Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Can I get rid of student loans by declaring bankruptcy?”
Does law school cost too much? It does if the law-school graduate does not land a post-law-degree job that pays well enough to keep up with law-school loan repayments.
One bankruptcy expert says American law schools are “poster children for market dysfunction” because they are churning out too many law-school graduates with too much debt who have little to no job prospects. That is leading law-school graduates into courtrooms, but not as practitioners. Instead, law-school graduates are ending up in bankruptcy court trying to escape the crushing weight of their law-school and related debts.
While legal employment opportunities have dwindled in the wake of the Great Recession, which officially ended in 2009, law-school enrollments have continued to expand. Writing at ValueWalk.com, Stephen J. Harper of the Northwestern University School of Law observes that federal student loan and bankruptcy policies create a moral hazard for law school deans.
Law school deans, Harper notes, see their role in much the same light as a corporate chief executive officer. Brisk, profitable business for a law school means classrooms filled with students. Healthy profits mean high law-school tuitions and students willing to pay. Incoming classes at law schools actually grew as the Great Recession unfolded, although enrollment has declined since 2010.
Harper hints (maybe more than hints) that the quality of a law school education is not what it once was. A decade ago, just over half of law-school applicants gained admission to law schools. Now, law schools hungry for students willing to foot the bill for high tuition accept more than three-fourths of applicants.
That has led students to turn largely to federal student loan programs to foot the bill, on average totaling $120,000 for law school alone. The problem is that the debt is being incurred by students who may have unrealistic expectations about their legal career prospects. Many of the law schools with the lowest job-placement rates charge the highest tuition, Harper observes. This is because law schools are seen as a single market, but in reality, the law-school market is tiered.
It is time, Harper argues, for law school tuition rates and the debt that students incur to attend a school to “bear a reasonable relationship to the legal employment prospects” for graduates of a given school’s legal program. Schools that fail the most—or those with the lowest job-placement rates—would fold altogether. In a true market system, as demand for attorneys fell (with the Great Recession and the so-called “recovery”), so too would the number of law-school applicants and, correspondingly, law-school tuition rates.
In reality, the opposite has occurred. Low-performing law schools are able to maintain high tuition rates because law students can—with the help of federal student loans—kick the proverbial can down the road and worry about loan repayment after securing a law degree and a high-paying legal job.
When the job fails to materialize and the degree looks all-but worthless, the student may end up bankrupt and demanding a change in the bankruptcy code to allow the discharge of student-loan debts. The law school that collected the tuition, meanwhile, keeps its money.
The federal student-loan program is, in effect, Harper notes, “a federal subsidy” that is creating a “moral hazard that encourages marginal law schools to engage in bad behavior that fills classrooms and maximizes revenues.”
At the same time, it is creating an “expensive and enduring” mess, the bill for which jobless ex-law students and the American taxpayer pay.
If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.
About the Author
Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.
Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.
In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.
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