The Quickly Exploding Law Graduate Debt Disaster

The average indebtedness figures for 2011 law graduates are stunning. Last year, 4 law schools had graduates with average debt exceeding $135,000. This year 17 law schools are above $135,000. Last year the highest average debt among graduates was $145,621 (Cal. Western); this year the highest average debt is $165,178 (John Marshall). Below are the 20 schools with the highest average law school debt among graduates (these figures do not include undergraduate debt).

John Marshall Chicago $165,178
California Western $153,145
Thomas Jefferson $153,006
American $151,318
New York Law School $146,230
Phoenix $145,357
Southwestern $142,606
Catholic (DC) $142,222
Northwestern $139,101
Pace University $139,007
Whittier $138,961
Atlanta's John Marshall $138,819
Pacific (McGeorge) $138,267
St. Thomas (FL) $137,721
Univ. San Francisco $137,234
Vermont Law School $136,089
Golden Gate $135,645
Florida Coastal $134,355
Stetson $133,082
Syracuse $132,993

What's remarkable is that the majority of graduates from these law schools -- with the exception of Northwestern -- do not obtain jobs with salaries sufficient to make the monthly loan payments due on the average debt. At some of these schools 90% or more of graduates with debt do not earn enough to make the loan payments on this level of debt (not all indebted students will carry the average debt).

Consider Thomas Jefferson, with average law graduate debt of $153,000. According to statistics provided by the school, only 33% of graduates landed jobs as lawyers in 2010. Most of the graduates who obtained lawyer jobs earned around $60,000 or less. (This estimate is based on the fact that the bulk who landed these jobs worked in firms of 2 to 10 lawyers; the salary figures supplied by TJ are based upon 16% reporting, and consequently are unreliable.) The placement numbers for the class of 2011 will be the same or worse (only 33% of Thomas Jefferson's 2011 graduates passed the California bar).

A simple calculation shows that many TJ graduates are in severe financial straits. Let's assume that taxes will take 30% of the graduate's $60,000 pay, leaving net monthly income of $3,500. The monthly loan payment due on $153,000 debt is $1,800; rent for a modest one bedroom apartment in San Diego is $1,200--totaling a combined outlay of $3,000. This leaves the graduate with $500 a month to spend after making rent and loan payments. It is not doable. Graduates in this position will be forced to enter Income Based Repayment, a reduced payment program that helps graduates in financial hardship avoid default, but which has significant negative consequences of its own (in particular, the loan balance will quickly balloon and will negatively affect the graduate's FICO score).

This is not just about Thomas Jefferson, of course. Eight of the law schools on the above list are in the bottom tier of US News, and 16 of the 20 schools are outside the top 100. At a number of these schools only half or fewer of the graduates will have obtained full time jobs as lawyers (these statistics should be available soon), and most of those who land lawyer jobs will earn $65,000 or less. At these debt levels, only graduates who obtain NLJ 250 jobs can manage the monthly loan payments--and on the above list only Northwestern places a significant percentage of graduates in these jobs.

Thousands of 2011 law graduates across the country will not earn enough to manage the debt they incurred to obtain their law degree.

When will law schools decide that they cannot continue to inflict ever increasing levels of unmanageable debt on their students? At the very least, the admissions offices at law schools across the country should explicitly warn students that anyone who expects to incur law school debt above $100,000 will likely suffer financial distress upon graduation unless they land a NLJ 250 job or a public service job that qualifies for reduced loan payments--and admitted students should be told that relatively few graduates get these jobs. Unfortunately, we cannot count on law schools to provide this message--which, if effective, would result in some schools closing their doors for lack of enough paying students.

This financial insanity will not stop until significant changes are made to the federal student loan program.



Boo-hoo, these kind of debt numbers have been going on for years in other professions. Why is it that lawyers seem to complain the most about it?

It seems to me that though this is a huge issue for those with incredible debt from T1 law schools, T2 or T3 law school alumni will be greatly affected by this phenomenon... Please let me know what you think. If T1 alumni are getting jobs at ~60 k and can't pay off their loans, how are T2/T3 alumni going to pay for theirs? In general, T1 students are getting the more prestigious and high-paying jobs. So even though T2/T3 alumni will have less debt, they are getting lower-grade or lower-paying jobs or none at all! Am I wrong!?

So what are students who want to be attorney supposed to do if they can't get into schools like Northwestern? Where is the money to come from? Schools are strapped, too, with falling enrollments and donations and the costs of the basics, from books to health insurance premiums to the water bill going up by double-digit percentages each year? Our institution has not only forgone raises, but employer contributions to employee retirement plans have been eliminated and we have a hiring freeze. Employees also contribute more to health insurance costs and co-pays each year, and we have no dental or optical insurance. And I doubt we're the only school in this or a similar situation. We have nowhere to cut without negatively affecting students.

Also, please note that students have options other than Income Based Repayment. There are extended repayment programs and graduated repayment programs and a combination of the two. The Public Interest Loan Forgiveness Program allows students working in government, non-profit or other qualified public interest programs to have the remainder of their loans forgiven after 10 years of income-based payments which can soon be capped at 10% of a student's adjusted gross income modified by a subtraction equal to 150% of the federal poverty level for the student's family size. Income-based repayments under the newly-authorized Pay As You Earn (PAYE) program allow loan forgiveness after 20 years of payments (although the amount forgiven is considered taxable income, which is something educators and financial aid officers are petitioning Congress to change). Yes, under any kind of income-based repayment, there is a potential for a student to make payments less than the amount of interest accruing on the loans and for the loan balances to increase, but that's not a given for all students, As long as the student makes on-time payments, his/her credit score should not take a major hit as it is how people make their payments that contributes the most to the credit score.

So what kind of changes in the federal student loan programs would you suggest? Would your changes preserve the opportunity for students who want to and who qualify to attend law school to do so? If students can't borrow, then where would you suggest they secure the resources needed to attend?

If you have a solution, please, I'm sure most of us are all ears. Otherwise, it's just like the comment about the weather--everybody talks about it, but nobody does anything to change it!

Mr. Tamanaha is certainly correct that this debt level, especially at lower-ranked schools, is a disaster. However, I don't think that student loan plans caused the problem, or that restructuring them will cure it.

When the Class of 2011 applied to law school in 2007 or 2008, the legal market was much stronger than it is now; Monday-night quarterbacking has never won a game, and it won't start doing so now.

As to curing the problem, I don't see how changing student loans will help. Tightening the requirements or reducing the amount of indebtedness will shift the proportion of already-wealthy lawyers. Stretching payments over more years simply adds interest. Perhaps we should consider complete loan forgiveness plans for certain public-interest jobs, as the medical and teaching professions have adopted over the years.

Another exciting idea is the recent proposal to eliminate the third year of law school. If there's a question of competence, follow the medical profession again and make the final year a low-paying externship rather than another year of debt-burdening classes. If individual competence is the issue, attach that externship to an agreeable GPA.

Perhaps Mr. Tamanaha has another solution; I'd be glad to consider other options. But I find finger-pointing without a concrete solution to be (if you'll pardon the pun) pointless. It's easy to name a problem, and much harder to create a solution.