A
large part of this educational debt was incurred by law students (now
graduates) who, unfortunately, typically find themselves among the poorest of
Americans. That is, they’re often in
debt to the tune of $200,000 or more, and huge numbers of them are unable to
find legal employment, or any employment at all. In
response, some of these graduates sued their former
law schools, claiming that the schools provided false or misleading employment
data that induced them to enroll. Typically, schools had reported that their
graduates were obtaining salaries well into the six-figure range, with 95 percent or
more obtaining jobs—but neither one of these things was
true. In fact, most of the lawsuits against
the law schools were dismissed, oddly, because the employment data was so obviously false, that the then-prospective law students (now law
school graduates / plaintiffs) should have known better than to rely on the data.
Now
that’s rather curious judicial reasoning.
But, in any case, with law schools off the hook, and with their
graduates owing massive amounts of debt that they’ll never be able to pay, who
is on the hook? That’s right: we
the taxpayers are. And we could be on
the hook for up to a $160,000 bailout for each unemployed or underemployed lawyer. But what’s different
about this bailout is that it’s not just being used after-the-fact to bailout
poor (or lied to) decision-makers; instead, it’s being used proactively by law
schools to entice prospective students to enroll and take on debt that they
know, up front, they’ll never be able to repay.
With
our $16 trillion (and growing) national debt—not to be confused with our
annual trillion dollar deficits—the bailouts have to end at some point. And the way to stop students from taking on
more debt in the future, which will result in more bailouts even further
down the road, is simply to cap the amount that the government will lend to each prospective law student. And when that happens, watch how
fast law school tuition rates will plummet to match the available funds.
I believe the loans are USG guaranteed so couldn't the USG stipulate that they only guarantee loans for that proportion of Law School students that the School says will not find jobs in their advertising? So if the school advertises that 95% of their graduates get jobs loans would only be USG guaranteed as needed - i.e. for the 5% that would not find jobs. This might work better than "moral hazard".
ReplyDeletelff
LFF -- Great idea, and it would probably force schools to give more accurate job numbers. The problem is, though, if that happens, then the USG would be guaranteeing loans for an increasingly larger percentage of graduates. Plus, many of the students who DO get jobs don't make nearly enough to pay off their loans, so that is as bad as being unemployed. Many solutions have been proposed, including allowing students to discharge their debts in bankruptcy, thereby putting the risk on the lenders who are so willing to lend these massive sums of money. Here's one blog post on the the topic from "inside the law school scam" blog: http://insidethelawschoolscam.blogspot.com/2012/08/making-student-loans-dischargeable-in.html
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