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?

Minnesota Bar's Practice Blawg Running Law School Debt Survey

From Andrea Hable at Practice Blawg:

I feel really, really lucky. Why? I know so many people who have barely paid on their student loans at all. Which is not to say that it’s been easy for me, I just know that it could be much, much worse. I think most of my classmates acknowledge that our law school employment statistics are not close to what we see in real life, and I am no exception, which makes me curious what “realistic” employment statistics would look like. And, in the interests of seeing the bigger economic picture, I’m curious how new lawyers are really dealing with their debt burden.

If you graduated from law school in the last 10 years, please take our Practice Blawg survey below. Are you part of the 25% of new lawyers in temporary jobs? Or are you working two jobs to make ends meet? We’d like to know so we can push this discussion further.

Hable is a 2008 graduate of William Mitchell for what it's worth regarding her "luck."

The survey is anonymous. It asks for basic employment information on work, loans, etc. I strongly encourage readers who qualify (graduated from law school in the last 10 years) to fill it out regardless of your current employment/loan repayment situation, especially Minnesota Bar members who may pass by here.

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.

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.
...
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?

Bankruptcy: Financial AND Moral - All in One Post!

Every time student debt forgiveness or any variant of said idea comes up, critics emerge from the rotted woodwork like cockroaches and spout the same refrain: these kids should have to pay / you borrowed the money, you pay it / there's nothing securing these loans / etc. It comes about in various permutations, but the motif of refusing to let student borrowers file bankruptcy almost always comes back to either self-perceived personal slights ("I paid my student loan from 1986 off and lived like a pauper...") or systemic concerns ("No one would give an unsecured loan like that!")

Well, all of those idiots should read this article about elderly people filing for bankruptcy to escape crushing debts when their income isn't what they expected it to be.

[P]eople 65 and older are the fastest-growing segment of the population seeking bankruptcy protection. . . .

Of course, the big question most seniors have when it comes to bankruptcy is: Will they take all of my retirement savings and leave me penniless?

"No," Connolly said. "Social Security and retirement accounts (up to approximately $1.1 million) are exempt from creditors so seniors will continue to have that stream of income."

What's more, many states have "homestead exemption" laws, which protect home equity from creditors. In Massachusetts, for example, you're protected up to $500,000.

So let's say Gertie, Age 70, has $1,000,000 in her IRA. She owns a home outright that is worth $400k in market value. She was successful until recently retiring. She was extremely prudent and has no debt. As a retirement gift to herself, she decides to take her excellent credit and go to Europe for two weeks and spend 20k splurging on herself. She gets back and suffers a heart attack and winds up 230k in medical bills.

Gertie has the assets to pay this off entirely and fairly comfortably. Her simple net worth is over $1 million. She's not going to live for much more than 15 years after this, and barring a severe penalty on distribution (I don't know how IRA's work completely if you're that old), she'll still have 50k a year to live off of.

But Gertie - who has unsecured debts of 250k plus interest - decides she wants to "leave a little something for the kids" and so she files bankruptcy and screws the credit card companies and the medical facilities who enriched and saved her life, respectively, on entirely unsecured credit. The rest of us pay for it.

Now consider Gertie's granddaughter Gertrude. I think you all know where I'm going with this. Gertrude takes out 100k to get an undergraduate education. In four years, she graduates magna cum laude from the big state university with a degree in business. She scores a 165 on the LSAT and gets accepted to a top-30 private law school, say Notre Dame, which is her dream because she's a lifelong catholic and blah blah blah. She excels at Notre Dame, makes law review, gets a federal court internship, and graduates in the top 7 percent of her class. She takes out 50k a year and graduates with a total debt around 250k. All of this is quite normal, and she thinks it's a good bargain because with her credentials the top firms in Chicago and Indy will fight for her. And they do - she lands a BigLaw job. It's great until she has a horrible car accident; not an expensive recovery, but her once-beautiful face becomes mangled and scarred, and the partners find a way to weed her out after 2-3 years.

She has about 200k in debt and zero assets. But unlike her grandmother, she cannot file bankruptcy to protect her future, even though she doesn't have the blessing of an approaching natural life expectancy threshold.

To those who are opposed to student loans having bankruptcy protection, what's the difference between Gertie and Gertrude? Both acted reasonably and had circumstances outside their control affect their financial situation, and both wound up with unsecured debts over 200k. Why should the one who has the assets to pay creditors in full be eligible to file for bankruptcy protection but not the one who hasn't a dime? Why does our system let elderly people who won't be around in two decades wipe the slate clean and leave money to heirs while we saddle young people with non-dischargable debt?

Anyone who believes this system of debtor relief has any notion of justice - or even rationality - behind it is not thinking clearly. We're supposed to have consistent laws in this country. A millionaire being able to discharge catastrophic medical bills (often brought by a less-than-healthy lifestyle) while students are stuck with their form of unsecured debt is patently unjust. It would take the brand of circular logic available only to Congressmen and partisan apologists.

---------------------------------------------

In the moral bankruptcy category, today I give you Liberty University School of Law, which was recently spotlighted in their local rag.

Central to the law school’s mission is the belief that God created law, and law is properly understood through a Christian worldview, Staver said.

Law without a Christian standard, Staver asserts, can become a “cold instrument of force.” ...

Professor Rena Lindevaldsen, who has a background in commercial law and religious right advocacy, teaches “Foundations of Law,” a required course for first-year students. It emphasizes the importance of limited government and the Biblical roots of the law. It also advocates an originalist approach to the Constitution, one that upholds the original intention of the founders, rather than viewing it as a dynamic document that can evolve over time.

“When you look back at any area of law, whether its torts or contracts or pick a topic, you can see that the Bible actually has principles that apply to this. It’s nothing new that we had to invent,” said Lindevaldsen, who has taught at Liberty since 2005 and earned her law degree from Brooklyn Law School.

There's so much more in the article that pretty much damns this place as a serious law school. And in the spirit of Christian fellowship, this school costs over $46,000 per year to attend. It was recently accredited (last 10 years), and your odds of finding a remunerative job are slim. Washington and Lee (ranked in the top 40) is an hour away. University of Virginia (T14) is an hour and fifteen minutes away. University of Richmond (top 100) is 2 hours away. And then there's the megalaw D.C. metro area.

I at least have to credit them for being seemingly honest on their employment statistics. Check this out:

That's brutal. I understand the desire for an organized church to have Christian lawyer-soldiers, but surely there's a better way of going about it than charging kids 50k a year to attend a place where only 47% have a real job 12 months later (and that's what they're reporting...). Ever heard of a scholarship fund? Personally, if I were a legal employer, any resume I got from this place would go straight in the trashcan, as I'm skeptical a brand new, Christ-first school can really teach the skills necessary to excel in the law, especially when the school is little more than a transparent vehicle for right-wing thought. I'm sure they know this, and with that in mind, it seems like a shameless cash cow to feed the University.

If you really wanted good Christian lawyers, wouldn't you be helping young Christians afford places like William and Mary or Virginia, where they can really do damage with a legal career? Maybe sponsor church activities for students already at those schools?

But it's not the first time evangelical Christianity has jumped on the profit wagon, and I'm sure it won't be the last.