U.S. News and the Law School Debt Crisis

The U.S. NewLaw School Debt Crisiss and World Report Law School rankings came out on Monday and, with them, the congratulatory press releases from well-ranked law schools, and the “rankings shouldn’t matter” announcements from lower-ranked ones. So far, at least one law school has changed deans. Yesterday morning, the University of Dayton School of Law which, coincidentally or not, tied for #145 in Monday’s rankings, named a new dean. Dayton might be first; it certainly will not be the last.

As almost everyone knows by now, the U.S. News rankings create a losing race for everyone. Even the U.S. Supreme Court has weighed in: Justice Alito has called the rankings of law schools “an abomination,” adding that “[t]he legal profession and the country would be better off if they were eliminated.”

For law schools in particular, one of several problems with the U.S News system is that it encourages law schools to get ranked higher by spending money. What does that mean? The U.S. News considers in its calculations faculty resources, expenditures per student, student-faculty ratio, and library resources. All of those involve considerations that require law schools to spend more money. We end up with a Catch-22. Students want to enroll in higher-ranked schools (we’re kidding ourselves if we don’t think students and their future employers aren’t paying attention to rankings). Law schools, who are all trying to attract students from an ever-shrinking applicant pool, spend the money to keep up with the rankings. Students then take out enormous debt loads to pay tuition for these schools.

Paul Campos, a law school professor and blogger, wrote a fascinating 2011 article on this upward tuition spiral. Like myself, Professor Campos attended the University of Michigan Law School. For the 1974-1975 school year, resident tuition at Michigan was $1240. That’s $5878 in today’s dollars. For the year 2014-2015, Michigan resident tuition was $50,980. By rough calculations, even adjusting for inflation, Michigan now charges nine times more for resident tuition than it did 40 years ago.

Michigan isn’t an outlier in the least. As Professor Campos explains, “Since the mid-1980s private law school tuition has increased by 161.5% in real inflation-adjusted terms, while public law school resident tuition has increased by an astounding 396.8% over inflation.” And while law school tuition has increased, median household income has remained the same (again adjusting for inflation) since 1975 – around $50,000. So in 1970, it would have cost 7.9% of the average American household salary to attend a $50,000/year law school; now, it would cost almost 100%.

Of course, the U.S. News isn’t entirely to blame for the dramatic increase in law school tuition. The ABA Young Lawyers’ Division recently released a report naming “federal lending practice” the primary culprit. And that’s precisely where the next step comes in the new law school crisis – the student debt.

Somewhat lost among the flurry of the “Best Law School” rankings was this less-talked about U.S. News ranking: “Which law school graduates have the most debt?” Leading the way, Thomas Jefferson School of Law with an average indebtedness per student of $172,445. In 2012, the ABA released similar numbers. For a public law school student, the average debt load was $84,600. For a private law school student? $122,158.

But it’s not only the numbers that are overwhelming; it’s the implications for our legal profession. Those implications include law licensing, job choices, and even the future career and lifestyle prospects for this generation of lawyers.

For example, because attorneys need to act as fiduciaries of client funds, to be admitted as lawyers they must meet character and fitness requirements about handling their own money wisely. In one much talked-about New York case, a lawyer was denied admission to the bar due to non-payment of student debt (in his case, over $400,000 in student debt). And between 2009 and 2013, the Illinois ARDC charged 38 lawyers with “bad faith avoidance of student loans” including 16 in 2010 and 15 in 2011.

The impact on career choices is equally telling. Last May The New York Times reported that people with student loans are less likely to start businesses of their own. And in a 2014 report, the ABA credited debt with affecting the career choices young lawyers make, limiting the diversity of the industry, and reducing the quality of legal services.

Finally, student debt generally (not only law school debt) is a crucial reason many in the Millennial generation are unable to move on from their parents’ protection. For example, in October, the Federal Reserve released a study indicating that student debt may be why Millennials are moving back in with their parents. Between 2005–2014, the percentage of 18-to-31-year-olds living with their parents grew by 15%, which the researchers described as an “unprecedented” speed. The researchers point the finger directly at student debt: “[W]hile local economic growth … has mixed consequences for youth independence, the increasing magnitude of student debt among college graduates appears to be driving young people home and keeping them there.”

For some parents, Millennials are not only moving back into their houses; parents are responsible for paying back loans. A January Business Insider article highlighted this dilemma. In that case, parents of a young lawyer refinanced their house and used the money to repay their son’s student’s loans. In turn, their son paid the bank the new monthly payments, payments that were far lower than his student loan repayments.

And of course problems lurk when parents take out student loans on behalf of their adult children, not fully aware of how it might affect their lifetime budget and their retirement prospects. U.S. News, fittingly enough, warned parents in 2014 about those dangers at the undergraduate level​:

A $20,000 loan for freshman year may sound manageable, but multiply that by the number of years you expect your student to be in school and the number of college bound children in the household and suddenly you owe $160,000 in Parent Direct PLUS loans, assuming you only have two children … a family of four with a combined adjusted gross income of $80,000 will still have a monthly payment of around $1,000 a month – paying back a total of more than $300,000 including interest.

Rising tuition continues. Rising student debt continues. Meanwhile, of course, the legal market is evolving toward a new normal of which we can’t even properly conceive, but which is currently leaving in its wake reduced job prospects for new graduates and reduced application pools for law schools. These all have a cumulative effect on us as a profession.

A new solo practitioner with $150,000 in debt needs to pay the bills. Is he likelier to take on a client who he isn’t qualified to help in order to do so? A 2015 graduate is contemplating taking a public service job or a private sector job – what role will his loans play in that decision? Conversely, a 2010 graduate knows it’s time to leave his public sector job but he also knows he will lose out on his law school’s repayment assistance program if he does so. Then there’s the 25-year old who has just graduated law school without a job, but has no family to fall back on and a couple hundred thousand dollars in loans to repay. Where does she go? What about the 63-year old lawyer who now finds himself, partly or fully, responsible for his child’s $200,000 loan? How much longer will he stay in practice? And for the many in this Millennial generation who delay home purchases, career changes, marriage, and children due to their student loans, or who return to their parents for direct or indirect help, what long-term effect will that have in ten years? In twenty?

Despite the many studies and articles that have been written about this, it only takes one release of law school rankings to realize just how much work we need to do, and how daunting a task it will be to get all the players in line.

Michelle Silverthorn

Michelle Silverthorn

Former Diversity & Education Director at Illinois Supreme Court Commission on Professionalism
After spending seventeen years living in the Caribbean, Michelle undertook a number of around-the-world detours before ending up at the doorstep of the Commission, including four years as a general litigator in New York and Chicago. She remembers pretty much everyone she’s met in her travels but she would especially like to meet again the passengers on a January 2001 flight from Miami to JFK. At the pilot’s request, they donated enough money for Michelle, who had her wallet stolen, to get back to college safely. She would very much like to tell them all thanks.
Michelle Silverthorn

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Michelle Silverthorn

Michelle Silverthorn

Former Diversity & Education Director at Illinois Supreme Court Commission on Professionalism
After spending seventeen years living in the Caribbean, Michelle undertook a number of around-the-world detours before ending up at the doorstep of the Commission, including four years as a general litigator in New York and Chicago. She remembers pretty much everyone she’s met in her travels but she would especially like to meet again the passengers on a January 2001 flight from Miami to JFK. At the pilot’s request, they donated enough money for Michelle, who had her wallet stolen, to get back to college safely. She would very much like to tell them all thanks.
Michelle Silverthorn

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