Casual Friday presents: Law School Debt Problem

On Sunday, the New York Times published a scathing indictment how the law school business model is killing the industry by stuffing more lawyers into an already scarce job market. The piece focused on a handful of recent law grads that have either been unable to find work or have been forced to take jobs that don’t pay enough to meet their debt responsibilities.

Unfortunately, they chose to lead and focus on this guy:

IF there is ever a class in how to remain calm while trapped beneath $250,000 in loans, Michael Wallerstein ought to teach it.

Here he is, sitting one afternoon at a restaurant on the Upper East Side of Manhattan, a tall, sandy-haired, 27-year-old radiating a kind of surfer-dude serenity. His secret, if that’s the right word, is to pretty much ignore all the calls and letters that he receives every day from the dozen or so creditors now hounding him for cash.

“And I don’t open the e-mail alerts with my credit score,” he adds. “I can’t look at my credit score any more.”

Mr. Wallerstein, who can’t afford to pay down interest and thus watches the outstanding loan balance grow, is in roughly the same financial hell as people who bought more home than they could afford during the real estate boom. But creditors can’t foreclose on him because he didn’t spend the money on a house.

He spent it on a law degree. And from every angle, this now looks like a catastrophic investment.

Tough break, right? Many recent graduates that can relate. In fact, many not-so-recent grads can relate. The story does a great job in exposing how law schools fudge their employment numbers for the purpose of artificially inflating their ranking in U.S. News and World Reports, and how they can make millions more in revenue by adding a handful of extra students each year, and without having to increase costs by hiring additional professors. And there are many recent grads that have been featured in similar but not quite as expansive articles with similar stories.

So what’s wrong with Wallerstein’s story? Well, for one, he seemed to treated his loans like an ATM, taking almost twice what the average student at TJSOL takes in loans.

WHEN he started in 2006, Michael Wallerstein knew little about the Thomas Jefferson School of Law, other than that it was in San Diego, which seemed like a fine place to spend three years.

“I looked at schools in Pennsylvania and Long Island,” he says, “but I thought, why not go somewhere I’ll enjoy?”

He could have found a Tier 4 law school just about anywhere. Why not go live in one of the most expensive cities in the country? It’s not like you’re paying for it … yet. And it’s not like TJSOL cares:

Mr. Wallerstein didn’t know it at the time, but Thomas Jefferson leads the nation’s law schools in at least one category: 95 percent of students graduate with debt, the highest rate in the U.S. News rankings.

They get paid either way. But it’s not like Wallerstein spent all of his quarter-million on law school. The guy used some of the money to go to Europe, among other things. In other words, he’s probably the worst example of a guy who amassed a sea of law school debt possible.

It’s too bad, because the rest of the article is spot on.  While not all of the responsibility should fall on the law school because students made bad decisions, they certainly have some of it. TJSOL, for example, claims to have a 95% job placement rate. Unfortunately, law schools aren’t exactly diligent in reporting the kind of work some of the grads are finding:

Today, countless J.D.’s are paying their bills with jobs that have nothing do with the law, and they are losing ground on their debt every day. Stories are legion of young lawyers enlisting in the Army or folding pants at Lululemon. Or baby-sitting, like Carly Rosenberg, of the Brooklyn Law School class of 2009.

“I guess I kind of assumed that someone would hook me up with something,” she says. She has sent out 15 to 20 résumés a week since March, when she passed the bar. So far, nothing.

Jason Bohn, who received his J.D. from the University of Florida, is earning $33 an hour as a legal temp while strapped to more than $200,000 in loans, nearly all of which he accumulated as an undergraduate and while working on a master’s degree at Columbia University.

“I grew up a ward of the state of New York, so I don’t have any parents to call for help,” Mr. Bohn says. “For my sanity, I have to think there is an end in sight.”

At some point, hopefully, the ABA will change its regulation of law schools to require more honest statistics. But considering that organizations like the ABA and the State Bar of Michigan make more money when it has more members, I’m not sure that day will ever come.

C or C+: The guy who organizes the U.S. News and World Reports’ law school rankings has told law school deans that the magazine is considering extending numerical rankings to the third tier schools. You know, because it’s really a big deal whether you are 52nd or 74th.

The National Law Journal talked to a handful of tier three deans and, of course, the results were mixed. Among those quoted in the story is Wayne State University Law School dean Robert Ackerman:

Wayne State University Law School Dean Robert Ackerman welcomed the prospect for change. “I think we would prefer to be listed by rank rather than alphabetical order,” he said. He noted that the latter tends to place his institution toward the bottom of the list.

“Psychologically, I think it makes a difference that we are listed at the end of the third tier,” Ackerman said. “I think people would make less of a distinction between schools ranked 1 through 150 than they now do between the second and third quartile.”

Maybe Dean Ackerman should focus more energy on helping recent grads get jobs, rather than how “psychologically” affected his school is by starting with the letter “W.” Besides, I’d hate to see Wayne shifting their statistics around to try to improve from 64th to 61st.

[HT: Above The Law].

Maybe I Go Up, Maybe I Go Down: Remember George Costanza’s low speed chase in the motorized carts? This is pretty similar. Then it gets weirder and more hilarious.

Too bad we can’t tell what kind of beer he was sitting on. My guess? Busch.

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