You know, I lived through the 90s when credit card companies thought they could loan all the money available to anybody regardless of the ability to pay, get the public entrapped, then raise interest rates through the roof, get the Congress to make it harder for families to escape the debt in bankruptcy, and that there would no end to the madness. In short, they thought that could fashion some sort of diabolical plan to make tons of money that could not be harmed by something as trivial as the American public's ability to pay back the money at loan shark type interest rates.
I lived through the tech bubble of the late 90s and early part of the century in which seemingly smart people thought they could raise many billions of dollars from people based upon nothing but a story, a cool name, a logo, and pay for everything with worthless stock, despite the fact that the companies had no product, no market and no earnings. The hubris was that the story of future unseen riches were so unbelievable that people would continue to throw billions at them forever regardless of results.
And, I lived through housing and derivatives bubble of this century, that almost plunged the World into a depression. It was based, again, on the greed for larger and larger amounts of money from ordinary people, that anybody with a high school education new could not be met, and that seemed to defy all logic about how these money grabs would later be made whole.
Lost in all of this greed, we might be witnessing the law school bubble. This is where law schools promise students the moon for enrolling, only to increase tuition and fees (the cost of the education) through the stratosphere in the process.
Law school tuition has been increasing at an alarming rate. And, nothing seems to justify the amount of the increases, except that, at least in the past, law students have had an endless supply of debt made available to them. Sure there has been some inflation, but between rankings, prestige and a culmination of greed, there is no real basis for the money if the goal was to just provide a solid legal education.
There is little difference here than credit card companies pandering to college students with no jobs and uncertain futures. Law schools would not be increasing tuition and fees as they are if students could not find a way to pay for it, and I doubt then that the quality of education would much change. So, they pile the students up with increasingly higher interest debt and lead them to believe that Big Law will bail them out when they graduate. But, that is not going to happen except for a highly gifted few (which means not most of the graduating law students).
Here is an example of the problem faced:
Law school tuition has skyrocketed over the past 15 years,
while federal loan limits have remained stagnant. This has resulted in the need for students to take out higher-cost private loans.
In 1994, students were limited to $18,500 in low-interest loans from
the federal government. Fifteen years later, that limit has only
increased to $20,500 though the $18,500 available to students in 1994
is worth $26,959.69 in today's inflation adjusted dollars.
At the same time, tuition and fees have tripled for in-state students at
public law schools, and more than doubled for out-of-state students at
public schools and those at private schools.
In the 1994-95 school year, low-interest federal Stafford Loans
covered full tuition for in-state students at every public university
law school in the country. In the '07-08 school year, Stafford loans
covered full tuition at 80 percent of public schools, according to a report by the Government Accountability Office.
Stafford loans used to cover full tuition for out-of-state students
at 97 percent of public university law schools and 80 percent of
private law schools. In the 2007-08 school year, those loans covered
only 22 and 11 percent, respectively.
The effect has been calamitous for students. The average law school
graduate in 2008 left school with more than $71,000 in debt, the GAO
reports.
"The rising debt burden of law graduates and other graduates has a
negative impact on the ability of highly qualified individuals to
pursue careers in public service," the American Bar Association reports. The ABA has been calling for Congress to raise the borrowing limit under the Stafford loan program.
The U.S. House of Representatives recently passed a bill calling for reform in the loan program. It's now in the Senate.
The answer, in the long run, is not so much about the need for cheaper money, although that would be welcomed. The problem is the amount of money, the amount of borrowed money, that is needed to achieve a law school education. Then, in this world of freelance work, some honest advice needs to be given to law student prospects about the type of work they will likely be engaged in after graduation.
The question is, when is the law school tuition bubble going to burst?
Recent Comments