So You’ve Graduated from a For-Profit Law School—Welcome to the Student Loan Debt Spiral!

Posted on September 23, 2015 at 9:56am by

For-profit law schools have sparked dozens of online “law school scam blogs” with criticism from former graduates, many of whom are unemployed or underemployed. According to the scam blogs, these law schools are notoriously expensive and offer poor employment prospects after graduation. At some of the schools, such as the Florida Coastal School of Law, graduates have an average student loan debt of $150,000. In an article published last year in The Atlantic, for-profit law schools were criticized for manipulating post-graduation employment and bar passage statistics.

The Atlantic article discusses InfiLaw, the company who owns the Florida Coastal School of Law, and how out of 1,191 graduates in 2013, almost 25 percent were unemployed nine months after graduation. Another one in eight allegedly received temporary jobs created by InfiLaw schools so they could count the graduates as “employed” and publish favorable employment statistics to attract more students. The article also claims less than 1 percent held “big law” jobs or received federal judicial clerkship positions that could lead to better employment prospects. Big law jobs are described in the article as being associate positions at law firms paying more than $100,000 annually.

So what happens to these graduates? For many, it will be exceptionally difficult to pay back their student loans, and with compound interest and fees, the principal balance on the loans will continue to increase.

What Can Happen to For-Profit Law School Graduates?

Let us use a hypothetical scenario to illustrate the situation for-profit law school graduates can face.

Teddy is a recent graduate of Missouri State University, having finished his Bachelor of Arts in Political Science. Six months after graduation, Teddy is having a very difficult time finding full-time employment. Teddy logs onto Amazon, orders books and begins studying for the LSAT to get into law school.

After spending several months studying for the LSAT, Teddy prepares to take the test that will determine which law schools are likely to accept him. Unfortunately, Teddy scores a 140 on the LSAT and decides to try his luck again. On the second try, Teddy scores a 143. Fed up with the LSAT, Teddy decides to apply to law school anyways. After being rejected by all but three schools, Teddy chooses what he would later find out is a “for-profit” law school in California.

Teddy studies hard and works towards achieving his Juris Doctor for the next three years. Over the course of his law studies, his loans from undergraduate and law school approach $200,000. Confident all attorneys make “big bucks,” Teddy decides not to worry about his loan debt. After graduation, Teddy fails to pass the California bar three times and takes a job waiting tables. With an annual salary of $26,000, it does not take long for his loans to go into default. Instead of $200,000, Teddy now owes $260,000. One year later, Teddy’s wages are garnished after defaulting on his federal loans and his credit is severely damaged, forcing him to move back home with mom and dad.

Are Only For-Profit Law School Students at Risk for Debt Horror Stories?

Stories like Teddy’s are not always fiction, and students who attend law schools can be financially devastated in an economic market that is saturated with attorneys. The consequences of student loans are not unique to for-profit schools. Take, for example, the 2011 New York Times story on Michael Wallerstein, the law school graduate with $250,000 in student loans who was waiting tables. Wallerstein attended a poorly-ranked law school with abysmal LSAT score averages and an unimpressive bar passage rate.

The problem is that the schools in this story make false or exaggerated promises to potential students to get them to take out hundreds of thousands of dollars in debt. In the legal profession, it can set up graduates for failure when they cannot find a job in an already-saturated market where they are competing with students from non-profit law schools.

It could be possible to receive an undue hardship discharge, and it is possible to negotiate with a student loan lender with or without filing for bankruptcy. Recent court cases have looked favorably upon students facing impossible situations with education debt. Our Kansas City bankruptcy lawyers encourage people in situations like the one we have written about today to review our previous articles on student loans.

The Sader Law FirmKansas City Bankruptcy Lawyers