Law Student Loans Key Component of Next "Debt Bomb"

A spate of recent news stories suggests trouble for America's 200-plus accredited law schools. It's summed up in the title of the cover story in the January issue of the ABA Journal: "The Law School Bubble: How Long Will It Last if Law Grads Can't Pay Bills?"

Here are some sobering facts from a variety of stories:

• The Associated Press reported that at more than $1 trillion, U.S. student loan debt has surpassed the volume of credit card and auto loan debt.

• The AP quoted the head of the National Association of Consumer Bankruptcy Attorneys as calling this "the next debt bomb for the U.S. economy. As bankruptcy lawyers, ... we were warning of mortgage problems in 2006 and 2007. Nobody had it under control. Now we're seeing the same signs of distress, ... huge defaults on student loans and people driven into financial difficulties because of them."

• The ABA Journal story referenced above stated that in 2010, 85 percent of law graduates from ABA-accredited schools had an average debt load of $98,500. At 29 schools, that amount exceeded $120,000.

• Not surprisingly, the Law School Admission Council reported that only 22,000 people took the LSAT in February, the lowest number since 2001. That contrasts to the 44,000-plus graduates that law schools churned out in 2010.

I recently wrote to a law school dean that today's legal environment is quite different than it was only a few short years ago. For the first time, ROI on tuition is not assumed in making a decision on whether to go to law school. It is a discussion that includes the cost of education, the mental challenges and the economic benefits of enrolling.

The analysis includes whether one can likely find employment, either with a firm or as a solo, and whether the law school provides the preparation to succeed, both academically and economically. As these columns have said many times, too few law schools address the second aspect.

Facing the prospect of an unsupportable student debt, increasing numbers of potential law students and recent alumni are concluding that the law school is failing in its responsibility to educate the whole lawyer.

In interviews for a West LegalEdcenter program that I conduct monthly, several recent graduates from around the country were angry with their alma maters for not providing even a hint of the law practice management education they perceive would have enabled them to be successful. Each of these folks is now engaged in other, non-legal employment.

The result is the rising number of lawsuits filed against law schools by firms representing students who say the schools actively mislead them about the ROI on a J.D.

I fully agree that getting a law degree should not guarantee a good-paying law firm job to cover a student debt load. Not even senior partners are safe in their careers these days.

Yet who among us would have thought just a few years ago that lawyers would successfully represent people who simply walked away from an insupportable mortgage debt? Are student loans next?