July 12, 2009
More on Lawyers With Super-Sized Student Debt
Posted by Christine Hurt

Remember the poor guy who wasn't given a license to practice in NY because of his $400k student loan debt?  Well,this guy hasn't had his license taken away, but he's trying to navigate through the bankruptcy system with almost that much student debt.  I'll leave the legal issues surrounding discharging student debt in bankruptcy to the experts, but I'm much more interested in the issue of how much student loan is even reasonable.

This Lewis & Clark student graduated in 2000 (nine years ago) with student loan debt that was listed as more than $360k when he filed for bankruptcy in 2005.  So, what's the monthly payment on that kind of student loan?  The judge thought that if he had taken advantage of an federal repayment program (consolidation?), his payments would have been $629 a month.  Not fun, but not unthinkable, compared to car payments, mortgage payments, rents, childcare costs, etc.  But, the debtor seems to have other expenses (child support) and a decreasing amount of income.  (His three jobs since graduation have been judicial clerk in Saipan, legal aid attorney in Alaska, and most recently, a Kelly temporary worker (presumably non-legal?).  So, one would think with that kind of debt, that he's picking the best work opportunities he has.  Perhaps his grades were poor?  Perhaps he has trouble taking the bar?  Unclear, but the judges that have heard his case seem to put his limited income down to lack of ambition and personal decisions.  This Chronicle of Higher Education article says that Mr. Jesperson, 43, has followed a nonlinear path, finishing college in 11 years and law school in 4 (at 2 institutions), but that he did pass the bar on the first try (Alaska?  Minnesota?  Unclear.)  Also, he is now working as a temporary legal services worker for $25/hour.

I think these two cases in tandem should force debate on some important issues with respect to law schools, students and student debt load.  How much is too much?  Just as we have learned that just because someone can qualify for a home loan doesn't mean that repayment is even feasible, we have to force debate on the mathematical reality that the more student debt one has, the more income one must have to repay that debt.  And, although there has historically been a correlation between mortgage principal and home FMV, car loan to resale value, there is not a direct correlation between law school cost and law degree value.  This is a reality.  Schools with poor employment stats do not necessarily have cheaper sticker prices than schools with great employment stats.  Within a school, students with high grades and higher probabilities of post-graduation income may even pay less than other students because of scholarships.  In other words, some of the students with the most debt at graduation may be the least able to repay that debt. 

I graduated having taken out the maximum amount of federal loans for my institution, but that number seems so small now and that time seems like a whole different era.

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