March 25, 2012
Unsustainable Law Student Debt
At Balkanization, Brian Tamanaha (Washington University) continues to shine a bright light on law student loan statistics. See The Quickly Exploding Law School Debt Disaster.
Viewing recently released 2011 data, Brian cites 17 law schools where the average debt exceeds $135,000 per student. The vast majority of students at these schools will be forced into Income Based Repayment (IBR), which is, functionally, a federally administered insurance program for indebted law school graduates who fail to make a high five-figure or low six-figure income. It caps debt payment at 15% of income above some basic poverty level threshold. (In future years, it will drop to 10%.) The downside of IBR is that unpaid interest is quickly capitalized, so a graduate's total debt load explodes upward, making it very difficult to afford things like a car or a home using debt finance. Then, as Brian suggests, buyer's remorse is going to set in for a whole generation of law school graduates.
As a political issue, this is not going away. I agree 100% with Brian's final line: "This financial insanity will not stop until significant changes are made to the federal student loan program." When this happens, every law school in the U.S. will be be affected. As I said last week, it is time we get our houses in order.
[posted by Bill Henderson]