Bankruptcy of Your Student Loans

Bankruptcy of Your Student Loans

Wednesday, March 30, 2016

WHAT EVERY LAW STUDENT SHOULD KNOW UPON GRADUATION

LAW STUDENTS HERE IS WHAT YOU SHOULD HAVE LEARNED!

"Pay no attention to that man behind the curtain."  Wizard of Oz" 1939


I am very fortunate to have learned what is required to get out out from under the trap that I walked into when I believed a college degree would provide an open door to a great job!

The illusion perpetuated upon our society is that if you want to succeed in life then you will need a good education and need to go to college, study hard and earn a respectable G.P.A. (grade point average), and if you work hard... there will be employers lined up to offer you a great job with a nice benefit package, and an office with a view.

Shrouded within that illusion is the allure of becoming "a professional", and getting into one of those looked-up-to careers, like a Teacher, Engineer, Doctor or Lawyer.  Not just any career, but one with a title and prestige. 

To help sustain and artificially maintain this illusion, universities and colleges engaged in a very subtle "game of masquerade", complete with lots of masks, facades, pretenses, and even creating a party atmosphere to draw in the unsuspecting students and parents.

Strip away the masks and what you find is the face of a lucrative business called higher education!  If you do not understand this, then you have certainly fallen for the deception perpetuated by those who play this game so well, they have millions continuing to buy into the lie that without a degree you will never get a great job.  Take law students for example.

During my research to file bankruptcy to get a fresh start and stop the garnishment of my social security check for a loan who's interest grew faster than weeds in my mom's flower beds, I read case after case where the student loan debtor was a law student and even many a working lawyer who could not pay off their student loans.  Statistics do not lie, there are thousands of law graduates who find themselves buried in debt with no career in law!

Colleges oversold and continue to oversell the dream, the time for a wake-up is here!

Perhaps the most overused smoke and mirrors trick has been suckering college graduates into going on into law school?  Let me share some facts here....

The last reporting on the prospects of law students from the American Bar Association was published about a year ago in April of 2015.  However the reporting data was based on the previous year, 2014.  The ABA indicated that employment for graduates was up slightly from the previous year, 2013, but that is a bit deceptive based on the fact that the total number who graduated from law school was lower in 2014 than 2013.

The ABA article gave this statistical breakdown to explain what happened to these law graduates post ceremonies. 
  • "26,248 graduates of the class of 2014, or 59.9 percent, were employed in long-term, full-time positions that require bar passage.
  • 4,912 graduates of the class of 2014, or 11.2 percent, were employed in long-term, full-time "J.D. advantage" positions where a law degree is preferred.
  • 9.8 percent of the class of 2014 were unemployed and seeking employment."

  While at first glance the two top bullets seem to be impressive stats.  However, read them again then look at the last bullet... Nearly 10% of the 2014 graduates were NOT employed!

  Now compare that percentage to the national unemployment rate reported for 2014, which averaged 6.1 for the year. The class of 2014 saw nearly twice the rate of unemployment as did the national rate.

  The ABA also presented the stats for the year 2013 in their article, where there were more students....

   "The class of 2014 had 43,832 graduates, down 6.5 percent from 2013's largest-ever class of 46,776 graduates."

   The breakdown for 2013 was reported as follows:

"In the class of 2013, 31,368 graduates, or 67 percent, were employed roughly nine months after graduation in long-term, full-time positions where bar passage is required or a J.D. is preferred. The 2013 figures break down as follows:
  • 26,653 graduates of the class of 2013, or 57 percent, were employed in long-term, full-time positions that require bar passage.
  • 4,715 graduates of the class of 2013, or 10.1 percent, were employed in long-term, full-time positions where a law degree is preferred.
  • 11.2 percent of the class of 2013 were unemployed and seeking employment."

  Again while the ABA is trying to indicate the success of law schools in the 2013 stats, take a look again at the last bullet.  That 11.2 percent is again double the national unemployed rate. 

  OK... let me share another tale of what happens to a typical law school graduate.  Consider the plight of Jonathan Wang a 2010 Columbia Law School Graduate who passed and was admitted to the the New York State Bar, yet remains "under-employed" and who has since "turned to tutoring and law school advising to pay his rent and loans."  Source: Burdened with Debt, Law School Graduates Struggle in Job Market, Elizabeth Olson, New York Times, April 26, 2015.

  Olson provided Wang's experience this way: 
 "When he entered law school, the economy was flourishing, and he had every reason to think that with a prestigious degree he was headed for a secure well-paying career. He convinced his parents, who work in Silicon Valley, that he had a plan. “I would spend three years at school in New York, then work for a big law firm and make $160,000 a year,” said Mr. Wang, 29. “And someday, I would become a partner and live the good life.”
Mr. Wang, who works in Manhattan as a tutor for the law school admissions exam, is living a life far different from the one he envisioned. And he is not alone. About 20 percent of law graduates from 2010 are working at jobs that do not require a law license, according to a new study, and only 40 percent are working in law firms, compared with 60 percent from the class a decade earlier. To pay the bills, the 2010 graduates have taken on a variety of jobs, some that do not require admission to the bar; others have struck out on their own with solo practices. Most of the graduates have substantial student debt." ibid NYT
  The real dark side of the law school cloud is this... "Over all, nearly 85 percent of law graduates have taken out student loans" ibid: NYT.
   
  What is really frightening is the amount of money most of these law students borrow to get that "pie in the sky" degree!
  
  As Olson expounds, "2010 law graduates accumulated debt averaging $77,364 at public law schools and $112,007 at private ones."  The dollars are certainly higher now than 6 years ago - running closer to $90,000 for public schools and $115,000 for private law schools.

  Yet according to an article in the Huffington Post, Natalie Gregg wrote that while the number of new students was falling, the number of new law schools was on the increase!  Gregg put forth that in 1977 there were 177 law schools and in 2013  there are over 200.  She further reinforced the New York Times author's findings by stating: 
  "Although the American Bar Association‘s recent report might lead one to believe that while new graduates from 2013 have a stronger 88.8% employment level, the truth is that the devil is in the details. Among these, one of the more staggering statistics is that many of those law students who want to be lawyers are not able to secure full-time attorney positions. In this new era of the eroded value of a law degree, the ABA reports that only 57 percent of graduates were working in long-term time positions where bar admission is required. The sad fact is this: two out of every 2013 law school graduates is either unemployed or working in a job that has little to do with the fact that they went to law school."
Source: Mamas, Don’t Let Your Babies Grow Up to Be Lawyers, Natalie Gregg, Huffington Post, March 15, 2015.
So... What should a Law Student learn in law school?
Well, for starters (in my humble opinion) they should learn that #1 Education is a Business and they are out to make money from everyone that they can get signed up!  Next, prospective students should learn (or may I suggest) personal finance.  

Here I fault the educators... Colleges and Universities should be required to teach students about money and the cost of attending college BEFORE they enroll any potential student.

Law Students should be made aware of the enormous cost involved.  Not only for the classes and on campus expenditures, but made aware of the huge cost of taking the exam to pass the bar!  

In his most recent blog, my friend Richard Fossey wrote about this, and I quote: "I was amazed by how much it costs just to take the bar-exam review course--$15,000! When I went to law school (a long time ago, I admit), the bar review course cost only $600, which I paid in installments with money I made working as a part-time law clerk. If I were graduating from law school today, I would be forced to take out a sizable loan just to prepare for my bar exam."

Fossey was describing the plight of a law school graduate who was unsuccessful in passing the bar and now owes over $300,000.00 in student loans - and who has only been able to find work as a secretary making $49,000 a year! Will this gal ever be able to pay off $300,000.00?  I seriously doubt it.

That is why I want to add one more course to the law school curriculum... 911 for Student Loans. Students (and not just law students) need a course informing them of the trap they are about to step into!  This course would include stories of the perils of students who are in debt over their heads, did not get the job after graduation, and who are now debt slaves to the Department of Education and the U.S. Government!

For law students, I suggest that one of the required courses be Bankruptcy 101.

Because they need to know that there is a really good chance they are going to find themselves having to either file for themselves, or one of their graduating friends, once they rack up the total fees required to do the 5 to 7 years it takes to become a lawyer.  That is if they can afford to do the internships, pay for the bar exams, and pass the bar... Let alone find a good paying job! 

Fossey helped summarize the dilemma by pushing back the curtain and revealing the "Wizard of Oz"... he writes: 
"Greedy law schools and the American Bar Association created this crisis. The law schools set tuition levels far too high, and the ABA allowed law schools to admit far too many students.  As a result, thousands of law-school graduates share Leslie Campbell's predicament-- an onerous level of student-loan debt and no law job. 
The ABA and the law schools have a moral obligation to advocate for reforms in the Bankruptcy Code that will allow impoverished law-school graduates to discharge their student loans in bankruptcy. But we haven't heard a peep out of the law schools or the ABA regarding bankruptcy reform for student-loan debtors."
To put this into perspective... let me just say, if you are in financial crisis with a student loan, I completely and thoroughly am able to understand.  I was there!  But I was a good student and learned how to solve problems.  

The answer to my problem was filing bankruptcy and proving undue hardship.  I had no choice.  My education (while a great one) did not provide me the door of opportunity I had expected, and my life had some very serious setbacks, none of which I had much control over.

Today I am debt free, I am still living just above poverty, but the weight of that unpaid debt is no longer on my shoulders!  If I can help or encourage anyone in a similar situation, please allow me to say... I am happy to try.

God Bless!  Sincerely yours, Richard Allan Precht

Please leave any comments or questions, I will be happy to answer them.

For further reading:

http://www.huffingtonpost.com/natalie-gregg/mamas-dont-let-your-babie_2_b_6457898.html

http://www.nytimes.com/2015/04/27/business/dealbook/burdened-with-debt-law-school-graduates-struggle-in-job-market.html

http://www.abajournal.com/magazine/article/latest_employment_numbers_for_2014_law_school_graduates_dont_add_up_to_tren

http://www.forbes.com/sites/susanadams/2014/10/09/the-best-law-schools-for-career-prospects-2015/#5d0c21fb28d6

http://data.bls.gov/timeseries/LNS14000000

http://www.condemnedtodebt.org/

http://www.wildcat.arizona.edu/article/2015/10/column-debt-and-unemployment-erode-law-school-dreams

http://www.imdb.com/character/ch0088707/quotes









  

  


   







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