Thursday, December 21, 2017
Those the Legal Profession Leaves Behind
One of the downsides of current tuition discounting practices is that the students who pay full tuition are often those who can least afford to. On average, getting a JD increases earning power. But we know that those benefits are unevenly distributed—there are some graduates who have a hard time either entering or remaining in the legal profession. It can be especially hard for women to re-enter the profession after stepping away.
A remarkable bankruptcy opinion from the Western District of Washington illustrates what can happen when things fall apart. Legally, it is interesting for its discussion of how income-based repayment of student loans interacts with dischargability in bankruptcy. But the court’s factual findings and discussion of the debtor’s circumstances are especially eye-opening.
The debtor’s educational path started in community college, where she got an associate’s degree. She later finished a B.A. in political science at the University of Washington and then obtained a J.D. from Pacific McGeorge. She took out a bit more than $300,000 to finance her various degrees. Along the way, she married and had children. She also had mental-health struggles and was diagnosed with bipolar disorder. In spite of her struggles, she managed to achieve academically and “consistently held some form of employment” when out of school.
Her family obligations and financial situation became much more difficult right around the time she was graduating from law school. She was pregnant with triplets who were born very prematurely. The triplets required lengthy hospitalizations and all three had some level of disability. One of the triplets had particularly severe disabilities, and even eight years later cannot walk, read, write, or count to 100. The triplets’ older brother was apparently diagnosed with autism during these years. The debtor's husband divorced her—he continued to pay child support, but the court opinion makes it clear that she had primary custodial responsibility for five children, four of them disabled.
It spite of those difficulties, she passed the bar and got a job as an associate at a law office. However, the court stated that the position did not offer her “an advancement track that would that would likely improve her financial situation.” As a result, she attempted to set herself up in solo practice. In order to establish her reputation and build her practice, she engaged in “volunteer and reduced-fee legal work.” Again, however, she was unable to earn enough money to support herself. She worked side-jobs as an Uber driver and a pizza delivery driver. She got a real-estate license and sold a couple of properties.
Ultimately, none of those ventures ended up being sufficient to sustain her, and she took a job as a waitress in a nearby casino. The waitressing job offered health insurance and allowed her to work nights and weekends in order to take care of her children.
She filed a Chapter 13 bankruptcy case and made the required payments for three years. At that time, the court had to decide whether to discharge her student loans, which had grown to $484,964 with interest and penalties. Navient/SallieMae stipulated to a discharge of the $68,967 owed to it, leaving the court to decide what to do the remaining $415,997.
In performing the “undue hardship,” analysis, the court made a likely accurate—but still very disquieting—conclusion. The court found that the debtor’s “work history as an attorney did not result in sufficient income to to repay her student loans and take care of her dependents,” and that, in fact, “she is likely earning more with benefits [through waitressing at the casino] than [she] could through practicing law.”
The final question before the court was how to consider the existence of income-based repayment programs in the undue-hardship analysis. The student loan companies argued that since her income was so low and her family expenses so high, her IBR payment would be $0 a month. They therefore opposed discharging the debt, preferring instead to take a wait-and-see approach as to whether she would be able to make payments some time in the next 25 years.
The court, however, held that such an approach would not advance “either the policy of repayment of student loans or the debtor’s fresh start.” The court therefore discharged nearly $200,000 of her debt. It left $220,000 intact, concluding that the debtor could potentially pay it off over the next decade if she put all available resources toward the debt. This would not leave her any money to save for retirement, but the court noted that “in ten years the Plaintiff will be 55 years old and with some time left in her working life.” If she is still able to waitress at age 55, she can start saving for retirement at that time.
Posted by Cassandra Burke Robertson on December 21, 2017 at 08:02 PM | Permalink
I confess to being a bit confused about the timeline. The OP suggests she was pregnant with the triplets (which may have been children 2, 3, and 4?) when she graduated from law school. And it isn't clear whether she was diagnosed with bipolar disorder before or during law school. But taking the sequence as you lay it out, John, I would never advise someone like this to attend law school -- and certainly not a low ranking school at sticker price entirely funded by a loan. If I were asked, I would say no. And I have advised a few family members not to attend. Those conversations are hard, but when they aren't particularly strong students, and their only choice will be a third tier school and a student loan, I think you have to tell them it's a bad idea. I find people over-estimate their abilities and misunderstand risk, though. And no one likes to hear "you aren't smart enough, and this will be a disaster." It's hard to have that conversation, but someone should have it with her. Maybe an advisor at the University of Washington, or a faculty member she talked to?
Posted by: anon andon | Dec 28, 2017 6:29:04 PM
All of that may be true, but it is a shame your analysis could not have been shared with her before her loan proceeds became income for her school. After all, she was already a mentally unstable mother of five children in her mid-30s when she applied. Naturally, it's much more clever to wait until after she's run her course as a loan conduit before telling her how unfit she would be to use the education she borrowed to obtain. Why blame McGeorge for not allowing a sucker to keep money she borrowed from the government?
Hard caps on federal graduate student loans can't come soon enough.
Posted by: John | Dec 28, 2017 3:51:39 PM
Many mistakes were made. Perhaps there is some moral fault in offering a law degree for $75K per year when the resulting diploma will be hard to translate into legal employment that allows repayment in a reasonable period of time, however we define that. I don't agree, but even if one were not inclined to hold to a caveat emptor philosophy, this particular story has enough red flags to suggest the debtor in question bears a great deal of responsibility for the fix she is in. The decision to take out so much in student loans (undergraduate and graduate) and the decision to undergo fertility treatment and bear three additional children (and possibly another, after, for a total of five?) raise questions, in my mind, about her judgment and responsibility. I am not sure I would be concerned that waitressing will pay more than lawyering, under the circumstances. I am not sure I would want someone as my lawyer who had made these kinds of calls. The fact that she has bipolar disorder also raises some questions about performance and reliability, if she is not consistently well medicated. All in all, this seems like a situation in which one might not expect the person to have the basic attributes needed for competent lawyering. It is a very sad situation, but is it really a case of someone the legal profession left behind? Certainly it's not analogous to women re-entering the legal work force after time away.
Posted by: anon andon | Dec 28, 2017 1:18:59 PM
The median LSAT at McGeorge is 151, which is below the 50th percentile for LSAT takers this past year. Unsurprisingly, only 44% of the class even has work requiring bar passage within 9 months of graduation, and as this woman's story shows, even that can mean very little to one's financial well-being.
Meanwhile, the cost of attendance is $75,566 this year. Contrary to assertions in other posts on this subject, it would seem that indeed some people "do pay sticker," and this woman was one of them.
It should disgust law professors to share a profession with the faculty at McGeorge.
Posted by: John | Dec 25, 2017 6:57:27 AM
Anon: Your recommendation is like the doctor who killed the patient in order to cure the disease. The point of law schools is to provide employment for law professors. Sure, it's sad when the students suffer from debt for the rest of their lives, but there are ways to address that without hurting professors, such as having the federal government pay the tuition through the public interest loan forgiveness program. Also, your proposal would mean taking away from the time available for professors to spend on their scholarship. As it is, very few of their articles are read or cited by any substantial number of people. Just imagine the quality of their work if they have to spend even more of their time dealing with students.
Posted by: biff | Dec 22, 2017 3:09:01 PM
imagine if half of US law degrees were LLBs obtained in state universities, with little accumulated debt.
Posted by: John Steele | Dec 22, 2017 12:30:02 PM
Perhaps law school tuition is part of the problem? If there is such an oversupply of highly qualified law professors on the market (as it appears from the comments on this site), then why not increase the teaching load on faculty? Require 2/2, or 2/3. Sure, some profs will be upset and might quit, or not go into academia. But if there is an oversupply, then what's the harm? That reduces law school tuition, at least.
Posted by: anon | Dec 22, 2017 9:46:47 AM
The degree of problems she's had with her children's medical issues seems a bit of a red herring. The main issue seems to be that she can expect to earn more as a casino waitress than practicing law.
At least, on average, she'll still earn an extra million dollars thanks to her law degree.
Posted by: Derek Tokaz | Dec 22, 2017 9:07:05 AM
I’m not sure this woman’s problems are entirely the fault of the legal profession. Apparently after she already had four kids, including at least one that is severely disabled she decided to get fertility treatments. When those treatments resulted in triplets, she did get one or two reduction abortions but brought all three to term. This left her with seven children, at least four of whom are disabled one profoundly so.
If one is in a whole she probably ought to stop digging.
Posted by: William | Dec 22, 2017 8:28:06 AM