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November 22, 2011 4:38 PM

Law School Debt Bubble: Aggregate Law School Grad Debt Grew $475 Million Between 2008 and 2010

Posted by Matt Leichter

Readers of David Segal's most recent quarterly New York Times exposé on the weaknesses of America's legal education system may have been surprised to find that "Last year . . . students spent about $3.6 billion on tuition, according to American Bar Association figures [ABA], accounting for discounts through merit- and need-based aid."

According to the blog Inside the Law School Scam, this figure comes from multiplying law schools' enrollments as reported in the ABA-LSAC Official Guide to ABA-Approved Law Schools (Official Guide) by their listed tuition and discounting the total by 20 percent to account for grants and scholarships.

Segal does not say how he distinguishes between public law school students who paid nonresident tuition and those who paid resident tuition. While his tuition number may be interesting to readers as such, for those who want to know how much debt law graduates take on to pay this tuition and how much total law graduate debt has grown in the last several years, it's not particularly useful.

Enter U.S. News's "Graduate Debt Rankings" page. One of my readers suggested multiplying the law schools' average graduate debt levels by their respective percent of graduates taking on debt. Then, this person suggested, take that total and multiply it again by the number of 2010 graduates for each law school as listed in the Official Guide. These figures, which range in the tens of millions of dollars, are what I call law schools' "graduate debt-revenue"—the amount of revenue that law schools individually receive from student debt. The sum is the total law school graduate debt for 2010. U.S. News provided the previous two years' data to Law School Transparency, which has made that data available on its Web site. Now it's possible to calculate how much total graduate debt the classes of 2008–10 have incurred.

Anyone who opens these spreadsheets will realize that law schools do not always report their average graduate debt levels and the percentage of their graduates taking on debt to U.S. News (and why average debt levels don't appear in the Official Guide is beyond me). That said, the omissions cause a calculation of total law school graduate debt to be lower than it should be, so for the sake of accuracy, I filled in the gaps for the three-year period between 2008 and 2010 with the following assumptions.

(1) For 2008, I copied data from a similar school in the same state (e.g. using NYU's numbers for Columbia) or used a school's own numbers from subsequent year(s) (as in the case of Florida A&M).

(2) For 2009, I filled in gaps by taking the average numbers from the previous and subsequent years (e.g. Thomas M. Cooley School of Law), or used the subsequent year’s numbers (Southern University).

(3) For 2010, I duplicated similar intrastate schools' numbers as I did for 2008 or used the average private or public school "percent taking on debt" if that was the only missing number.

(4) For all three years, I duplicated Widener-Delaware's numbers for Widener-Harrisburg.

(5) U.S. News excluded the three ABA-accredited Puerto Rico law schools. So I do as well.

(6) Though not a gap-filling assumption, it's important to note that in this time period, three private law schools received provisional ABA approval: Charlotte (NC), Drexel (PA), and Elon (NC). When they provided data, I counted them.

Here's what we learn upon examining the data.

 

(79 PUBLIC LAW SCHOOLS)AVERAGE PUBLIC LAW GRADUATE DEBTAVERAGE PUBLIC LAW SCHOOL GRADUATE DEBT-REVENUEMEAN ABSOLUTE DEVIATIONTOTAL PUBLIC LAW SCHOOL GRADUATE DEBT-REVENUE
2008 $45,826 $10.6 mln
$5.1 mln
$836.8 mln
2009 $50,271 $11.3 mln
$5.8 mln
$893.1 mln
2010 $53,714 $12.1 mln
$5.9 mln
$952.3 mln
GROWTH RATE +17.2% (+$7,888) +14.2% (+$1.5 mln)
N/A +13.8% (+$115.5 mln)

*****

(114-117 PRIVATE LAW SCHOOLS)AVERAGE PRIVATE LAW GRADUATE DEBTAVERAGE PRIVATE LAW SCHOOL GRADUATE DEBT-REVENUEMEAN ABSOLUTE DEVIATIONTOTAL PRIVATE LAW SCHOOL GRADUATE DEBT-REVENUE
2008 $69,567 $19.7 mln
$8.9 mln
$2,310.3 mln
2009 $73,926 $21.2 mln
$9.1 mln
$2,478.2 mln
2010 $79,665 $22.8 mln
$10.2 mln
$2,668.5 mln
GROWTH RATE +14.5% (+$10,098) +15.7% (+$3.1 mln) N/A +15.5% (+$358.2 mln)

*****

(193-196 LAW SCHOOLS)AVERAGE LAW GRADUATE DEBTAVERAGE LAW SCHOOL GRADUATE DEBT-REVENUEMEAN ABSOLUTE DEVIATIONTOTAL PRIVATE LAW SCHOOL DEBT-REVENUE
2008 $87,761 $16.1 mln
$8.3 mln
$3,147.1 mln
2009 $91,606 $17.2 mln
$8.8 mln
$3,371.4 mln
2010 $97,310 $18.5 mln
$9.5 mln
$3,620.8 mln
GROWTH RATE +10.9% (+$9,549) +14.9% (+$2.4 mln) N/A +15.1% (+$473.7 mln)

Note that I use "mean absolute deviations" instead of "standard deviations" because these are full populations that are not normally distributed.

And now, to sate your unspeakable viewing desires, here's the animated number of law schools by graduate debt-revenue, what I affectionately the "Law School Debt Blob." The blue line on the left is the median, the black line, the average.

2008

This graphic gives us an idea of the distribution of law schools by graduate debt-revenue over the last few years, and it's what happens when you add nearly half-a-billion dollars onto law students' backs. We can only imagine how far rightward it moved before 2008. Although, it's important to note that universities significantly increased their tuition in fall 2009 due to the damage the financial crisis did to their endowments, so the increase is not indicative of typical years.

The next three graphs show which five-million-dollar categories grew and contracted. 

Public Private Total

I hesitate to adjust numbers this large to inflation, but we know the growth rate is faster than that. I also wish I could compare this to graduates' starting salaries, but NALP data are short term, too inaccurate in my opinion, and subject to cyclical swings.

The list of top 20 public law schools by graduate debt-revenue doesn't contain too many surprises, but for private law schools, it's an interesting mix of expensive, prestigious law schools and less expensive ones that have very large enrollments. However, I can't ignore how much of an outlier Cooley is, so I included the z-scores on the right of the table. The z-score measures a data point's distance from the mean, and it's measured in mean absolute deviations. Cooley's 6.33 tells us it is way out there, the tiny red droplet on the far right of the debt blob animation. Perhaps its large, rapidly growing graduate debt-revenue explains its defensive "Report One."

 

#PUBLIC SCHOOL2010 PUBLIC GRAD DEBT-REVENUE (MILLIONS $)Z-SCORE
1 California-Hastings 35.6
 4.02
2 Michigan 35.4
 3.99
3 Virginia 34.6
3.84
4 Indiana (Indianapolis) (Est.) 31.5
3.32
5 California-Los Angeles 28.2
2.75
6 Baltimore 26.3
2.43
7 Texas 24.0
2.04
8 California-Berkeley 22.8
1.83
9 Temple 20.9
1.50
10 Indiana (Bloomington) 20.7
1.47
11 Minnesota 20.5
1.43
12 Penn State 19.6
1.29
13 Maryland 19.0
1.19
14 George Mason 18.8
1.16
15 Florida 18.8
1.15
16 Rutgers (Newark) 17.5
0.92
17 Wisconsin 16.7
0.79
18 Oregon 15.5
0.59
19 North Carolina Central 15.4
0.58
20 Houston 15.3
0.56

**********

#PRIVATE SCHOOL2010 PRIVATE GRAD DEBT-REVENUE (MILLIONS $)Z-SCORE
1 Cooley 87.6
6.33
2 Georgetown 67.9
4.41
3 Harvard (Est.) 58.2
3.46
4 American 53.5
3.00
5 New York University 49.6
2.62
6 New York Law School 48.6
2.52
7 Florida Coastal 47.4
2.41
8 Suffolk 47.0
2.36
9 George Washington 44.9
2.16
10  Loyola Marymount (CA) 43.8
2.05
11 Fordham  43.7
2.04
12 Columbia 42.2
1.90
13 Brooklyn 38.0
1.48
14 Pacific (McGeorge) 36.6
1.35
15 Stetson 36.2
1.30
16 Miami 35.9
1.27
17 John Marshall (IL) 35.8
1.27
18 South Texas 35.7
1.26
19 Catholic 34.6
1.15
20 Cardozo 34.4
1.13

(*Law school did not report either its graduates' average debt levels or the percent of its graduates taking on debt, so the number is estimated per the bulleted assumptions above.)

The $475 million more dollars in law school debt 75,000 law graduates took on in 2009 and 2010 could have been put to better use, and the profession will not benefit from the fallout when the public is forced to accept a write-down for all this nondischargeable student debt. In a few weeks, I'll project debt levels into the future. Until then, enjoy your Thanksgiving.

Matt Leichter is an attorney licensed in Wisconsin and New York, and he holds a masters in International Affairs from Marquette University. He operates The Law School Tuition Bubble, which archives, chronicles, and analyzes the deteriorating American legal education system. It is also a platform for higher education and student debt reform.

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