We’ve blogged before about the divergence between the number of law jobs available (few) and the number of students graduating from law schools (many). We also know that, with times tough all over, the response to that information is probably “who cares?” Here’s why you should care: you’re paying for it. No, not through higher attorney fees or the time value of enduring more attorney ads. You’re guaranteeing the loans of all the law students who should never have been accepted into a law school, who will never become lawyers and never, ever, be in a position to pay back those loans.
The Atlantic Monthly reports that investor groups have opened law schools across the country (including Phoenix) based on a fairly elegant business model. These schools set admissions standards low and tuition high, with most of it paid by student loans guaranteed by the government—which means you. Unless these students can actually pass the bar and get a job, the chance of their paying those loans off is slim and most student loans can’t be discharged in bankruptcy . Who gains? The investor groups who have created these schools make their money up front from the tuition and never need care whether the students get jobs and pay back the loans. The profit is made on admitting students, not making lawyers.
The 2006 Federal Direct PLUS Loan program allows students to borrow all of the cost of attending school, not just tuition, but living expenses, as well. There are, according to The Atlantic, no limits on what the school can charge or what can be borrowed. The article estimates that the median educational debt carried by a student who graduates from one of the identified “for profit” law schools is $204,000, with approximately a quarter of a billion dollars in taxpayer-guaranteed debt from the graduating class of just three of these for profit schools. All three of these for profit law schools are owned by InfiLaw System, a corporate entity created and controlled by Sterling Partners, a Chicago-based private-equity firm. Why would a private-equity firm own law schools? As the Atlantic article makes clear, it’s not in furtherance of some mission to support higher education. It’s because there’s money in it. Very. Big. Money.
The public has long supported the idea of student loans as a way of giving everyone the opportunity to achieve higher education. The problem is not with the concept, but with the execution. Without oversight of the admissions standards and success rates of all schools (but particularly the “for profit” schools) an ongoing and enormous bill is being generated which, like all bills, will someday have to be paid and which none of us saw coming.