Just read Don't Go to Law School (Unless) Forum

[JCougar]

It's a silly thing to speculate about if you are going to ignore first your salaries in 1990. Like tuition, 1st yr salaries have also grown totally out of sync with inflation.

They have grown as well, but they haven't grown as fast as tuition.

[JCougar]

You're making a number of worst-case assumptions. First, I think the 50-50 split is an unreasonable estimation when you're talking about a data set where half of the data set has spouses who do not work full time. Second, you're ignoring IBR. How many of the people in the bottom quartile are in government jobs that would be eligible for IBR today? Third, you're assuming that people didn't already pay off their loans before taking these lower paying jobs.

I realize all three of the above, but the reverse could also be true--some of those salaries could be from a spouse that is making more than the lawyer in the family. It's not really that unrealistic, as UVA grads are probably more likely than most to marry into the upper-middle and upper classes.

[IAFG]

Like tuition, 1st yr salaries have also grown totally out of sync with inflation.

Median salary for Class of 1991, in 2011 dollars: $65,045
Median salary for Class of 2011: $60,000

We are talking about UVA, not everyone aggregated together.

[IAFG]

You're making a number of worst-case assumptions. First, I think the 50-50 split is an unreasonable estimation when you're talking about a data set where half of the data set has spouses who do not work full time. Second, you're ignoring IBR. How many of the people in the bottom quartile are in government jobs that would be eligible for IBR today? Third, you're assuming that people didn't already pay off their loans before taking these lower paying jobs.

I realize all three of the above, but the reverse could also be true--some of those salaries could be from a spouse that is making more than the lawyer in the family. It's not really that unrealistic, as UVA grads are probably more likely than most to marry into the upper-middle and upper classes.

Some likely are married to high income people. Half actually are married to people who don't work or work part time.

[Paul Campos]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

[Tiago Splitter]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

Or you could say salaries have gone up by 47% since 1994.

Still shitty relative to the 100% rise in tuition, but not quite so bad when you pick a different arbitrary endpoint.

[hume85]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

What could change this? It doesn't seem like the elite schools (T6 or T10?) are going to see a large enough drop off in applications to force schools to react. So without market pressures can we expect some sort of government intervention? And as an aside, do you think attending a T10 school on your parents dime is a good idea if you want to be a lawyer?

[NR3C1]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

What could change this? It doesn't seem like the elite schools (T6 or T10?) are going to see a large enough drop off in applications to force schools to react. So without market pressures can we expect some sort of government intervention? And as an aside, do you think attending a T10 school on your parents dime is a good idea if you want to be a lawyer?

The government already intervenes by providing student loans to anyone with a pulse and for whatever amount schools decide tuition should be. And THAT is the source of the problem. Take the credit provided by the US gov't out of the equation and then there will be robust market pressure to lower prices.

[minnbills]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

What could change this? It doesn't seem like the elite schools (T6 or T10?) are going to see a large enough drop off in applications to force schools to react. So without market pressures can we expect some sort of government intervention? And as an aside, do you think attending a T10 school on your parents dime is a good idea if you want to be a lawyer?

The government already intervenes by providing student loans to anyone with a pulse and for whatever amount schools decide tuition should be. And THAT is the source of the problem. Take the credit provided by the US gov't out of the equation and then there will be robust market pressure to lower prices.

Wouldn't private lenders just step in?

[Bronte]

The government already intervenes by providing student loans to anyone with a pulse and for whatever amount schools decide tuition should be. And THAT is the source of the problem. Take the credit provided by the US gov't out of the equation and then there will be robust market pressure to lower prices.

Wouldn't private lenders just step in?

The idea is that private lenders would be more risk sensitive. Would you lend $200,000 to someone to attend Cooley Law? The government is motivated by something more than profit, which is encouraging higher education.

Before someone suggests that private lenders would just increase interest rates, realize that there is a point at which a loan doesn't make sense no matter what the interest rate. You can lend a million dollars each to a 1000 homeless people at 1000% interest, but the reality is you're just not going to get paid back.

[androstan]

Tuition at elite private schools has increased by 100% in real terms since 1990. Over the same time frame the going rate for first-year salaries at big firms has increased by about 25%. (It was about $130,000 in 1990 in 2012 dollars). The big run up in associate salaries at large firms took place between the mid-1960s and the mid-1980s, when they doubled in real terms.

What could change this? It doesn't seem like the elite schools (T6 or T10?) are going to see a large enough drop off in applications to force schools to react. So without market pressures can we expect some sort of government intervention? And as an aside, do you think attending a T10 school on your parents dime is a good idea if you want to be a lawyer?

The government already intervenes by providing student loans to anyone with a pulse and for whatever amount schools decide tuition should be. And THAT is the source of the problem. Take the credit provided by the US gov't out of the equation and then there will be robust market pressure to lower prices.

Wouldn't private lenders just step in?

NR3C1 means that the federal government should stop guaranteeing educational loans without taking any consideration of whether the loan will be repaid, whether they go through a private lender or not. If such consideration had to be made, many would not qualify and could not afford $150k in tuition. Then the argument is that at least some schools will have to lower their prices just to fill seats.

[minnbills]

Would you lend $200,000 to someone to attend Cooley Law?

Absolutely. And this gets to the heart of my point.

We're talking about non-dischargeable debt here. Lock a young person into high debt they can't get rid of? At 6.9% or greater interest? They'd make a killing.

[Bronte]

Would you lend $200,000 to someone to attend Cooley Law?

Absolutely. And this gets to the heart of my point.

We're talking about non-dischargeable debt here. Lock a young person into high debt they can't get rid of? At 6.9% or greater interest? They'd make a killing.

Just because it's nondischargeable doesn't mean you're going to get paid. Some people just stop paying the debt.

[minnbills]

Just because it's nondischargeable doesn't mean you're going to get paid. Some people just stop paying the debt.

Can't they garnish your wages? And how many law graduates are really going to stop paying?

[Bronte]

Just because it's nondischargeable doesn't mean you're going to get paid. Some people just stop paying the debt.

Can't they garnish your wages? And how many law graduates are really going to stop paying?

They can garnish your wages to an extent, but not so far as to deprive you of a reasonable standard of living. If you're not making much money, they might not be able to get anything. Also, to get a garnishment, the creditor has to incur litigation costs. By the point of wage garnishment, the creditor is probably already losing money on the loan.

As to whether a law student would stop paying, they will if they simply can't afford it. What else are they going to do? Elie Mystal regularly claims that he hasn't been making payments on his law school loans for years.

[minnbills]

I think you're being overly pessimistic about law graduates' lifetime earnings. Even if people never work in law in the long run they will still make quite a bit of money, relative to the rest of the population, of course.

And if Mystal isn't making payments, won't they go after his estate when he dies? Plus, I still think a strong majority of law graduates are going to make payments as well as they can.

[Bronte]

I think you're being overly pessimistic about law graduates' lifetime earnings. Even if people never work in law in the long run they will still make quite a bit of money, relative to the rest of the population, of course.

And if Mystal isn't making payments, won't they go after his estate when he dies? Plus, I still think a strong majority of law graduates are going to make payments as well as they can.

Maybe. I won't claim to know for certain that it's a losing bet to loan to students going to low ranked schools. However, I think it's very safe to assume that the federal loans and guarantees have contributed to tuition price inflation.

As to collecting on Mystal's estate, you already have a losing loan at that point. You're not making a positive rate of return. To get a 7% return on a $100,000 loan that you don't collect on for 60 years, you would have to collect about $6 million dollars from the estate. But we're probably getting a bit far afield there.

[JCougar]

The idea is that private lenders would be more risk sensitive. Would you lend $200,000 to someone to attend Cooley Law? The government is motivated by something more than profit, which is encouraging higher education.

The thing is, back before there was no cap on government loans, private lenders were stepping in and providing supplemental grad school loans at like 11% interest.

That wasn't that long ago.

[Bronte]

The idea is that private lenders would be more risk sensitive. Would you lend $200,000 to someone to attend Cooley Law? The government is motivated by something more than profit, which is encouraging higher education.

The thing is, back before there was no cap on government loans, private lenders were stepping in and providing supplemental grad school loans at like 11% interest.

That wasn't that long ago.

Were they subject to a federal guarantee? Also, I assume this was before the financial crisis and in particular the legal crisis.

[JCougar]

The idea is that private lenders would be more risk sensitive. Would you lend $200,000 to someone to attend Cooley Law? The government is motivated by something more than profit, which is encouraging higher education.

The thing is, back before there was no cap on government loans, private lenders were stepping in and providing supplemental grad school loans at like 11% interest.

That wasn't that long ago.

Were they subject to a federal guarantee? Also, I assume this was before the financial crisis and in particular the legal crisis.

After 2005, they were. They were giving out supplemental loans both before and after that date.

There's only two ways out of the current crisis: put heavy-handed restrictions on tuition or lending, or inform consumers on the actual value of the degree. Our government has decided not to do the former, so bloggers and now journalists have decided to pursue the latter.

[Bronte]

After 2005, they were. They were giving out supplemental loans both before and after that date.

After 2005 they were guaranteed, but they weren't before?

[JCougar]

After 2005, they were. They were giving out supplemental loans both before and after that date.

After 2005 they were guaranteed, but they weren't before?

Private loans, yes. Government loans were guaranteed before that.

[Bronte]

After 2005, they were. They were giving out supplemental loans both before and after that date.

After 2005 they were guaranteed, but they weren't before?

Private loans, yes. Government loans were guaranteed before that.

Mmm. I don't know if we're talking about the same thing. I'm saying that any private lending that is backed by the federal government--meaning the federal government tells that bank that if the student doesn't pay it back, the government will--is pretty much the same as a federal loan in its capacity to distort the market.

In any event, the question is whether, post-ITE, getting rid of federal loans and guarantees wouldn't create downward pressure on tuition prices and potentially force some lower ranked schools to close. I suspect it would, but maybe I'm wrong.

[JCougar]

In retrospect, we were talking about different things...I was talking about dischargeability in bankruptcy. I'm not sure about which loans were government guaranteed or not, but if they're not dischargeable in bankruptcy, that lessens the need for the guarantee.

[Bronte]

In retrospect, we were talking about different things...I was talking about dischargeability in bankruptcy. I'm not sure about which loans were government guaranteed or not, but if they're not dischargeable in bankruptcy, that lessens the need for the guarantee.

Nondischargeability lessens the need for a guarantee somewhat. But see my argument above as to why it's not clear it lessens it that much.