Keeping Up with the Joneses

Legal Dollar and BIDER have shared with us this commentary from a University of Chicago Law Professor regarding his poverty in spite of being above the $250,000 bracket:

Read here for the full text.

I liked this passage in particular:

The problem with the president’s plan is that the super rich don’t pay taxes – they hide in the Cayman Islands or use fancy investment vehicles to shelter their income. We aren’t rich enough to afford this – I use Turbo Tax. But we are rich enough to be hurt by the president’s plan. The next time the president comes home to Chicago, he has a standing invitation to come to my house (two blocks from his) and judge for himself whether the Xxxxxxxxxs are as rich as he thinks.

The irony is that this professor specializes in economics, security regulation, and other subjects that should touch upon the tax code at one of the top law schools in the country....yet, he has absolutely no idea how to hide his money and needs freaking Turbo Tax to tell him what to do!

Wow. If that isn't a damnation of law school.

I heard that at the University of Phoenix, someone from higher up outlined the entire curriculum, while they hired an adequately-credentialed talking head to purvey the information. I can't help but think there are many law school professors who got stuck teaching a subject that they don't know anything about.

Imagine if a Medical School were run like this:

"Can you teach me about dysfunctions of the adrenal gland?"

"That's not really my area of specialty, but I read something about it in a book once. Here's a link to WebMD. By the way, here's the bill for $250,000 for having me and my ilk grace you with our presence."

But why is that?

In spite of the Tier System cooked up by U.S. News and World Reports, schools ultimately "teach to the test." It also helps the bottom line of lesser schools if they can take the emphasis off of recruiting professors with real world experience and basically hire anybody who is capable of using a textbook to teach the U.C.C. The irony is that this professor's academic credentials are impressive overall, but they don't actually have any insight to contribute into the body of law that they've been recruited to teach.

And, if we are going into the whole "are you being paid what you're worth?" argument, it is kind of ironic that his job as a talking head could be done by an adjunct for a fraction of the cost, but his salary and work schedule are artificially regulated by the ABA (and to an extent, by U.S. News and World Reports).

Yes, what a sad gnat who is being pummeled by the establishment while everyone else sails off to the Cayman and has their masseuse rub them with oil-soaked $100 bills. If only he had actual knowledge of economics and the tax code, then he might not have gotten into this predicament.

He also states that his money is better spent on a nanny, gardener, and housekeeper rather than sending it to Washington because he has direct control over how the money is spent and that it is better for these people to earn a wage rather than be on welfare.

All of his hires are recent immigrants. Is it a mere coincidence that he hired recent arrivals from Mexico and Poland because he loves the American dream? Or is it because they work for the least amount of money?

The irony is that it is fairly likely that none of his employees have health insurance, and if they were sent by an agency, the likelihood that they are covered by worker's comp is fairly small. The minute Pedro cuts his hand on the lawnmower blade, he will be dumped at the emergency room where the taxpayers will pick up the tab. If Marie the housekeeper becomes ill with the flu, she will probably not be paid sick leave and will probably show up at his house and spread the disease to the inhabitants before she becomes so run down that she acquires secondary infections like pneumonia. She will then visit the local emergency room and receive free treatment from county services. She will probably also need handouts from charitable organizations to help pay rent, food, and medical bills.

In the end, it's hard to become too excited that Professor Henderson is doing his part to keep the economy going. Yes, he spent $300 that month to keep somebody employed, but he also used the cheapest services and avoided paying many of the necessary costs to keep these people housed, fed, and healthy and conveniently spread the rest of the cost onto the taxpayer.

More Blood Money

After writing my last blog entry in which I calculated how much more a person would pay for their law degree thanks to a 1-2 punch of rise in tuition and student loan interest rates, I decided to take a visit to my alma mater's website to see what they were charging the poor people who signed up for the once in a lifetime opportunity to be an attorney.

The incoming class is now paying $200+ more than I did in my first year! And I started school in 2006!

Seriously? After an entire year of hearing about the crummy jobs (or no jobs) many alumni have scrounged up! This is how the school responds?

Where does it stop? Where will tuition be in 5 years? Will it be $1200 per semester hour? Right now, they are clocking in at owing nearly $90,000 in tuition and books alone!

And I can see why they needed to increase tuition. Those podiums the professors use are so out of date! And those copies of 1934 real estate form books... Why, it's about time that students will have access to form books that don't contain language about making it illegal to sell houses to the colored people. And let's not forget that tragic moment when career service's fax machine broke. That event completely shot OCI all to hell. They were left scrambling and the only employers they could manage to invite to OCI were the legal aid office. Poor kids. They certainly would have been scooped up by the understaffed top 250 law firms.

Buy Your Law Degree Now Before the Cost Rises Another $50,000

9/16 Update: Correction of Numbers using proper amortization calculator

In my mind, people go to law school in the same way that people bought all of those houses during the bubble. Were the houses as expensive as hell? Yes. Were the mortgage payments overwhelming? Yes. But goddamn if it wasn't your own personal piggy bank!

Entire neighborhoods in foreclosure do not suggest that a group of people teamed up and decided to be stupid together.

Where was I?

Oh yes. Personal piggy banks.

People who attend law school generally think that an attorney job is their own personal piggy bank. It's easy money. It's a place where you sit out 3 years of your life and pop out on other side with great earning potential.

Student loans don't even make you feel the gravity of your investment. You got the paperwork in the mail showing what your monthly payments will look like, but you don't actually look at them. For one thing, you can't do much to control how much your monthly payments will be. Even if you lived cheaply, there is still the question of both tuition and the interest rate on those loans. What was the lending rate just a few short years ago for graduate students? It hovered somewhere around 3-4% (the same rate applying to all students regardless of being a graduate or undergraduate) And not only that, tuition skyrocketed over the past few years. Together, the interest rate and tuition have made law school tens of thousands of dollars more expensive for the average borrower. Even if your tuition "only" went up a measly $200 a semester hour over the course of your stint in law school, thanks to 6.8% interest rates, you will end up paying substantially more for your education over the following 10 years than somebody who graduated about 5 years ago (in 2005).

Let's say that you borrowed $100,000 at 6.8% and paid it off over 10 years. According to calculators, you will have paid a grand total of $138,100 at the end of your loan.

If you borrowed $100,000 at 3.6% (which is an average of the interest rates between 2002-2005), you will have paid a grand total of $119,225.99 at the end of 10 years.

As you can see, you are paying an extra $19,000 for borrowing the same amount of money over the next ten years for interest alone!

Yes, that presumes that tuition was exactly the same as it was 5 years ago. Now, you will have to borrow even more money to buy the same product.

Let's pretend that tuition is now (when averaged over 3 years) is about $150 a semester hour more than what a 2005 graduate had to pay. Let's also say that a 2005 graduate paid $700 a semester hour while a 2009 graduate paid $850.

$700 X 90 hours = $ 63,000
$850 X 90 hours = $76,500

Subtracting the difference:

$150 X 90 semester hours = $13,500.

Yes, the recent graduate paid an extra $13,500 in interest-free tuition.

Of course, that presumes that the student paid cash up front.

If the student borrowed money, at my chosen interest rates, here is what it would look like:

$700 X 90 hours X 3.6% interest over 10 years = $89730.09

$850 X 90 hours X 6.8 % interest over 10 years = $147697.78

By the time that the loans have been paid off, the new graduate has actually paid $57,967 more for their schooling than the 2005 graduate!

No, wait. That isn't right. That figure is actually too low!

Granted, I simplified things and didn't calculate for the fact that you obviously won't borrow the full 90 hour amount in the same year, and I didn't calculate for the fact that interest begins accruing on Unsubsidized Stafford Loans and private loans while you are in school!

But the figure is obviously on the cheap side as I presumed that all of the tuition expenses would be fully covered by Stafford loans, which is a lower interest rate than private loans. When tuition is cheaper, more of it can be covered by government subsidized loans as opposed to having to borrow more money in expensive private loans with interest rates at 8%+ (depending upon your credit score. I've heard of cases where the interest was 12%). If you are capped at $22,500 per year when borrowing federal loans, tuition is $850 a semester hour, and you want to borrow the entire tuition amount of $25,500, then you will need to take out an additional $3,000 in private loans just to cover the shortfall (at $700 per semester hour, the cost would have been $21,000 per semester, which would leave $1500 of federal loans before being maxed out)....never mind that you will need to take out money just to cover books for class, living expenses, suits for work, food, and the occasional social activity. All of that money will be borrowed at private loan rates.

So, what, exactly, are the totals for a year of schooling for a 2005 graduate vs a 2010 graduate (without counting for the accrued interest while the student is in school)?

2005 Graduate
$21,000 X 3.6% Stafford Loan over 10 years of repayment
=
$29910.03 per year.

2010 Graduate
($22,500 X 6.8% Stafford Loan over 10 year repayment) + ($3,000 X 8.5% PLUS loan at 10 years repayment)
which reduces to:
$43440.52 + $6782.95
=
$50,222 per year.

That is a difference of $20,300+ per year!

Multiply that number by 3 years of law school, and you actually end up paying $60,000+ more than a 2005 graduate from the start of your repayment!

Ok, the addition of PLUS loans 'only' tacked on an additional $3,000 in interest, but still...

(Naturally, this number balloons if you have to defer your loans, go on Income Based Repayment, or any other graduated repayment option because interest continues to compound on top of your owed amount!

______


Yes, you get the picture.

On top of that, chances are fairly slim that you'll acquire any employment in law school that will lessen your need for borrowing money. Remember: the rules state that you CANNOT work in your first year, and chances are, unless you got a job waiting tables at Chili's, the chances are small that you're going to see very little income from any of your clerkships. You're either going to be working for free in an internship, or making $10 an hour working for a solo. Depending upon which school you get into and your grades and connections, you MAY land one of those BIGLAW jobs where you clear 5 digits over the course of the summer.

Obviously, people don't think about the interest rate and loan repayment because they have it in their heads that nobody would charge that kind of tuition or interest if you can pay it back. A big part of the draw of law school is that people view it as an "easy" way to start making good money. To them, it's like purchasing an annuity at 15% interest. "I may pay you $100,000 for my education, but my income will not only cover the amount of the loan, it will be significantly enough to completely increase my standard of living over what it would have been had I not attended law school."

(I'll save "how many hours/days/years you need to work to pay off $100,000" for another time).

And without further adieu, this is where I proudly introduce (for your own reading and my own vindication) a blog that I have just found:

Shit Law Jobs.

Yes, reading over these tasty morsels of actual jobs makes any person want to fork out that extra $30,000 over the next 10 years....let alone $100,000, or $200,000.

These are not outliers or starting salaries, people! After a year of fruitless job search, I am now a proud expert in the "there ain't no jobs out there" field. I can tell you that these are the jobs that most of you will be LUCKY to get.

And that additional $60,000 that you paid over a 2005 graduate? That is if you are on standard repayment. At $35,000 per year, if you want to eat, you will probably have to find alternative payment options. Imagine that $60,000 compounded over an additional 20 years (my calculator just broke at hearing that) if you switch to a 30 year repayment plan or a graduated payment option. Or the interest that accrues if you can't pay because of economic hardship. I'll let your imagination run wild with what you could be paying, which is probably the sensible thing because nobody can foresee what life is going to be like for you. Whether you become ill and go broke because you have no health insurance, your employer runs out of work and has to let you go, or you work for somebody who decides after two years that they can hire a new graduate for much cheaper, it's hard to say. All I know is that, on the whole, there are a lot of hard luck stories, and that you either really need to be an opportunist or know how to take advantage of that one opening if you really want to get anywhere.

Gone, Baby, Gone!

These past few days, I have taken to sorting through all of my garbage and cleaned out most of my law school papers.

Admittedly, I'm a bit of a pack rat, but I felt a particular need to keep the wonderful lecture notes, note cards, supplements, and even unsold textbooks because I had bought into a crazy concept that all of these notes would be useful in my future law practice. After all, juicy tidbits of law that were previously chewed, semi-digested, and regurgitated by great legal minds for the nourishment of younglings in the nest sounded like a goldmine.

It especially sounded good whenever professors would encourage us to call them with questions during our subsequent law practices about the actual law. It sounded better than any court on this land. They got a ruling from Professor Schmidt on non-conforming use, which is like waving a cross at a vampire on the opposing side.

Well...

The funny thing about calling up professors with questions to basic legal concepts after you've passed the bar is that it demonstrates the worthlessness of law school if they can't even spend more than a semester teaching you how to research, or that more than a few non-gifted people slip through the net who are either too lazy or just don't have the ability to spot a basic issue (or just don't have access to a thesaurus if their favored search terms aren't working). If you don't know how to schmooze with a judge or make your filings conform with the local rules, you obviously need the help of another attorney since it is all the unwritten social context that nobody wants to really admit exists. If you're 3 years out of Property I, and still need to call Professor Dumbledore because you still can't figure out Google enough to explain a basic legal concept....

Wow.

"So, there is like this thing where some guy didn't mean to cause an accident, but he wasn't paying attention to the road because he was reading a magazine and drinking a beer while he was driving, and he forced my client off the road and into a ditch. Can you help me out? I tried searching Westlaw for terms like 'all over the road,' 'ditch,' and 'magazine' but I just can't find any case law that explains to me if my client has a good case. I don't think the courts have tackled this issue yet, so this one might be turned into a movie like Amistad."

The funny thing about calling the professor is that sometimes it could backfire. You never know if the professor you are seeking to talk to is actually the expert witness for the other side.

So, I cursorily looked at my notes. Not only can I not tell you what I had written anywhere (which would make my search that much more difficult than just typing the phrase in Google), I realized that cobbled bits of law from God knows where do not make the current law in my state. They might make a general concept, sort of like how high school teaches you "standardized" German and Spanish, but it's nothing I can cite to any court.

Yes, see My Stack of Old Torts Lectures on Contributory Negligence that I condensed into flashcards, Fall 2006.

Besides, after taking BarBri, I began to realize that law school made the law much more difficult than what it is. I guess they had to do something to explain why we were in law school for 3 years instead of 6 weeks.

When you look at what law school accomplishes, why not make it a 6 week program? All the core curriculum of law school does is teach towards the bar anyway. Sometimes, the school is successful in brainwashing the students into believing that this method is in their best interest and they shouldn't burn any of those precious 90 hours taking clinic and instead use that time to take a random class that will consist of a grand total of 1/2 of an essay on the bar exam. You may not know how to go to court and are hobbled out of the starting gate, but you really overkilled that Secured Transactions question that an examiner spent 30 second reading.

I can fault many programs for taking the approach of making the coursework "cost effective" to the point of being useless by using outdated equipment and methods that aren't actually helpful in the working world. However, law school is so much more expensive and the practice of law carry many more demands on the employees

I'm sure that about 1/4 of my notes have question marks written beside them. In my first year, the question mark was a result of a genuine "WTF?" because the way they teach law, it is sort of like bringing an elephant into a darkened room and you having to guess that it's an elephant from touching its tail. In my second and third years, the question marks appear in the margins because my mind wandered and I snapped back into focus somewhere around prong 3 of a 4 prong set.

The good old days of memorizing "three prong tests." It's funny that I had to learn that stuff when judges were constantly misapplying the standards even with a book open in front of them.

Anyway...

Tons of paper is in the recycling bin. In a few short months, somebody will be wearing a paper hat made from my old law notes. There will be a smile upon the face of an innocent child as he plays with his origami giraffe made with UCC notes. I had a brief spike in hope that companies were still making toilet paper made from recycled paper like they did years ago, but that brief hiccup of caring for The Last Rain Forest has passed quietly away in the dead of night somewhere around 1994. Damn. No more biodegradable trash bags or paper towels made of recycled paper and their brown, course texture wiping away pizza sauce that you spilled on the counter. Back in the day, it could have been possible that somebody was going to literally wipe their bottom with "last shot doctrine" lecture notes. Yes, that was their last shot at being useful for anything.

Sallie Mae, I Can't Wait Until You are in my Rear View Mirror

I'm a person who has been fairly successful at paying my bills over the years. Maybe I've forgotten to pay my phone bill once or twice, but I've never had problems with a system where I was actually trying to pay my bills.

I have not consolidated my loans, and I was in that weird transition period where some of my loans are still with Sallie Mae and some are with Direct Loan. In just the past few months, I've had a false belief that I had hit the "confirm" button on my payment. The button was buried at the bottom of the screen, so I forgot that even though I told them to pay a certain amount, that I still had to confirm that I wanted to pay that amount.
This problem got me into the habit of paying early enough so that I could revisit the website in a few days to see if I could catch problems before they turned into issues.

This system is paying off....slightly.

Earlier this month, I had typed in the dollar amount to pay. I looked on my bank account, noticed that it had actually posted, but went back to see if the payment actually took.

For some reason, both my Stafford and Plus loan on that one website were a few dollars short! According to them, I still owed about $17 for the month. I felt that was weird, but I compared what went through the bank to confirm that they didn't take out the full amount, but lost $17 in the process. Seeing that the dollar amounts matched, I went back, added in the extra money, and then went back and made sure that the dollar amounts actually read zero. I'm not sure what happened, but since it's a computer, it's hard for me to argue that I typed in the right dollar amount, even if it is fishy that the payments I made for both loans were just a few dollars too low.

As I feel the annoyance, all I can think is that I'm looking years into the future and having these problems haunt my every step. All I'm doing is very base line activities. I can't imagine what a mess it is for people who fall behind. Seriously, people, you can't even effectively tell your computer how to remove the set amount of money that I owe from my bank! All I need are these jokers trying to ruin my credit.

I can't wait until I become employed. I'm going to live in a tent and eat bread and beans until I get rid of you people.

Work Smarter; Not Harder

I caught this gem of a story that covers the fact that the United States is slipping in the world rankings for churning out college graduates:

We are now ranked 12th in the world for creating college graduates.

Yes, in spite of the rise of for-profit schools, it appears that people aren't bothering to finish their degrees!

The math of this article is fairly simple: College Degree = Success.

And, as usual, southerners are blamed for dragging down this great nation.

Quote:

Nowhere is that trend more apparent than in Arkansas, a state of deeply entrenched poverty, where just over 40 percent of students finish college with bachelor’s degrees in six years or less. Arkansas is one of several southern states that have seen college enrollment rates increase, even as college completion rates remain stubbornly low. The contradiction has frustrated education officials and prompted calls for action at the highest levels of state government.

Hmm. Maybe we should be giving them a medal for doing their part in not contributing to the number of people filing for bankruptcy. If you're in Arkansas, and your job options include being a pig farmer and running the General Store, I don't think that racking up $30,000 in student loans is going to help your situation that much.

People in large metropolitan areas are used to having a wide variety of careers to choose from. Chances are, you can do something with that Economics and Advertising degree. In many areas that are relatively sparsely populated, the food chain looks like this: Doctor, Lawyer, Business Owner, Health Care Professional, Realtor, Cop, Home Construction/Repair, Low-Level Bureaucrat, Car Sales, Auto Repair, Retail Worker, Bus Boy.

Yes, identify which of these lines of work needs a college degree to successfully complete the job. Either you completely bite the bullet and give nearly 10 years of your life to rotting in college and graduate school, or you take a couple of semesters at the community college before the light bulb pops on that Intro to British Literature has nothing to do with selling houses or taking drivers license photos at the DMV.

You can't really blame some 18 year old Arkansan who was the first in their family to proudly go off to college to suddenly give up when they see that it is a road to nowhere. Not only are they already leery of the amount of debt they will have to take on thanks to skyrocketing tuition, they have seen for themselves that their older friends who have already graduated are moving back home and have resumed their former jobs at the local Sonic. Other than a few degree fields like nursing, there is very little opportunity that makes relocation a viable option.

If there were recruiting fairs or stories about how their friends had jobs lined up from the beginning of their senior year, there would see a lot more interest from the students in actually finishing their degrees. Instead, they get a year or two in their studies, figure out that they aren't Rhodes Scholar material, know that the job banks are nearly empty, and realize the remaining two years of their degree is a waste. In some ways, they end up being more marketable by simply giving up on their degree rather than being branded as a graduate who will probably try to leave the minute a "good" job opens up.

It is also not surprising that students would quit going to college since many of the jobs that created the economic base that funded their schooling have moved out of the country. If mom and dad's job at the sock factory is now in China, and the rules require that parents become partially responsible for repaying many of the loans that their children are taking out, it is fairly likely that there have been many serious talks where mom and dad have had to break the news to their children that they can no longer afford to pay to send them to college.

So where is the incentive to actually finish?

Unfortunately, it is too expensive for the average person to be educated just for education's sake. When the expense of an education can't be parlayed into an economic benefit, it simply becomes a luxury that many people can't afford. We can't simply make it a goal to have a better-educated society simply for its own sake if we are going to turn around and crush the students who step up to the plate with ungodly debt and no prospects for paying their bills.

Don't Let the Salaries Fool You

The other day, I read a very entertaining article which suggested that we do away with the bar exam.

Everybody has their opinion on the bar. I waffle too much to even address if we should have a bar exam, so that will be left for another day.

I'm going to address a side point that the author raised about attorney salaries.

Quote:

More importantly, I think that the high salaries of lawyers combined with the high cost of even very basic legal services show that we have too few lawyers rather than too many, and that the best way to determine the “right” number of lawyers is through market competition, not government mandate.

I clicked on the bio of this writer. Surprise, surprise, they are in academia! And instead of using personal anecdotes, or even questioning why this urban legend of thousands of unemployed attorneys exists, they reach for NALP numbers.

The professor/blogger says this bon mot in another blog entry:

I should note that the NALP and Labor Department data do not account for lawyers who are unemployed. Unfortunately, neither these sources nor others I have looked at have shown anything approaching a good estimate of the unemployment rate among lawyers. However, it seems unlikely that there is large Marxian “reserve army” of unemployed lawyers out there. If there were, one would expect lawyer salaries to drop substantially as competition from the unemployed drives down the pay of those who have jobs, especially at the lower ends of the distribution (e.g. — the 10th and 25th percentiles noted in the post).

According to this professor/blogger's theory, absolutely nobody should have been an unemployed attorney working the perfume counter at Macy's. Third year law students should have not had to even think about finding a job once they graduated. They should have their pick of desperate employers long before they were measured for their tams. They should have been begged to start work early by those who are swamped with work. Even if BIGLAW was making a few cuts, it doesn't mean that there aren't severely understaffed areas like small firms or public interest groups who have had to turn away cases because they just don't have the labor resources to take them.

I thought an actual clue that there are many unemployed attorneys would be hearing that there were well over 100 applicants for the same low-paying jobs that I had been applying for, but apparently not. Those numbers can be apparently explained away by assuming that there are over 100+ attorneys out there who are unhappy with their current employment and who have decided to lateral over into something that pays less than $40,000 per year.

But let's not stop there: Let's define non-saturation. If the professor wishes to talk about salaries, then we should also speak of what is missing in the compensation packages. If the legal profession were not overly saturated, a good majority of employees would get compensation packages that includes:

Signing bonuses
Paid moving expenses
Company housing
Paid vacations
Health insurance
Offers to pay for travel expenses for interviews
Week-long wooing sessions where they take you (the POTENTIAL employee, not the ACTUAL employee) and your spouse out to 4 star restaurants and Broadway productions
Retirement plans
Reimbursement on your student loans

AND

The biggest sign of non-saturation?

THE ABILITY TO NEGOTIATE YOUR SALARY.

I don't think anybody who has been on a job hunt recently can claim that they were engaged in skillful negotiations to get a great salary. All I've heard about is people who were in a take-it-or-leave-it position who chose to walk away. To me, that doesn't sound like a desperate employer who absolutely can't anybody for the job. It sounds more like an employer who has a large stack of resumes on their desk from people who were just as competent as the person they were offering the job.