Student Loans

As I’ve mentioned before, I graduated from law school over $150,000 in debt. As many of you know, I haven’t exactly paid all of that money back. Not making payments that first year was all my fault. I wanted to get married, didn’t have a credit card, and was using money that should have been going to my loans to finance my wedding.

After that first year, things got a little out of hand. My debt was being sold, the monthly payments were outrageous, and I wasn’t really paying a lot of attention to the situation during the few times when I was both awake and not billing hours. Then I quit my law firm job, hilarity ensued, and I woke up one day with a credit rating below 550.

I’ve been paying the minimum balances to various collection agencies since 2007 or so. Whatever. My hopes for paying it off or owning property pretty much rest on my ability to hit the lotto. Most likely, I’ll die still owing money for law school. And that will be the story of me.

A reader emailed us, asking how bad non-payment of law school debt can really be. As one who has walked this path for eight years, I can honestly say it’s not that bad. Sure, it’s a completely different lifestyle than my friends lead. I can’t do “normal” things like get a Discover card or answer my unlisted telephone. But once you get used to it, it’s really not that bad. Your creditors will take away everything they can, but living a paycheck-to-paycheck, judgment-proof existence isn’t as bad as people make it look when they are trying to get you to sign up for a “free” credit reporting service….

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Resorting to violence is part of human nature. We see it all the time, especially in children. When arguments fail, when hope wanes, the fists come out. Most people are willing to fight long before they are willing to admit that their entire worldview is wrong.

Institutions are no different; they will fight to preserve the way they’ve always done things before they will change, even if their old ways are ass-backwards and likely to lead to ruin.

This desire to fight instead of change is how I understand the Department of Education story that has been blowing up the internet today. Apparently the Department of Education — not the police or the military, but the DOE — got a warrant to send in a SWAT team after a person who was delinquent in paying back their student loans.

A SWAT team, guys — a freaking SWAT team, over some unpaid debts.

UPDATE: Please note the important updates and corrections to this story, after the jump.

Now I ask you, does that sound like the behavior of an institution that is confident about the state of the student loan economy, or does that sound like an organization trying to keep things together by using force and terror?

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Okay, I’m using the term “lifts” very loosely. We all know that outsourcing is taking work that used to be done by very expensive associates based in America and giving to inexpensive workers based in India. The law firm saves money, the client saves money, and the only people who are harmed are recent graduates of U.S. law schools.

But could outsourcing companies be poised to give something back to American law school graduates? Outsourcing companies aren’t ever going to replace the many lost Biglaw jobs that are never coming back, but they could be giving rise to some new opportunities.

At this point, every little bit helps…

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We mentioned this news last week, but judging from the slew of emails we’ve received about it, many of you want to discuss it at greater length. So let’s talk about it: the class action lawsuit recently filed against Thomas Jefferson School of Law by a 2008 honors graduate of TJSL, Anna Alaburda, alleging that the San Diego-based law school commits fraud, by using misleading post-graduation employment and salary data to attract new students.

The complaint in Alaburda v. TJSL contains counts for fraud, negligent misrepresentation, and violations of various California statutes (including laws against unfair business practices and false advertising). Plaintiff Anna Alaburda claims that she racked up more than $150,000 in student loans and can’t find decent legal employment, even though she graduated with honors from TJSL, passed the California bar exam, and sent more than 150 résumés to law firms. She now does document review on a project-by-project basis.

Alaburda’s lawsuit seeks compensatory damages “believed to be in excess of $50,000,000,” punitive damages, and injunctive relief, to stop TJSL from continuing its allegedly unlawful conduct. Alaburda seeks to represent a class consisting of “[a]ll persons who attended TJSL within the statutory period” — a group estimated to contain more than 2,300 individuals.

Let’s take a closer look at this lawsuit — filed by partner Brian Procel of Miller Barondess LLP, a Boalt Hall grad and former Quinn Emanuel associate, incidentally — and consider its possible implications for legal education….

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Try telling a recent college grad to think critically before applying to law school. Just try to do it. It won’t be long before the young person you are trying to help gets inappropriately angry and shouts, “Well what AM I supposed to do, you fat f**k? Seriously oh wise internet blogger, what the hell am I supposed to do, work at Barnes & Noble? Oh wait, they’re not hiring, a$$hole.”

Yeah, recent college grads tend to act like going to law school (or some other professional school or post-graduate degree program) is their only option in a market that doesn’t have enough jobs. Citing the results of a recent poll taken by Twentysomething Inc., Time reports that 85% of 2011 college graduates are expected to move back in with their parents. (Gavel bang: BL1Y.)

Honestly guys, this is how riots start. Unemployed adults living in forced infancy without enough money to start a family of their own. That’s the tinder that has brought down pretty much every society ever.

The report reiterates what we already know: people are turning to professional school to wait out this terrible job market.

In the face of these numbers… well, I still think that people going to law school simply in response to a difficult job market are making a terrible and ruinous choice. Here’s why….

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We know that tuition keeps going up at American law schools. And, for the most part, we know where the money goes. Law schools use tuition money and alumni donations to fund capital projects and law professor salaries. And, at some schools, the law school kicks back some money to the larger university. Law schools are cash cows, and everybody likes money.

Who is to blame for this? It’s hard to say. I tend to blame the American Bar Association, since the ABA is one of the few entities with regulatory authority over legal education (some law students are trying to get the Department of Education involved).

If the ABA will not act, it’s only natural for people to make as much money as possible, with reckless disregard to who gets trampled along the way. But one can find other culprits if you look hard enough. You could blame law school administrators, who are more concerned with money than education. You could blame the students themselves, for willingly forking over all of this cash. You could blame the federal government, for seemingly giving away money without making sure the taxpayers are getting a return on their investment.

But you know who you shouldn’t blame? Law school faculty. That’s right — they might get fancy new buildings and make six-figure salaries, but it’s not really their fault that the cost of a legal education has outstripped its value.

Who among us would not take more money and more perks for doing our same job?

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Fed up with the slow movement towards law school transparency, several law school student body presidents are appealing to a higher power. They’ve proposed legislation that would require law schools to engage in some honest reporting practices, under the oversight of the Department of Education.

If the American Bar Association is too weak or too unwilling to act, these students are hoping the DOE will take into account the best interests of students. Arne Duncan, if you are listening, every law student in America could use your help.

The movement seems to be spearheaded by Nate Burris, the student president at Boston College Law School. But 55 other SBA presidents have signed on, representing law schools in 27 states.

We already know that the legal educators don’t give a damn about the changes their students would like to see, but is there any chance law makers or the DOE will take a look?

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Breaking news: law school is expensive. Really, really expensive. Much more expensive than it used to be.

Are there still people out there who don’t know that? I mean, we’re certainly at the point where you don’t deserve sympathy if you go to law school without understanding the financial ramifications of your decision. The truth is out there, people.

And the truth hurts. The Hartford Business Journal (gavel bang: ABA Journal) reports that law school debt has reached a beyond ridiculous, all-time high…

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After the 1L money runs out....

That’s the question essentially posed in a long and interesting New York Times article, Law Students Lose the Grant Game as Schools Win (which we previously mentioned on Saturday; yes, we do post on weekends). The piece is by David Segal, who also wrote a big and buzzy piece back in January, Is Law School a Losing Game?

Segal’s latest article is more interesting than the January one. His January piece, while well-crafted and solidly (if imperfectly) reported, covered ground that had already been covered by many other outlets. Readers of Above the Law, other legal industry publications, or the numerous “scamblogs” already knew that the value proposition of going to law school was very much open to question (to put it mildly).

This weekend’s piece focuses on a less familiar aspect of the law school process, namely, merit scholarships. You might think that these grants, which help law students pay for their education in an age of ever-growing debt loads and skyrocketing tuition, are undoubtedly a good thing.

Well, think again….

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By the middle of second semester of that first year, everyone saw the system for what it was. We were furious. We realized that statistically, because of the curve, there was no way for many of us to keep our scholarships. But at that point, you’re a year in. They’ve got you. You feel stuck.

Alexandra Leumer, a 2009 graduate of Golden Gate University School of Law, quoted in an interesting and provocative New York Times article suggesting that law school “merit scholarships” can be a bit of a scam unfair in the eyes of some recipients, due to the fact that so many students lose them after their 1L year by not achieving the required GPA.

(We’ll probably have more to say about this piece, entitled Law Students Lose the Grant Game as Schools Win, on Monday — but in the meantime, feel free to discuss it in the comments.)

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