaning on clerkships and part-time legal work, forced to abandon — or at least delay — their dream jobs to make their monthly debt payments.
...
The large debt is what sets this recession apart from all others, said James Leipold, executive director for the National Association for Law Placement.

That quote isn't completely correct, and I wish he had focused on someone broke and unemployed rather than the cute blonde who landed a job two weeks after the bar exam by "networking," but at least people might start to understand that the law school bubble is different if mainstream journalism keeps repeating these types of articles.

With that need for repetition in mind, Brad is the journalist of the day for publishing a second article on the profession as a whole on the same day, which I haven't seen posted anywhere else:

The message from Connecticut’s attorneys is clear: Unless you love the law, you’ll hate being a lawyer.

That’s the message more lawyers are telling their children.

And that’s a concern for an industry that finds itself in turmoil. The price of admission is up and interest in being a lawyer is down. The passion that once marked the profession is fading in the face of business pressures as law firms race to be the biggest and most comprehensive, judging lawyers’ value on the revenue they generate.

This is obvious to many of us who have already paid the for the boat show ticket, but ordinary people (and businessmen, like the readership of this newspaper) cannot hear it too many times: law is not what's on TV, and it's not what it was even 30 years ago.

And in this article, we get an actual anecdote of failure:

Avon native Daniel Lindenberg graduated in 2009 from Albany Law School in New York. . . .

Over the next 15 months, Lindenberg interviewed for 80 jobs. With $200,000 in deferred law school debt looming, the riches weren’t flowing. He moved back into his parents’ house. Connecticut bar exams, he started his job search.

Over the next 15 months, Lindenberg interviewed for 80 jobs. With $200,000 in deferred law school debt looming, the riches weren’t flowing. He moved back into his parents’ house.

He finally got a full-time job in January. The article talks about cutting costs, disbanding summer programs, and generally how the shift from profession-first to a business-first has fallen disproportionately on new lawyers.

All true, and I wish every newspaper in the country ran a story like this so the masses could see the major problems in the legal field.

Elie Mystal Gives Terrible Advice

It's easy to pile on Elie Mystal, who must give nightmares for Harvard Law School's marketing department by being a public intellectual lightweight. But gosh darn it, it's kind of fun.

So today Elie - in contrast to his self-proclaimed skepticism about law school - has decided to tell a disgruntled 1L who wrote in that he should stay at his "elite" law school. What a shocker, eh?

Here's the kid's basic info:

• At an unidentified "top 10" school
• At the bottom of his class despite "working really hard"
• Lost motivation and is pessimistic about his future in the law
• No great pre-law work experience
• Liberal arts major
• "Significant financial help" from parents.

Now here are Elie's reasons for staying in law school:

(a) He picked the right parents.
(b) He got into the right school.
(c) He doesn’t have any other burning passion in his life.
(d) The worst part of law school is over.

Why wouldn’t this guy finish law school? Here is a situation where there is almost no downside. Assuming he’s going to be in a position to graduate debt-free or nearly debt-free, with a degree from an elite institution, what’s the harm? He can do anything he wants after it’s over. No, idiot law school marketers, not because you can do anything with a law degree. But because you can do anything with financially supportive parents.

This is retardation at work. Let's take these in order.

(a) "Rich parents" are not a valid reason to continue in law school. Elie claims that the kid is graduating "debt-free" if mom and dad pay for the whole thing. Furthermore, he claims that this guy can go to law school for "free."

That's an outright lie. Just because he's burning mom and dad's money instead of the federal government's doesn't mean that it's now "free." If anything, I'd feel guiltier about hoodwinking my parents into paying 50k a year instead of getting the government-banking complex to pay 50k a year. Furthermore, our concepts of "debt" and "free" should be broader than whether some 3rd-tier financial institution sends you a bill after graduation. The kid is sacrificing two more years of his life, plus taking the limitations of having a J.D. on his resume. Lost opportunities are a major downside, especially for someone in their early-to-mid 20s.

And if "you can do anything with financially supportive parents," that actually counsels against staying in law school doesn't it? Or it's a neutral at best? Your parents can help you start a business, travel the world, pursue other passions. There's plenty of investment alternatives here, so even with rich parents, you have to defeat the alternatives and prove law is a strong enough investment to keep that capital invested in it.

(b) There's no such thing as the "right school" for someone who finishes at the bottom of the class. Elie the elitist called it a "top 10" school, so I'm guessing it's somewhere like Penn or Northwestern or NYU and not Harvard or Yale. Given the continuing BigLaw and government cut-backs, I would not gamble on being a bottom-quartile graduate at Northwestern or Penn. Georgetown has already been caught fudging its graduate employment numbers, and Duke had to set up a program to ensure all its graduates landed jobs.

Never mind that to be an attorney, one actually has to pass the bar exam. Depending on what "bottom of the class" means to this kid, he might find the bar exam a very difficult challenge. For example, according to Law School Numbers, at NYU 6% of bar takers don't pass on the first try. For Michigan, 8% of in-state bar exam takers did not pass in 2007. For Cal-Berkeley, 6-16% fail the"notoriously hard" California bar exam the first time around.

I can guarantee you some of this kid's classmates didn't work that hard at all. If he put in a top effort and wound up near the bottom, he's probably going to have a difficult time with the bar. At which point in time, his "top school" doesn't matter at all. Investing all that time only to find the bar exam an insurmountable hurdle (like >2% of the class often does, even from "elite" schools) is a major downside; you cannot ignore this possibility.

So the bottom line is that even at a top school, this kid needs to have the right attitude to be paying the not-so-free full sticker price.

(c) The question is not whether he has some other burning passion, it's whether he actually has a burning passion for the law. This person seems very pessimistic and burnt out. He has no motivation by his own words. If he has no motivation at the end of 1L (before spring exams, when he might have a chance to redeem his fall performance), how is he going to feel answering interrogatories at 9 pm? How is he going to do well in the next two years? How is he going to have to drive to do top work for his clients and/or his firm? How is he going to be gung-ho about finding work opportunities in his 2L and 3L years?

This student seems to have gone to law school because he had nothing better to do. That's not a good reason to stay in law school when he has no strong desire to actually practice law.

(d) The worst part of law school is not necessarily over. People like to talk up 1L year like it's some sort of boot camp, but at least in my experience, parts of 2L are worse depending on your array of classes. And at least during 1L year, any thoughts of unemployment and debt repayment are far in the distance. Try talking to a generic 3L right now and the fog of unemployment and taking the bar exam plagues them worse than even 1L exams. 1L is time-consuming and stressful, but it's a time-limited stress; once mid-May hits there's no more 1L Socratic method or harsh-curve exams. That doesn't work with debt default.

All in all, this person needs to think long and hard about the law, and if they have no honest drive to be a lawyer, they need to get out after this semester. The connections are, for the most part, already made. With "financially supportive" parents, the life reorganization won't be that bad, and new experiences can quickly wipe away the tarnish of a bad year in law school.

The loss of time and money is a major harm, Elie. To spend significant amounts of both, the student should have a positive, compelling reason for staying in law school. This student does not.

Would you personally spend $100,000 and two years of your life on something you had no enthusiasm for that had no guarantee of paying any kind of a reward down the road? Of course not, and if this didn't involve an "elite" law school, I can't believe even Elie Mystal would be so dumb as to suggest otherwise.

How Not to Do a Value Survey

This U.S.N.W.R. article seeks to find which schools are the best values by looking at the median salary to average debt ratio. Right away we have a methodology problem by comparing an average to a median. Another problem is that the survey includes only private sector salaries, ignoring the sizable amount of government workers who have salary/debt ratios well below one.

The worst problem, of course, is that they're using the schools' horribly flawed, self-reported numbers.

Here's the list for giggles:

1. Southern U.
2. Georgia State
3. Rutgers-Camden
4. Texas Southern
5. Brigham Young
6. North Carolina
7. Texas
8. Loyola-New Orleans
9. Georgia
10. California-Berkeley

There's like four or five of these that make sense. Anyone who thinks Southern U. Law Center grads are making five times their debt load after graduation is a fool, and if anyone can prove to me that Loyola-New Orleans median grads are actually making 84k a year with only 45k in debt (total cost full time is 45k a year and less than 20% get juicy scholarships on the tuition part), I'll eat my computer piece by piece and then move to Louisiana.

Garbage in, garbage out. If anyone actually did this survey honestly, perhaps only 15-20 schools would have salary/debt ratios over 1.0.

Is Reverse Auctioning Coming to Legal Profession?

It appears so-called "reverse auctions" are entering the legal field, where prospective clients can present their case and attorneys can bid to do the service for them.

This is from the ABA Journal:

[Robert Grant] Niznik’s graduation musings led him to contemplate the plight of indebted law students struggling to find a job in a bleak economic climate as well as the expensive and largely inaccessible nature of the legal profession. His answer to both issues is at once goofy and serious. The New York Law School student founded Shpoonkle, a playfully named website that allows attorneys and law firms to bid on legal requests submitted by clients. The service is free for now, but Niznik said attorneys may be charged membership fees in the future.

"Shpoonkle" is a horrible, horrible name, and I think there are numerous potential pitfalls that have to be overcome (e.g., the clients' incentives to lie seems higher than if they're in a one-on-one initial consultation, and if the lawyer's aren't allowed to ask questions before bidding, I could see the site becoming a platform for misrepresentation). However, the fact that people are developing such technologies should surprise no one, and I think this is a positive sign that the real dangers of lawyer oversupply may become present.

By way of example, I'd like to discuss the sports card market's collapse in the early 90s. For example, in 1990-1993, a Ryne Sandberg 1993 Topps rookie card was "worth" approximately $35-40 in mint condition according to price guides that monitored the market. By the late '90s, the price had dropped dramatically (to $15 or so) and today - even after Sandberg has been inducted into the Hall of Fame - one can buy a Sandberg rookie card for about $4.00 on eBay. Sandberg's career trajectory cannot explain that by itself, as the same phenomenon can be witnessed in the value of other cards from the 70s, 80s, and 90s (e.g., this card once went for $100+). Factoring in inflation, that's a major collapse.

Why did it happen? The initial knee-jerk reaction might be that the strike of 1994 and the steroid era forever ruined baseball's popularity. But the same effect can be seen in other sports as well (see this, for example). Rather, what happened in the mid-90s was that the development of the internet (specifically eBay) destroyed the supply/demand illusion that previously dictated prices. See, prior to eBay, sports card values were set by price guides (like Beckett), who purported to monitor sales. People involved in private one-on-one transactions had no idea what the true supply of these cards was, and often the demand was overstated; such is very easy to do with there is limited information about the supply and demand of an object.

When eBay came around, it destroyed that market illusion by showing the market that the supply was much greater than anyone thought and the demand was actually much lower than anyone thought. It provided a superior means of determining supply and demand (ergo price), ultimately benefiting consumers at the expense of those who had been stockpiling sports cards on the false belief that these things would be valuable at some point in the future.

Now apply to law. What does good legal representation cost? Aside for the more "routine" services (simple chapter 7, llc drafting, basic real estate transactions, etc.), no one has a damned clue. Indeed, the ambiguity involved in legal representation - the fear that lawyer costs may skyrocket - inhibits a lot of people from seeking attorney aid. And when someone sits down with a lawyer in a one-on-one setting after a consultation, the potential client lacks any power to bargain if the lawyer says his services cost $200.00 an hour.

This set-up is a market illusion, just as the baseball card market was before eBay. The consumer (client) has no idea what the actual supply of legal services is. The lawyer is thus in a superior position to argue that his particular services are in high demand and short supply, even if they aren't.

If there were a reverse auction site set-up - not just this Shpoonkle thing, but also LawyerBid is in the game - prices for everything worth taking except the most complex litigation will drop. Why? Because lawyers are a competitive bunch and there are more licenses floating around than are necessary to service the current demand for legal services. People are, overall, cheapskates. If one barred lawyer can represent someone for half the price of another - and the individual can see the cost savings in black-and-white - that consumer isn't going to care who went to Harvard and who went to Cooley.

This is the nation of Wal-Mart and McDonalds. Prestige has nothing on cost savings, and not even Fortune 500 companies will turn down lower legal fees if they're clearly being overcharged. Right now, there's a market illusion that keeps people from seeing that they're being overcharged. If an auction site were set up, that illusion is gone.

This, of course, would be great for notions of "justice" and providing access to new parties, but, you see, the people at the high end are obviously worried. Or just ethically-minded attorneys in general. From Simple Justice:

By no means does the need for money make this a justifiable mechanism. It is anathema to what the legal profession is supposed to stand for, implicates a wide variety of unpleasant ethical considerations and reflects a further step, maybe giant step, away from excellence toward commodity. Yet my fear is that the lawyers who would sign up for this mutt couldn't care less.
...
I find it hard to blame some anonymous entrepreneurial law student from putting together this horrible idea. He's just trying to make a buck, and the creation of this new concept doesn't compel lawyers to sign up, lawyers to outbid each other to see how low they can go, lawyers to try to glom up cases in areas where they lack competency or lawyers to provide less than stellar services. It doesn't require that things go horribly wrong. But we all know they will.

That's my gut reaction as well, but let's face some facts. Law's professionalism went out the window a long time ago. The profession is now over saturated with 15k excess graduates every year in a market that is threatened to shrink by both outsourcing and technological advances.

And yet, attorneys at the top of the food chain still make a very good living, both the BigLaw partners and those working is solo firms at so-called "boutiques." There are absurd inefficiencies and market illusions harming consumers while the practitioners most burdened by the oversupply of attorneys is carrying a disproportionately heavy amount of non-dischargable debt acquired by entering the "profession."

Real professions don't set up situations such as that. Instead, they regulate who can enter the profession in order to ensure that there are few licensed professionals who struggle to make a living or pay off the costs of join the profession. The legal profession discarded that principle when it opened law school to any Joe and Betty with a 150 LSAT and a federal loan application. It cannot now hide behind professionalism as a shield to keep normal business conditions for penetrating every inch of the "profession" in a veiled attempt to keep billable hour rates unduly high.

At some point, something has to give.

I don't think this site will be a success. Indeed, as Simple Justice points out, other sites like this have failed previously, and I see too many ethical hurdles that may kill this site, especially if bar associations start looking after their interests and prohibit participation in these sites to maintain illusive values.

But people can't live in the dark forever, and you can't keep pumping out attorneys (i.e. supply) without prices, and therefore salaries, collapsing at some point. Maybe reverse auctions won't do it, but something will accelerate the race to the bottom that can already been seen in some areas.

Hypocrisy at the Ohio Supreme Court

As others have reported, a law graduate in Ohio has failed the "character and fitness" portion of the bar application because "the applicant has neglected his personal financial obligations by electing to maintain his part-time employment with the Public Defender’s Office in the hope that it will lead to a full-time position upon passage of the bar exam, rather than seeking full-time employment." His financial obligations include $170,000 in law school debt and about $16k in credit card debt.

This is, of course, absurd, a sort-of Kafkan nightmare in a world where the state's flagship public law school costs 100k over 3 years. A non-wealthy student going straight from undergrad would have to borrow the majority of that sum, and that's after the student has gone through four years of undergraduate school. The cost to attend The Ohio State University is roughly $25,000 for Ohio residents.

So for seven years at OSU - undergraduate and law school - an Ohio resident would need roughly $200,000 at minimum. Most middle- and lower-class students have no option but to borrow that money. And yet $170,000 in debt while a student tries to get a job in the law is deemed "financially irresponsible." Even a student who works part-time, 20 hours a week, for all seven years, every single week, averaging $10/hour would still have $130,000 left on the tab.

What really galls me is that every member of the Ohio Supreme Court signed the opinion without realizing their own blatant hypocrisy. Let's take a look at the justices individually (costs and fees either taken from Law School Numbers or from the school's websites; reasonable estimates made where necessary):

Chief Justice Maureen O'Connor got her B.A. from Seton Hall. She received her law degree from Cleveland-Marshall. Resident cost of attendance for Cleveland-Marshall is about $93,000 for three years. Four years of undergrad at Seton Hall? $30k a year on tuition alone, roughly 15-20k more in living expenses. For someone starting today, Justice O'Connor's education would cost at least $273,000.

Justice Paul Pfeifer "raised purebred Yorkshire hogs to finance his college education." That education? Both undergraduate and law degrees from OSU. He had his J.D. at 24, so I don't think he was working full-time before law school. Even if farm kids today had the means to raise hogs on any scale that made money, I'm pretty sure that kid isn't going to be able to bank the $200,000 needed to "finance his college education" from any profits. Someone with humble farm origins would almost certainly need to borrow most of the cost of his education today.

Justice Evelyn Lundberg-Stratton was "[b]orn to missionary parents in Bangkok" and once "returned to America alone with only a few hundred dollars in her pocket." She "[w]ork[ed] her way through school" at the University of Akron and then at OSU Law. As already noted, OSU law costs 100k for three years. Akron? For residents, it'd be 9k in tuition and an estimated 12k in living expenses every year. Relatively cheap, but the 4-year price tag is still $84k. With law school, that's $184,000 to bankroll Justice Lundberg-Stratton's education that has obviously served her well from a lower-class background. As noted, working part time would result in a 70k reduction. Where is the other $114,000 coming from?

Justice Terrence O'Donnell went to Kent State and then Cleveland-Marshall. As a resident, you can go to Kent State for under 20k a year and Cleveland-Marshall costs around 93k. $173,000. Cheap date, all things considered, although I wouldn't bet on the success of a Kent State/Cleveland-Marshall grad today.

Justice Judy Lanzinger is the "granddaughter of coal-miners" and the "first in her family to attend college." She attended the University of Toledo for both undergraduate and law school. For undergrad, Toledo costs about 7k a year in tuition. A room, board, and food estimate would be around 17k. Three years at Toledo Law costs $20k per year in tuition alone. Add living expenses and it's a 37k per year expenditure. Total for those seven years at Toledo? $207,000. How, pray tell, is a first-generation "coal-miner granddaughter" supposed to pay for that without taking out over 100k in loans?

Justice Robert Cupp hails from "rural Allen County and grew up on his family's farm." His educational choice was limited to Ohio Northern University for both his undergraduate and law degrees. That school's private. Total costs are 37k for law and 42k for undergraduate. The grand total? $279,000 for this private school education. Working may take it down to 200k. How many farm kids can even make a dent in that from their family contributions?

Justice Yvette Brown went to Ohio University and then matriculated to Ohio State for law school. As stated, the law portion, starting today, would cost 100k. Undergrad at Ohio University? Tuition is 9.5k for in-state; estimated costs would be around 14k. The total would be 94k for undergrad for a grand total of $194,000 to fund this woman's education.

To duplicate their chosen educational paths today, each of these justices would have to find more than $170,000 to fund their educations, yet, apparently, $170,000 in student loan debt makes one "financially irresponsible" unless one quits all ambitions of having a law career and takes a full-time private sector job.

I understand that many of these individuals likely had scholarships, and to be fair most of these schools are generous with scholarships today to lower the tuition costs, but someone somewhere has to pay the sticker price. Even those that get scholarships and work part-time often wind up with substantial debt.

The fact that the Ohio Supreme Court cannot recognize that financing an education is fundamentally different today and that not one of them could repeat their educational path (even with raising hogs or working 30 hours a week) without incurring absurdly-high expenses, often paid with student loans, is an indictment of how out-of-touch the Court is. Having student loan debt over $125,000 is the new normal, not some prima facie evidence of fiscal ineptitude.

For all seven justices to obviously benefit from their now-expensive educations and then categorically deny bar admission to someone who took a remarkably similar path is hypocrisy at its finest. That at least four were of humble origins and a fifth (Brown) is a minority makes the opinion all the more offensive. The average middle-class kid can simply not get a law degree without borrowing six figures or getting generous scholarships at every step of the process.

There's problems with the system, yes, but barring admission to students with normal debt loads on "character" grounds is not the solution.

Why Pay Tuition? Get Your Law Degree on eBay!

Yes, a(nother?) disgruntled graduated has decided to sell her degree on eBay...but only for the right price:

“Resume Goddess” is selling a six year old law degree on eBay, never used, from The John Marshall Law School in Chicago. She tells NetNet that loans from the third tier law school have “ruined” her life.

The price for this wonderful piece of paper? $200k starting bid. Looks like someone was looking for return on her investment!

I can't get the actual eBay auction to load. It's probably been taken down, since eBay values the integrity of its system and all, but at least it made it to CNBC.

Patriotism = Defaulting on a Student Loan

If you're ever in need of a quick statistic/drunken quip for cocktail parties as to how our lawmakers perversely incentive all sorts of government-fueled fiscally-suicidal behavior, take a look at today's Wall St. Journal:

After paying the companies that actually collect the loans and other costs, the U.S. Department of Education expects to recover 85% of defaulted federal loan dollars based on current value. The recovery figures are quite generous when compared with other corners of consumer debt. Banks, for example, often retrieve less than 10 cents on the dollar from overdue credit cards.
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According to [Mark] Kantrowitz [of finaid.org], the government stands to earn $2,010.44 more in interest from a $10,000 loan that defaulted than if it had been paid in full over a 20-year term, and $6,522.00 more than if it had been paid back in 10 years. Alan Collinge, founder of borrowers' rights advocacy Student Loan Justice, said the high recovery rates provide a "perverted incentive" for the government to allow loans to go into default. Kantrowitz estimates the recovery rate would need to fall to below 50% in order for default prevention efforts to become more lucrative than defaults themselves.

So because student loans are non-dischargeable, the federal government can wallop the private sector on the collection of unsecured debts. The result is that government has no incentive whatsoever to correct the problem because, sure as I'm sitting here, that number would drop right down to 10% (maybe lower) if students could discharge, even if it were only after a time period (my preferred suggestion, if my Congressman is reading). Likewise, government has little incentive to stop lending money anytime soon with that kind of rate of return (representatives don't usually make good bankers, so they're probably not adjusting for inflation).

If the state makes more money on defaulted loans than properly-paid ones, it's seems like it might be one's patriotic duty to let it default and pay more. Fiscal responsibility ceased being an American virtue at the federal government quite some time ago, so why should it promote individuals to keep up the charade?

News Roundup: Virtech Paralegal, Suing McDonalds, Debt Collections, and Merry Christmas!

Our first item up today is Virtech Paralegal, a company based out of Dallas that seeks to reduce economies-of-scale advantages held by bigger law firms by making it easier for solo practitioners and small firms to access paralegal services and organizational software. I saw this today about the company:

Last month, Virtech landed its first private financing – $500,000 from a local angel investor group – for marketing and to hire up to 40 people, said Brandon Lloyd, co-founder and chief operating officer of Virtech. Almost all of Virtech's nearly 20 clients are sole practitioners, he said.
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Beyond its recent angel financing, Virtech plans to raise $2.5 million in a private stock offering to expand to new markets, enhance its software and hire more staff, officials said.
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First Virtech plans to expand its paralegal service to Austin, Houston, San Antonio, and to other states, starting with California next year, Brown said.

Now, I don't think this company's model is going to revolutionize the legal industry or bring BigLaw to its knees or anything like that, but that's a lot of financing and a lot of planned growth for a young company. Reading between the lines, I'm guessing that their numbers are very good for them to nab to 500k and then turn around and discuss a stock offering for five times as much, with expansion to other markets within two years. Either these people are expansion/credit-crazy to a fault and their business will come crashing down faster than a housing bubble eating Krispy Kremes, or their model is showing some very good returns thus far and proving itself better than whatever else is out there. My gut says the latter and that this is a situation to watch in lowering costs for private practitioners.

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Our next item up is McDonalds and yet another example of someone taking products liability/tort/trade practices/etc. theories obviously too far. I don't think this really needs comment:

The Center for Science in the Public Interest is representing the mother of a six-year-old girl in a class-action lawsuit on behalf of all California children under the age of eight who have been exposed to McDonald's "inherently deceptive and unfair" marketing in the last three years. The suit claims that McDonald's has "engaged in a highly sophisticated scheme to use the bait of toys to exploit children's developmental immaturity and subvert parental authority" and that arguments over Happy Meals have caused "needless and unwarranted dissension in their parent-child relationship."

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Our third item is debt collectors. For the uninformed, the FTC has passed through a number of changes in debt collection law in the wake of the omnibus financial reform that took place last year, specifically to target deceptive practices. But as with all things where laws cannot cover the full gamut of clever means to the ultimate end, Creditbloggers reports that debt collectors are finding novel solutions. This one struck me in particular:

Another tactic: Pose as lawyers, who are exempted from the new rules. By setting themselves up as law firms, many debt resolution companies believe they can skirt the rules. But few consumers actually get to speak to a real lawyer, according to the letter, and if they do, the lawyer is usually not licensed to practice law in their state.

I would hope there's no attorneys dumb enough to set up these firms that exist solely to evade the law and perform what seems to me to be the unauthorized practice of the law, but I'm sure we'll be seeing more stories on this in the future. There's too much money involved in debt collection - especially as joblessness continues - for there to not be entertaining shenanigans in the murky debt collection sector.

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The fourth item is that I want to wish all my readers who celebrate it a Merry Christmas!

Meet Rich Labrador

Rich Labrador is a 42-year-old lawyer and Congressman-elect from Idaho. By all accounts, being elected to the House is a noteworthy achievement. But there are two things you should know about Rich Labrador that should scream "problem."

1. Rich Labrador turned down admission at Georgetown over a decade ago because it was too expensive compared to his final option, the University of Washington.

2. Despite being in his 40s and being careful to avoid debt, Labrador still owes "between $15,000 and $50,000 in federal student loans" from 15 years ago.

This will be part of our next generation (or two or three) of leaders: people who are still saddled with student loan debt, people who have been inhibited from purchasing things like houses or planning for retirement because they had to pay beyond the cost to gain a law degree (even at a public school like UW). And Labrador went to law school before the tuition rates became nearly as high as they are today, and since he's been elected to Congress he's obviously not a failure or a "whiner."

Hopefully, having members of the indentured class in power will make positive legislation more likely, so long as they're not of the "I beat it myself, so there's no systemic problem" mindset.