Subscribe via RSS Feed

Author Page for Paul Campos

rss feed

Truth in lending

[ 70 ] August 17, 2013 |

Matt Taibbi is shrill:

In a way, America itself is violating the Truth in Lending Act. It’s cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn’t a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo.

We’re doing the worst thing people can do: lying to our young. Nobody, not even this president, who was swept to victory in large part by the raw enthusiasm of college kids, has the stones to tell the truth: that a lot of them will end up being pawns in a predatory con game designed to extract the equivalent of home-mortgage commitment from 17-year-olds dreaming of impossible careers as nautical archaeologists or orchestra conductors. One former law student I contacted for this story had a nervous breakdown while struggling to pay off six-figure debt. It wasn’t until he tapped into one of the few growth industries open to young Americans that his outlook brightened. “I got my life back on track by working for a marijuana delivery service in Manhattan,” he says. “I’ve had to compromise who I am . . . because I started down a path that I couldn’t turn away from. Student loans aren’t hope. They’re despair.”

The most interesting revelation in this important and disturbing piece is that, by its own estimates, the government ends up collecting close to or even more than the original principal balance on student loans that default. This is because, unlike almost any other form of debt, student loans can almost never be discharged in bankruptcy, and, when it comes to collecting on its debts:

“Student-loan debt collectors have power that would make a mobster envious” is how Sen. Elizabeth Warren put it. Collectors can garnish everything from wages to tax returns to Social Security payments to, yes, disability checks. Debtors can also be barred from the military, lose professional licenses and suffer other consequences no private lender could possibly throw at a borrower.

The upshot of all this is that the government can essentially lend without fear, because its strong-arm collection powers dictate that one way or another, the money will come back. Even a very high default rate may not dissuade the government from continuing to make mountains of credit available to naive young people.

H/t Anna in PDX.

Law school death watch

[ 41 ] August 16, 2013 |

San Diego’s Thomas Jefferson School of Law joins Florida Coastal and Hamline as prominent recent admits into legal academia’s ICU:

The Thomas Jefferson School of Law will begin a new semester Monday with 12 fewer employees after the administration cut $4.4 million from its budget because of declining enrollment.

Thomas Guernsey, who took over as dean of the school on July 1, said Thursday that some adjunct faculty and other staff members were laid off. Fourteen classes that had low enrollment or were highly specialized were eliminated, he said.

(h/t ichininonsan at JDU. Given the precedents at FCSL and Hamline, the administration’s claim that only adjunct faculty and staff have been laid off warrants considerable skepticism).

How bad are things at TJSL? The school is carrying $133 million (!) in debt, incurred when it paid for a 305,000 square foot eight-story new law building in downtown San Diego, completed two years ago. It’s also dealing with a lawsuit by former students, which has survived a motion to dismiss and is now in full discovery. Here are some stats regarding the school’s most recent entering classes:


Applicants: 3,323
Offers: 1,604
Percentage of applicants admitted: 48.27%
Total matrics: 422
Median GPA: 3.00
Median LSAT: 151 (49th percentile)
Transfers in: 0
Transfers out: 48
Academic attrition: 35
Total full-time faculty and administrators: 44


Applicants: 2,697
Offers: 1478
Percentage of applicants admitted: 54.8%
Total matrics: 440
Median GPA: 3.01
Median LSAT: 151
Transfers in: 3
Transfers out: 43
Academic attrition: 41
Total full-time faculty and administrators: 50


Applicants: 2,200
Offers: 1,613
Percentage of applicants admitted: 73.3%
Total matrics: 387
Median GPA: 2.93
Median LSAT: 148 (37th percentile)
Transfers in: 9
Transfers out: 49
Academic attrition: 58
Total full-time faculty and administrators: 55

The school’s drastic slashing of already-low admission standards has not forestalled a collapse in this year’s enrollment. First year orientation began this week, with only 250 students in the new entering class.

Given that the school appears to depend on tuition for an astonishing 97% of its operating revenue, that it doesn’t have a parent university to bail it out, and that its only significant asset is a piece of San Diego real estate with a generic eight-story office building on it, the faculty lounge probably shouldn’t be stocked with green bananas.

Tipping point

[ 102 ] August 16, 2013 |

french revolution

Since it’s NCAA-bashing day here at LGM, I wanted to mention that the current well-deserved storm of vituperation being visited on the organization seems like a classic tipping point phenomenon. After all, the basics of the situation — big time college football and men’s basketball programs raking in huge dollars; players prohibited from getting any share of the vast revenue streams they create — have been the same for a long, long time.

So why the sudden cultural shift on this, in which lots of elite opinion types are attacking the NCAA in the context of the Manziel business?

My sense is because at some point the combination of dollar amounts and rampant hypocrisy become too much for a critical mass of people who are in a position to have their opinion heard. It’s one thing to pay your football coach $250,000 a year (This was about the highest salary of any college football head coach 30 years ago, and it was considered an outrage at the time by many people, as it was much more than any university president was being paid. It’s the equivalent of about $600,000 in current dollars btw).

It’s another when a head coach with a $15 million guaranteed contract is entitled to only one third as much as one of his peers and there are assistant coaches getting seven figure annual salaries, and luxury suites are being rented out at $85,000 per year (price does not include actual tickets to the games, which must be purchased separately), and the NCAA is making bank on freaking VIDEO GAMES using player names and images and etc etc.

At some point it all becomes too much, and that point is apparently now.

. . . Alan Tomilnson in comments notes that widespread disgust over the Paterno scandal may have played a role, which seems plausible. A friend adds:

When conference expansion first hit in a wave, a lot of it made sense. Penn State to the Big Ten was a logical move, as was FSU to the ACC and the creation of the Big XII. The most recent spate, starting with the ACC adding BC and then continuing with Rutgers/Maryland to the Big Ten, hasn’t made sense on the field. It hasn’t been a result of Team X winning a lot of games and then getting invited into a better conference. Instead, it has been about nothing more than TV markets. Even the Big XII defections were driven by TV. A&M to the SEC, Nebraska to the B1G and Colorado/Utah to the Pac Ten make some regional sense (Mizzou to the SEC does not), but it was all the result of Texas fucking the rest of the conference by starting the Longhorn Network.

Texas no longer plays Texas A&M. Pitt no longer plays West Virginia. Maryland is about to give up its rivalries with UVA, UNC, and Duke. And this is all because of TV. If college football is going to be so obviously driven by revenue maximization and fans are going to lose some of the traditions that made the sport attractive, then why would they oppose players getting paid. Once you drill home the fact that college football is a business, then the employees need to get more than scrip from the company store.

JBJ in comments:

You neglect to mention part of the perfect storm over Johnny Manziel — as sportscaster Jay Bilas made known on Twitter, if you go to the NCAA website and search on Manziel’s name, you find a range of Texas A&M jerseys with Manziel’s name and number, selling for up to $65 per. This came to light simultaneously with Manziel being threatened over the allegation of selling his signature. Even the NCAA couldn’t defend that juxtaposition.

US News keeps publishing deeply misleading law school employment statistics

[ 39 ] August 15, 2013 |

I don’t know if there’s much point in continuing to harp on this, but US News just published another ludicrous law school “ranking,” in a story entitled Ten Law Degrees With the Biggest Return on Investment. The publication calculated this by determining “the 10 schools whose students leave with the least amount of debt relative to their first-year salaries in the private sector.”

One of those ten schools was Rutgers-Newark, which made the list because according to the magazine the “median private sector starting salary” for its 2011 graduates was $117,500.

A little digging into the school’s NALP data (note that until about a year ago it would have been impossible to check US News’s claim, since prior to the pressure created by the law school transparency movement only a handful of schools made their NALP numbers available) reveals that this “$117,500″ figure is the median salary among the 44 (out of 248) 2011 graduates who got private sector jobs and had reported salaries. In other words, the $117,500 or higher number represents the salary of approximately 9% of the graduating class (This is further confirmed by the fact that only 16 graduates got jobs with larger law firms).

The real median starting salary for the class was, at most, $43,437. Note that graduates who were completely unemployed nine months after graduation outnumbered those making the “median” (sic) salary $117,500 or more.

PhD v. JD steel cage death match

[ 226 ] August 15, 2013 |

I missed this when it was published last spring. In this corner, we have the deeply embittered holder of a PhD in literature:

Don’t do it. Just don’t. I deeply regret going to graduate school, but not, Ron Rosenbaum, because my doctorate ruined books and made me obnoxious. (Granted, maybe it did: My dissertation involved subjecting the work of Franz Kafka to first-order logic.) No, I now realize graduate school was a terrible idea because the full-time, tenure-track literature professorship is extinct. After four years of trying, I’ve finally gotten it through my thick head that I will not get a job—and if you go to graduate school, neither will you.

So you won’t get a tenure-track job. Why should that stop you? You can cradle your new knowledge close, and just go do something else. Great—are you ready to withstand the open scorn of everyone you know? During graduate school, you will be broken down and reconfigured in the image of the academy. By the time you finish—if you even do—your academic self will be the culmination of your entire self, and thus you will believe, incomprehensibly, that not having a tenure-track job makes you worthless. You will believe this so strongly that when you do not land a job, it will destroy you, and nobody outside of academia will understand why. (Bright side: You will no longer have any friends outside academia.)

On the contrary, you are probably spectacular, due to the manic professionalization of the literary disciplines meant to create Ph.D.s who can compete. Everyone has a book contract, peer-reviewed publications, and stellar teaching evaluations. This was not the case when today’s associate professors were hired in the boom of the late 1990s. But don’t resent them for insisting that it has “always been hard out there”—just let them buy you lunch. You may also be tempted to resent the generation of full professors teetering ever precariously toward retirement, and thus cleaving ever more resolutely to their positions. Leave them alone—they won’t be replaced when they leave anyway; their “tenure lines,” as they are called, will die with them.

No, you will not get a job—not because, like Kafka’s mouse, you went in the “wrong” direction, but because today’s academic job market is a “market” in the sense that one stall selling fiddlehead ferns in the middle of a strip mall is a “farmer’s market.” In the place of actual jobs are adjunct positions: benefit-free, office-free academic servitude in which you will earn $18,000 a year for the rest of your life.

In one sense, it’s all so familiar:

(1) Special snowflake syndrome, aka optimism and confirmation bias. Yes the odds of getting what I want look very bad, but somebody has to get that job in a Tier I department/with the Environmental Defense Fund, right?

(2) Massive credential inflation. People whose resumes when they graduated wouldn’t at this point even get them an interview with a satellite campus of Multi-Directional State/a reasonable shot at a $38,000 per year associate gig with a firm in whatever town in Mississippi makes Jackson look like Paris are now, respectively, the chair of the department at the Tier I university, and the managing partner of a mid-sized firm in Pittsburgh. And they’re deciding whether you are worthy of a callback interview.

(3) Internalized stigmatization. That you’ve been screwed over by structural factors somehow makes almost no difference to your sense of spoiled identity and self-loathing.

On the other hand:

(1) Getting a PhD doesn’t normally leave people in much if any educational debt, right? (I don’t actually have any numbers on this — are there any?)

(2) That getting a doctorate, at least in the humanities, is a very high risk proposition has been a cultural cliche for at least 30 years. Departments weren’t peddling fake employment and salary stats AFAIK (corrections welcome).

(3) Personally I’d much rather “waste” time in graduate school than in law school, given the likely relative intellectual value of the experiences.

On yet a third hand:

(1) Law school only lasts three years, usually.

(2) Schuman claims that 6% of PhDs in her field are going to get tenure track jobs. By contrast maybe half of all current law school students are going to have legal careers of some kind. (But again “of some kind” is a crucial modifier. After all, lots of PhDs get to have academic careers “of some kind.”).

Real estate tycoon gives law school $55 million; school’s grads hope to get jobs as lawyers some day

[ 33 ] August 14, 2013 |

Even in the grim context of contemporary American legal education Chapman University’s law school has catastrophic employment numbers. Only 65 of the school’s 178 2012 graduates purportedly had jobs as lawyers (full-time jobs lasting at least a year requiring bar admission) in February of 2013, but even this number is seriously inflated by various factors.

Breaking it down:

Five of these 65 graduates were holding themselves out as solo practitioners (It’s somewhere between extremely difficult and almost impossible for a new law graduate to maintain a viable solo law practice, so graduates who report themselves as doing so are usually in a state of de facto unemployment).

Another 29 listed themselves as employed with firms of two to ten lawyers. This is too is a highly suspect classification. An unknown but significant number of these jobs are hourly contract positions, eat what you kill office sharing arrangements, and otherwise tenuous forms of quasi employment.

15 were with firms of 11-25 attorneys. At least most of these jobs are probably real (although almost invariably quite low-paying) legal jobs.

A lucky 13 graduates got jobs with mid-sized firms. Not a single graduate in the whole class got a big firm job.

So that accounts for 62 of the 65 legal jobs for 2012 grads, with perhaps half of those 62 jobs representing real positions with law firms.

Note this means that every other form of legal employment — every type of government legal job (DA, PD, regulatory agency positions etc.), all public interest jobs, all in-house positions with private companies, all judicial clerkships — yielded a total of THREE jobs for Chapman’s 2012 class.

So, realistically speaking, 20% of the class got real jobs as lawyers. The 88% of the class that took out law school loans took out an average of $133,700 in such loans, which means that with accrued interest average law school debt for those graduates was over $150,000 at graduation (this figure does not include other educational debt).

I have been told by a member of the school’s faculty that, despite its sky-high tuition (nearly $45,000 annually), Chapman balances its budget by admitting a couple of dozen young Saudi nationals into its “international” LLM program each year, even though many of these students have extremely marginal English skills.

In a word, this is exactly the kind of school that wouldn’t be accredited by the ABA, if the ABA considered “whether the school’s graduates are able to actually get some sort of legal job” a relevant criterion of accreditation for a law school. But it doesn’t, so here we are.

Or rather here we were, because Christmas has come early to Orange, California, in the form of a $55 million donation from a real estate tycoon. Chapman shall henceforth be known as the Dale E. Fowler School of Law.

It’s maddening that the U.S. tax code enables and encourages this kind of thing. Chapman’s 2012 graduating class racked up $24 million in law school debt, almost all of it in federal student loans, a very large percentage of which will never be fully repaid. Dale E. Fowler would be performing a public service if he gave Chapman University a $55 million bribe to shut down its law school, as opposed to spending that much to have his name stamped onto it. Indeed he would be doing far more social good if he dumped suitcases full of cash into random Orange County alleyways.

Where is all that extra tuition revenue going?

[ 124 ] August 14, 2013 |

Brian Galle of Boston College is doing a survey of the budgets at several hundred US colleges and universities. His data cover the years 1999 through 2007, and are adjusted for inflation.

During this time, he finds that both gross and net tuition revenue rose by nearly 40% in real, inflation-adjusted terms. How did university administrators decide to spend this money? If you guessed “on hiring lots more underlings, and giving enormous raises to themselves,” you have just won an authentic Gordon Gee bow tie. Gale finds that University president salaries rose by 50%, and total employee compensation went up by 22%, yet full-time instructor salaries (this includes both tenure-track and non-tenure track people) barely rose at all. Indeed the latter category may well have declined if non-full time adjunct faculty had been included.


The higher learning in America

[ 57 ] August 13, 2013 |

law school

It is much more difficult to recede from a scale of expenditure once adopted than it is to extend the accustomed scale in response to an accession of wealth. — Veblen –

I started ITLSS two years ago this week, in part, because I was frustrated with the sheer level of bullshit prevalent in American legal academia. I stopped it, in part, because after awhile one (and by one I mean me) becomes tired of playing the role of Jeremiah or Howard Beale or your annoying and embarrassing relative who is always saying tactless things at the wrong times and places, even, or especially, if those things happen to be true.

Still . . . last week an ABA committee issued a “working paper” that, after many pages of throat-clearing, issued some on the whole very mild recommendations regarding possible reforms to the structure of American law schools, given the combination of their increasingly high cost and the increasingly problematic employment outcomes experienced by their graduates.

Nothing could better illustrate the need for reform than some of the reactions to the paper. For example, this post features an approving link to a PDF in which a former dean of a law school expressing his view that a distinction needs to be maintained between the training and education of lawyers, and that law schools should not sacrifice the latter in the pursuit of the former:

Let me make a quick and rough distinction between education and training. I can train a reasonably intelligent eighth-grader to draft a non-compete clause in 10 or 15 minutes. I cannot, however, educate them about market definition, information asymmetries, or public policies regarding employment in different sectors of the economy. One might quickly ask: Why would someone who knows how to draft such a clause need to know about economics and market dynamics? The answer is as simple as it is obvious. They need to know the context so that they can critically assess a non-compete clause or draft one in another situation for another client. Without the scholarly work in law and economics or jurisprudence or behavior psychology or other disciplines, the ability to analyze and criticize rules and principles of law is made more difficult if not impossible.

Let’s work through this.

(1) A lawyer drafting a non-compete clause needs to know two things: to what extent are these things enforceable in this jurisdiction, and who is my client? The lawyer will then cut and paste a non-compete clause from a preexisting form, and possibly, depending on how much money his or her client is willing to spend on this transaction, try to narrow it if the lawyer is representing the bound party, or broaden it if the lawyer is representing the enforcing party. That’s it. The economics and psychology and general jurisprudence of non-compete agreements are no doubt fascinating academic topics, especially from a comparative and historical and sociological perspective, but lawyers don’t get paid to think about that stuff.

(2) Law students don’t pay to think about that stuff either. Why? Because this is how much class time will be spent over the course of law school on non-compete agreements, in the experience of the average law student: Between zero and fifty minutes, with the median being zero. If any time whatsoever is spent on the subject, here’s how it will go down: The student will learn, or at least be exposed to, a few doctrinal generalities regarding such agreements, from which at most the student will take away a vague memory that they can be enforceable in a lot of places if they’re not “unreasonably” broad but probably not in California. If the student is unlucky he or she may retain an even vaguer memory of being harassed regarding whether making such agreements enforceable is “sound public policy,” from an economic and psychological and jurisprudential and comparative and sociological perspective (socially appropriate answer: it depends on a variety of factors, which must be carefully balanced by courts and legislatures; true answer: nobody really knows, especially not law professors, whose knowledge of the economics and psychology and etc. etc. etc. of non-compete agreements is never going to be more than puddle-deep, if that much).

(3) Speaking of law professors, here’s the CV of the person who favored the ABA committee with his observations regarding their work. Check it out kids: if you had only had the foresight to be born in 1948 instead of 1988, you too could have had an academic and professional career that consisted of going straight from undergrad to George Washington Law School, getting moderately good grades, spending two years as an associate with a small law firm in New Jersey, then spending the next 37 years (and counting) as a law professor, of the sub-genus homo administratrix, “serving” on about a hundred committees and task forces, eventually running a law school, and lecturing people about what lawyers need to know about a wide variety of extremely complex academic subjects, on the basis of your experience as a general litigation associate with a small law firm in New Jersey 38 years ago, and your own training in a wide variety of extremely complex academic subjects as a law student 40 years ago.

More on Florida Coastal’s rapidly shrinking law school

[ 32 ] August 9, 2013 |

Last month I wrote about the situation at Florida Coastal School of Law. I’ve since learned some further details about what, according to various sources, has been going on at the school. To summarize:

(1) FCSL is a for-profit law school owned by Infilaw, which in turn is owned by Sterling Partners.

(2) FCSL’s contractual obligations include a “guaranteed return on investment” to the school’s owners.

(3) When it became clear that that the school was going to miss its enrollment target by a huge margin, the school’s owners decided to get rid of a large percentage of the school’s faculty. FCSL’s first-year enrollment:

2010: 808
2011: 672
2012: 571
2013 315 (projected)

(4) In order to legally circumvent the contractual rights of tenured and tenure-track faculty, the school would have to declare a financial emergency, which would then allow it to undertake a formal reduction in force, i.e., it could then fire enough faculty to allow the school to have a chance of making good on its owners’ guaranteed return on investment.

(5) The school’s owners, however, were unwilling to declare a financial emergency, since they calculated doing so would be a public relations disaster for an enterprise whose finances were already severely strained by the unfortunate effects of increasing transparency regarding employment outcomes for its graduates. Instead, the administration approached 14 faculty members with the following offer: accept a severance package in return for your “voluntary” resignation, or be fired via a formal reduction in force. Apparently, 12 of the 14 faculty members accepted this offer. Two others did not, and are planning to sue the school.

(6) At least one faculty member was fired shortly before the “voluntary” severance packages were offered. As of two days ago, the school’s web site had yet to be updated to reflect the school’s much smaller faculty.

(7) One of my informants emphasized that in his/her view the school is admitting ever-larger numbers of students who have no realistic chance of ever practicing law, while saddling them with $150,000+ in debt, and that many faculty members feel “dirty” about this, but also feel financially trapped by their own circumstances. This person is particularly angry about what he/she considers the school’s egregious mis-statements to the local and national media. It’s worth recalling that last month the school’s interim dean (who is also the general counsel of Infilaw) flatly denied that any departures from the faculty were anything but voluntary:

You accused us of “lying to the media,” but nothing could be further from the truth. Some of our faculty members have indicated their interest in resigning, retiring or continuing in a different role with the school.

In point of fact I didn’t accuse FCSL (or more accurately Infilaw) of lying to the media: rather, I pointed out that the story the school’s administration was giving out to the media was radically inconsistent with what I was being told by certain present and former employees of the institution. Readers can decide for themselves which of these stories seem more credible.

Ohio university to name disgraced football coach as president?

[ 96 ] August 8, 2013 |


Forget it Jake — it’s Ohio.

. . . I’m a bit surprised that some posters are taking the view that Tressel’s willingness to flout NCAA rules (he was involved in scandals at both the Ohio State University and Youngstown State) isn’t an issue, because the rules are bad. By way of analogy, I think the ABA rule that students can’t get academic credit for paying externships is a bad rule, but if a law school dean allowed violations of that rule at two different schools where he had been dean that would surely be relevant to whether he ought to be a university president. This of course doesn’t touch on the more basic absurdity of considering Tressel (who has done nothing in his entire adult life besides coach football) for a university presidency.

Debts that can’t be repaid won’t be

[ 94 ] August 6, 2013 |

The Consumer Financial Protection Bureau has done a breakdown of the repayment status of the one trillion dollars of outstanding federal student loan debt (this figure doesn’t include private student loans), held collectively by nearly 51 million Americans.

Here are the numbers:

Total federal student loan debt: $999.7 billion

In repayment: $493.7 billion

In school: $146 billion

In grace period (these are people who graduated recently): $47 billion

In deferment: $122.1 billion

In forbearance: $91.1 billion

In default: $89.3 billion

Other: $9.5 billion

So only 49% of federal student loans are currently getting paid back. Another 19% aren’t being paid back because the people who owe the money are either currently in school or graduated recently. That leaves nearly one-third of federal student loans either in deferment, forbearance, or default. (A commenter notes that some and perhaps most of the loans in deferment are held by people who are doubling down on more degrees).

Matt Leichter:

I’d love to see a comparison to credit cards, but aside from class concerns, I think it’d tell us that the federal loan program has been a spectacular, embarrassing failure.

Basically, contemporary America has moved from a model of higher education in which a lot of people could afford to go to college, to one in which most people can’t. And we’re putting off the social upheaval this shift might cause by loaning people money they can’t repay.

The difference between this and a Ponzi scheme is that a Ponzi scheme is illegal.

Would you pay $250 million for a newspaper in 2013?

[ 100 ] August 5, 2013 |

And “affiliated publications.”

This is pretty much walking around money for Jeff Bezos, so maybe it can be modeled as consumption, as the dismal scientists say.

. . . interesting nugget from below the fold:

[Bezos] founded Amazon at 30 with a $300,000 loan from his parents, working out of the garage in his rented home in Bellevue, Wash. He called his creation Amazon in part to convey the breadth of its offerings; early promotions called the site “Earth’s Biggest Bookstore.”

These bootstraps are made for walking.