In today's NY Times, there is an editorial on the Law School Debt Crisis which highlights many points that emerged in the current research phase in an integrative manner. It also shows the importance of the topic beyond education as it also impacts society more deeply:
"Perhaps the most galling part of this crisis is the misallocation of resources. Even as law schools are churning out unqualified graduates stuck under hopeless mountains of debt, millions of poor and lower-income Americans remain desperate for quality legal representation. (...) If fewer federal dollars were streaming into law schools’ coffers and more were directed to fund legal services organizations, the legal profession — and the American legal system as a whole — would be better for it."
Back to the focus of this challenge, a few important points that emerged from this article:
1. No jobs but high costs and high debts : " In 2013, the median LSAT score of students admitted to Florida Coastal School of Law was in the bottom quarter of all test-takers nationwide. According to the test’s administrators, students with scores this low are unlikely to ever pass the bar exam. (...) Despite this bleak outlook, Florida Coastal charges nearly $45,000 a year in tuition, which, with living expenses, can lead to crushing amounts of debt for its students. Ninety-three percent of the school’s 2014 graduating class of 484 had debts and the average wasalmost $163,000 — a higher average than all but three law schools in the country. In short, most of Florida Coastal’s students are leaving law school with a degree they can’t use, bought with a debt they can’t repay."
Note that this is not only the case of for-profit law schools. A majority of American law schools (with nonprofit status) do exactly the same thing.
- "The most significant explanation is also the simplest — free money. In 2006, Congress extended the federal Direct PLUS Loan program to allow a graduate or professional student to borrow the full amount of tuition, no matter how high, and living expenses. The idea was to give more people access to higher education and thus, in theory, higher lifetime earnings. But broader access doesn’t mean much if degrees lead not to well-paying jobs but to heavy debt burdens. That is all too often the result with PLUS loans."
- In conclusion: "Law schools jacked up tuition and accepted more students, even after the legal job market stalled and shrank in the wake of the recession."
A negative spiral:
"This reality has contributed to the drastic drop in law school applications since 2011, which has in turn exacerbated the problem — to maintain enrollment numbers, law schools have had to lower their admissions standards and take even more unqualified students. "
This points to an unintuitive, yet important, observation: more money, or easy access to money, might lead to unintended consequences, i.e. higher costs and eventually higher debts.
It also highlights a point raised in many research posts of the lack of ROI for many students who end up with high debts and no jobs, or at least not the well-paying jobs they were expecting.
3. Lack of information and lack of incentives for change lead to an appalling situation.
- No one knew due to lack of information: "For years, law schools were able to obscure the poor market by refusing to publish meaningful employment information about their graduates. But in response to pressure from skeptical lawmakers and unhappy graduates, the schools began sharing the data — and it wasn’t a pretty picture. Forty-three percent of all 2013 law school graduates did not have long-term full-time legal jobs nine months after graduation, and the numbers are only getting worse. In 2012, the average law graduate’s debt was $140,000, 59 percent higher than eight years earlier."
Beyond the importance of transparency of information (or lack of), this also highlights the importance of understanding the motivations of colleges and think of incentives that lead for real, long-term changes in behaviors.
4. How to get out of this? Two options mentioned in the article.
- "For starters, the government must require accountability from the law schools that live off student loans. This year, the Obama administration extended the so-called gainful employment rule, which ties a school’s eligibility to receive federal student loans to its success in preparing graduates for jobs that will enable them to repay their debt. The rule currently applies only to for-profit law schools, all of which, given their track records, would fail to qualify for federal loans. This rule should also apply to nonprofit schools. If it did, as many as 50 nonprofit schools could fail as well, based on one measure that considers students’ debt-to-income ratio."
- "Another good idea would be to cap the amount of federal loans available to individual schools or to students. This could drive down tuition costs, and reduce the debt loads students carry when they leave school."
This highlights the importance of taking a holistic view of all the players in the system.
It also points how more access to money leads to higher costs, and thus higher debts.