Gosh, now we have a law school bubble.

I know quite a few lawyers and their careers have varied widely. Some went the route of working for a large firm and made partner. Many get weeded out along the way and some ended up in good situations and others are still moving from job to job in their 40's and 50's. I know several lawyers who started out working for federal government agencies here and in D.C. and ended up remaining there because it worked well with their lifestyle and they appreciate the relative autonomy of working for one client- the government instead of private practice. I know several lawyers who started out in law and ended up in finance and other business ventures. It's a very varied path. All I know is that you need to find your niche by somewhere in your 30's to early 40's or it gets very difficult to find a job. This young woman in the article is certainly young enough to have things work out for her despite a rocky beginning.

Easy financing again Government made it easy to take out loans.. easy financing easy money. tuition goes up and up and up... very similar to the housing market.. student loan defaults are a concern.. have been one for a while

shameful that school debt is not eligible in bankruptcy--more shameful that garbage hyped for-profit schools prey on our young people--disgraceful that for-profits were able to pay to arrange laws allowing unlimited pursuit of ex-military, to fleece GI Bill and loan money--

perfect--put our young people at risk in folly war and welcome them home to huge debt for useless for-profit colleges with 5% grad rate, and useless diploma for those that grad

I don't think you, or the author of this article, knows what a bubble is. No one goes to law school because other people think that someone else might think that the degree has resale value. A law degree may or may not be a good "investment," if you want to think of a professional degree as an investment, but there is nothing like a bubble here.

Government loans have partly made up for the loss of government support for higher ed, so the middle class isn't entirely priced out of law school. But subsidizing banks to offer loans is an extremely inefficient way to pay to educate the next generation. And there is no reason at all why we should should be subsidizing for-profit schools, or why student loans should be non-dischargeable. If banks are profiting, they should be taking risk too.

FG, do you think that easy money is a major cause for increased tuition?

I think the article has merit. When the economy sours, recent unemployed grds or those that just graduated use the opportunity to continue education thinking there's no job market, so the article points out the downside of the ffelp guarantees. When people decide on a vocation they partially do it baesd on an expectation of the future income stream of that occupation.

There's data missing from the article to make it's point: is it the case that the government has increased the amount of financing available, and how does that increase correlate to increases in tuition? Just saying "tuition is going up" and "the government is providing financing" is not very interesting without some actual measure of correlation, much less causality.

http://www.salon.com/2013/04/06/law_school_is_a_sham/

Oh poor lawyers.... I feel so bad for them.

http://25.media.tumblr.com/tumblr_lgwg5bIdBK1qgx5fko1_400.jpg

Thanks HB, great article.

The US currently lends to graduate students at 7.8% -- far above its borrowing rate. This is the opposite of "easy money." If we lent at breakeven instead of usurious rates, student loan payments would be well under half of current numbers, and student money would be going to education instead of replacing the money lost to the mortgage interest deduction.

Financecat makes sense, we should be subsidizing law school students.

We need more lawyers. The government should make it happen.

Not sure he read the article

Ah, a supporter of more lawyers, who doesn't read articles.

+1 to financeguy. The government lends money to grad students at these insane rates and then has the audacity to call those predatory loans a form of "financial aid". Lend at the prime rate and watch a whole lot of problems disappear. Set caps on the ratio of administrative staff to teaching staff and watch tuition itself go back to something reasonable.

Another ambulance chaser.

Financeguy, those of us that went to law school (or presumably any grad school) in the 90's remember those rates of 7, 8 or 9% well. I think it was in the early 2000's that rates on student loans went to half of what they were. I've read a lot of these articles about law school debt and they make a lot of good points, but many of the points would seem to apply to other grad schools as well. At least law students have a shot of earning a pretty good living right out of school. The NYT had a recent article about vet school where graduates also accumulate big debt and for them the best that they can hope to earn the first year out of school is 5 figures, and the $ no going up significantly from there. I assume this also applies to many grad students in other fields as well.

Jojo, remember though that back in the '90s interest rates in general were higher, and you could get as much as 2-3% on an ordinary savings account. Tuition wasn't nearly as high -- it has accelerated upwards at far more than the rate of inflation -- and so your total debt-to-expected-salary ratio was lower. What were unemployment rates like for postgrads fresh out of school? Lower than now?

Incidentally, I'm not just sticking up for postgrads because I too have a pile of debt; I chose to get my postgrad humanities degrees at a foreign university with nice reasonable tuition ($6k/year) because I knew going in that the chances of ever making any money from these studies were, and always will be, very small. Even then, had I quit working in order to do it, I'd be in the poorhouse.

Triple, I'm sorry but I cant say what employment rates were like when I graduated because I dont know any numbers with any accuracy. Also one issue according to many reports is that the numbers seem to never have been accurately reported. I can recall when i started law school in the mid 90's a huge number of schools reported near 100% employment rates and 70 to 80k starting salaries (the going big law rate at the time). I graduated with $100k in debt, tuition alone was just under $25k/year and my starting salary was like $85k (for those in the know I started just before the beloved Gunderson raises). Now the 1st year associates at my firm regularly have $200k in debt when they graduate, I think tuition alone is a bit over $50k (private school) and starting salaries are at $160k for them. I may have the current numbers off slightly but roughly speaking by my math everything has doubled. I'm involved in recruiting for my firm and will say that hiring at big firms across the board does seem to be down from say 2006 (having improved slowly from fall of 2008-I remember doing on campus interviews right after the Lehman BK) but hiring is very cyclical at firms (presumably this isnt just a law firm thing). Hiring was down throughout the first half of the 90's and then in 2001, 2002. Has there been a permanent shift to firms hiring less people? Maybe but I tend to doubt it. One thing that I can say with some confidence is that there has always been a big risk for people going to law schools that are not highly regarded and there still is, but I think that more people are finally waking up to this risk.

Unaffordable law school loans are just one aspect of the general problems caused by reducing government support for education.

Not so long ago, the US recognized that its future depends on educated people, and that all of us -- not merely, or mainly students -- benefit from education. Accordingly, we created state universities where students could study largely at the expense of state taxpayers and Federal land grants. The Federal government supported research and medical schools and foreign language study and university capital costs. And from the '50s to the early 90's, it made sure that student loans had interest rates close to and often below inflation.

Today, instead, the states have shifted their budgets from education to paying private companies to build and operate prisons to hold small-time drug users. The Federal government has radically reduced its support of R&D and medical training, preferring instead to eliminate corporate taxes and build a military as large as the rest of the world's. And Federally "subsidized" student loan interest rates are 6 points above both inflation and the Federal government's costs.

At current interest rates, over half the money that students borrow goes to interest, not education. Essentially, we are taxing student borrowers to subsidize the military and tax shelters for hedge fund managers. Instead of paying for education collectively, we have an excise tax on middle class kids going to university.

Teaching isn't free. Neither are administrators who must compete for the limited number of students who can afford to pay for education before they have it. Nor are the bankers who hand out those overpriced loans and suck up half of the student dollar. If we are unwilling to pay for education through government, students have to pay through tuition and loans.

Of course, that means that the system as a whole will cost more -- competition for students leads to lots of wasted expense on things that improve rankings but not education, and forcing students to pay upfront through loans instead of later through taxes is highly inefficient -- and leads inevitably to less education, more inequality and less economic growth. But how is that any different from privatizing medical care and pensions?

As for the employment issue, new lawyers are having trouble finding jobs. So are new graduates of all varieties. So are non-graduates. The problem is not schools -- the universities don't control the unemployment rate. The problem is private corporations, which don't pay existing employees enough to allow consumers to spend enough to allow business to expand and hire more employees, and national politicians, who have refused to step into the gap caused by the private sector's failure. If the Congress made its goal full employment instead of tax cuts for the wealthy and guns for the mentally disturbed, we'd be building desperately needed infrastructure, funding research and development of the new energy economy, rebuilding our obsolete transportation system, helping states pay for teachers, removing pension and medical expenses from corporate income statements so that US firms could compete abroad, raising the minimum wage, and even hiring regulators to stop businesses from blowing up towns in Texas.

With a lower unemployment rate, new grads would be able to find jobs, which they could use to pay off their loans -- at least if the loans were at a reasonable interest rate. And universities could spend tuition on education, instead of zero-sum games to poach paying students from other schools. Of course, it would also help if we rescinded the Reagan-era anti-trust rules that bar law schools from cooperating to reduce class size.

The government does not need to be using taxpayer money to subsidize potential future lawyers.

I like the idea of articles like this so that college graduates have a better sense of the realities of attending law school and what their future prospects could be. Years ago, people often just attended graduate school after they finished college without always understanding the difficulties in securing
and keeping a well-paying job after they graduated and passed the Bar. I know several people in their 40's and 50's that started out with very good jobs and are now struggling in their careers and having a difficult time maintaining their lifestyle.. It may be that people need to shift their expectations a bit and understand that a medical degree, a law degree or a business degree isn't a guarantee of immediate and continued financial success. There will always be students from comfortable backgrounds who don't have to worry about how their tuition will be paid and the rest will have to make some difficult choices and maybe take a leap of faith. But understanding what could happen is good information for them to have.

I want FinanceGuy for President in 2016.

Good luck with that.