DEBT, DECEPTION, AND THE ABA

The ABA kicked the can down the road again. When law schools classify their most recent graduates as “employed” in 2012, they still won’t have to disclose whether the jobs are part-time or require passing the bar. Anything and everything counts — which leads to this question:

Q: When are some law schools like for-profit colleges?

A: Every day.

Both groups are under increasing scrutiny for similar tactics. The Wall Street Journal doesn’t like the new efforts to hold for-profit colleges accountable. Recently, it used those initiatives to bludgeon a favored target:

“Where there’s money, there are trial lawyers…”

After the many WSJ articles about the rise of corporate big law’s multi-millionaires, such special disdain for greedy, non-corporate trial lawyers seems somewhat disingenuous. But I digress.

The editorial criticizes the government’s intervention in a whistleblower’s False Claims Act case against a for-profit college system and concludes with this non-sequitur:

“If the government thinks such schools are unfairly benefitting from federal subsidies, then it should cut off grants to all college students.”

Whoa, Nelly!

The Journal sidesteps the most important questions that the False Claims Act cases raise and that apply equally to many law schools: How do institutions of higher education recruit students and what happens after they sign up? When colleges are accused of “a boiler-room style sales culture,” it’s no answer to say “a recruiter’s job is to recruit.” Surely, the Journal‘s editorial board understands the importance of truthful information to the proper functioning of free markets.

For example, here’s information that for-profit colleges are loathe to emphasize: their student drop-out rate is over 50 percent. According to one report, only 38 percent graduate within six years (compared to 53 and 64 percent for public and private non-profit institutions, respectively). Another report of the ten largest for-profit schools puts their graduation rate at 22 percent.

Law schools don’t have those stunning drop-out rates, but two other criticisms apply to many of them:

Encouraging students to take on debt that can’t be repaid. Bloomberg News reports that for-profit colleges enroll 12 percent of all undergraduates, receive 25 percent of all student loan dollars, and account for almost half of all defaults. Only a day after its editorial, the Journal reported that the for-profit default rate had soared to 15 percent, compared to non-profit rates of 7.2 and 4.6 for public and private schools, respectively.

Ironically, the same edition running the editorial attacking efforts to increase for-profit college accountability also contained a small item on the front page: “Vital Signs” — a graph with this accompanying description:

“Americans are borrowing more for student loans. In July, consumers owed the government about $386 billion, largely for student loans, up from $139 billion two years earlier. However, during the same period of time, consumers pulled back on other types of borrowing, such as credit cards and loans for automobiles.” [emphasis supplied]

Evidently, a standard hot-button topic for the Journal‘s editors — “wealth redistribution” — isn’t so bad when the redistribution is from students to their schools.

Law schools? Almost half of their graduates incur more than $100,000 in educational loans. But the real tragedy that the ABA continues to facilitate involves ongoing deception about the prospects for getting jobs needed to repay them.

Misleading employment stats. For-profit schools’ recent battle over federal “gainful employment ” regulations mirrors the controversy over the way many law schools report employment data. Prospective students read about graduates who are “employed,” even though they’re performing tasks that don’t require the degrees that schools are trying to sell them. Likewise, law schools can call their graduates employed, even if they’re greeters at Wal-Mart.

Overwhelming educational debt is one of many terrible things happening to the next generation under the guise of “letting the markets decide” — however imperfect or distorted those markets may be. Whether for-profit or, like most law schools, run as if they were, educational institutions that pursue the myopic short-term mission of filling classrooms with tuition-paying bodies do their students a disservice. As the cycle of deception-debt-no jobs produces a bubble that is already beginning to burst, the resulting damage to the country will become increasingly obvious, too. Some of the “Occupy Wall Street” protesters are already making that abundantly clear.

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