10 Best States for Paying Back Your Law School Debt

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Average law school debt at graduation exceeds a staggering $100,000. Everyday at Credible, we see young lawyers trying to deal with their student debt, whether by refinancing their student loans, finding an appropriate federal or state forgiveness program, or even relocating for a better job.

Having helped over 1,000 lawyers with their student debt in the last three weeks alone, we have perspective on which states are most attractive destinations for young lawyers trying to repay their law school debt.

We have found that the most important factors are the ability for young lawyers to get a job, their ability to save once they have a job (which is a product of salary and cost of living), and the breadth and magnitude of each state’s loan forgiveness programs.

With those factors in mind, we have created a list of the Best States for Paying Back your Law School Debt. Bear in mind that this list uses aggregated data – so for lawyers not taking advantage of forgiveness programs, whichever state they can get a stable high-paying job is likely the best for them.

That said, we looked at the numbers and identified the top 10 states for young lawyers to reduce their loan repayment timeline, and detailed some determining metrics below:

1. District of Columbia
Employment Ratio (ratio of lawyers to lawyer jobs): 1.5
Mean Lawyers Salary: $162,800
Cost of Living Rank (#1 is the least expensive state): 49 of 51

D.C allows employment to lawyers barred (admitted to practice) in other U.S States and offers a generous repayment assistance program with awards of up to $12,000 for a one-year public service commitment.

2. Georgia
Employment Ratio: 1.3
Mean Salary: $137,280
Cost of Living Rank: 19 of 51

Georgia’s high mean salary and modest cost of living means lawyers there should have an especially low debt-to-income ratio, an important factor for those who want to refinance their loans, which pushes the state to the number two position. The state also has generous forgiveness options on a federal and school-specific level.

3. Texas
Employment Ratio: 1.4
Mean Salary: $134,200
Cost of Living Rank: 15 of 51

The State Bar of Texas funds approximately 125 lawyers to work within the public sector. In addition to this generous contribution, Texas’ low cost of living and top ten salary promotes Texas to a top position on our list.

4. California
Employment Ratio: 2.0
Mean Salary: $155,750
Cost of Living Rank: 47 of 51

Despite California’s above average employment ratio and high cost of living, the potential for growth and high salary jobs at global firms keeps California high on our list.

5. Virginia
Employment Ratio: 1.8
Mean Salary: $129,800
Cost of Living Rank: 22 of 51

Virginia lawyers enjoy a generous state forgiveness option (up to $5,600 per year), above average mean salary, and many high paying law firms as a result of its proximity to Washington, DC.

6. Arizona
Employment Ratio: 1.1
Mean Salary: $131,200
Cost of Living Rank: 28 of 51

Arizona has the lowest employment ratio on our list and offers a generous state forgiveness program that awards up to $10,000 per year for public service work.

7. Colorado
Employment Ratio: 1.4
Mean Salary: $136,120
Cost of Living Rank: 31 of 51

Colorado lawyers can benefit from high salaries and an overall low unemployment rate (4.3%), signaling a stimulated economy. The state offers loan forgiveness through the federally funded John R. Justice Repayment Program.

8. Utah
Employment Ratio: 1.4
Mean Salary: $115,930
Cost of Living Rank: 9 of 51

Utah may offer average compensation, but the low cost of living and thriving cities such as Salt Lake and Provo breaks it into our top ten rankings.

9. Illinois 
Employment Ratio: 2.3
Mean Salary: $132,910
Cost of Living Rank: 23 of 51

Illinois offers one of the most substantial loan forgiveness programs in the country. In addition, high mean salary and the chance for growth within a big city are factors worth considering when it comes to loan repayment.

10. Delaware
Employment Ratio: 4.2
Mean Salary: $152,490
Cost of Living Rank: 36 of 51

With forgiveness options on a federal and state-specific level and high mean salary, lawyers have options when it comes to loan repayment. Studies also show an improved projected employment ratio for barred lawyers.

Note: We used a number of other data sources for this analysis beyond our own data including:
The Lawyer Surplus, State by State.” Economix The Lawyer Surplus State by State Comments. N.p., 27 June 2011. Web. 05 Dec. 2014
“Average Mean Salary.” Bureau of Labor Statistics. 2013. Web. 05 Dec. 2014
“Cost of Living Third Quarter 2014.” Council for Community & Economic Research. Web. 05 Dec. 2014.

Posted in ABA, cost of living, Debt, Department of Education, forgiveness, Legal Education, public interest, Student Loans

A Steep Slide in Law School Enrollment Accelerates

The bottom of the law school market just keeps on dropping.

Enrollment numbers of first-year law students have sunk to levels not seen since 1973, when there were 53 fewer law schools in the United States, according to the figures just released by the American Bar Association. The 37,924 full- and part-time students who started classes in 2014 represent a 30 percent decline from just four years ago, when enrollment peaked at 52,488.

The recession was in full swing then, and many college graduates looked at law school, as they have many times in the past, as a sure ticket to a good job. Now, with the economy slowly rebounding, a growing number of college graduates are examining the costs of attending law school and the available jobs and deciding that it is not worth the money.

“People are coming to terms with the fact that this decline is the product of long-term structural changes that are just not going away,” said Paul F. Campos, a professor at the University of Colorado’s law school. “It’s kind of a watershed moment.”

Harvard Law School in Cambridge. New enrollment at law schools is down 30 percent from its peak four years ago.

Harvard Law School in Cambridge. New enrollment at law schools is down 30 percent from its peak four years ago. Credit Darren McCollester/Getty Images

A year of tuition can cost $44,000, even at schools that are ranked low on the U.S. News & World Report list. A diploma at a top-rated school, like Harvard, will cost an additional $10,000 or more annually.

That would seem a worthy investment if the job market awaiting new law school graduates looked more promising. But the bar association’s employment figures are dismal. In 2013, fewer than two-thirds of newly minted lawyers had found jobs that required passing the bar exam.

Part of the problem is that jobs that once required lawyers — for sifting through documents before a trial, for instance — are increasingly being automated. Do-it-yourself services, like LegalZoom, are gaining popularity with consumers.

“There’s also outsourcing,” Professor Campos said. “India has millions of people who speak English perfectly well and they can handle basic legal work. The only segment of the market that isn’t affected is the elite firms, the Wachtell Liptons of the world. But that represents a very tiny slice of the market.”

The downturn in enrollment has had some effect on the margins of the business of law school. Western Michigan University Thomas M. Cooley Law School laid off more than half of its faculty over the summer. There has been talk of some law school mergers, too.

But given the deterioration in attendance, what strikes many in law school academia is how modest the response by law schools has been thus far.

“In any other industry, there would be consolidation, more reductions in work force, but we don’t do those things,” said William D. Henderson of Indiana University’s Maurer School of Law. “Students see the debt they will need to take on, but they don’t see the product changing. We still train people in the artisan craft of lawyering that is in decline.”

Fewer people are taking the admissions test and applying to law school, according to recent data from the Law School Admission Council. The number of test takers was 8.1 percent lower than a year ago, and about 50 percent below the same test period in 2009, according to council figures.

The realities of legal education become clear each December, when the bar association releases statistics from law schools, which are accredited by the bar association’s Section of Legal Education and Admissions to the bar. The schools are required to post their data on their websites by Dec. 15; the bar association also posts the information online.

The overall picture shows that 119,775 law students — both full- and part-time — are currently enrolled. That is 8,935 fewer than in the fall of 2013, and 17.5 percent fewer than in 2010. The total enrollment, the association reported, is the lowest since 1987, when there were only 175 accredited law schools.

This year, 127 law schools, or nearly two-thirds of them, had smaller first-year enrollment than they did a year ago. But 69 schools had larger entering classes this fall than a year ago, as some schools have expanded their cross-disciplinary offerings and others have lowered tuition or increased scholarships. To tackle the growing issue of the cost of legal education, student loans and debt loads, the bar association formed a task force last spring. The group, led by Dennis W. Archer, a former Detroit mayor and former bar association president, will also examine issues like scholarship awards and conditions and discounting tuition.

There are some optimists about the future of the profession, however. Some law deans argue that the country needs more people studying law, not fewer.

The financial model can be overhauled, said Nicholas W. Allard, dean of Brooklyn Law School, because “there is a large and exploding unmet demand for lawyers to meet the upcoming challenges in a host of areas like health care, bioengineering, international commerce, government relations, housing, elder care and digital security.”

Source: NYTs December 18, 2014

Posted in ABA, Career, Debt, Department of Education, Economy, Law, Legal Education

Accusations fly as State Bar of California leader Joe Dunn fights ouster

The agency that regulates California’s lawyers is once again beset with conflict, riddled by accusations involving expense accounts and ethics.

The turmoil became public last month when the board of the State Bar of California fired its executive director, Joe Dunn, a former state senator from Orange County.

Dunn did not go quietly.

He hired high-profile Los Angeles lawyer Mark J. Geragos and filed a lawsuit charging the bar with “egregious improprieties.”

Dunn’s critics fired back by revealing that a confidential report commissioned by the board found Dunn had spent $5,600 for a party at a Los Angeles restaurant and that a former bar president had filed an expense account report for $1,000 at Tiffany & Co.

The acrimony threatens to further diminish the reputation of the bar, an arm of the California Supreme Court that oversees nearly 250,000 lawyers and is charged with rooting out corrupt attorneys and upholding high moral standards.

Some lawyers and lawmakers have long criticized the bar as bloated, political and lenient on errant lawyers. Upheaval in the 1990s almost led to the organization’s demise, and there have been various efforts to make it less a trade organization and more a regulatory agency.

“The bar is just further descending into a banana republic,” said Golden Gate University law professor Peter Keane, who tried unsuccessfully decades ago to overhaul the association. “It is totally dysfunctional and should be unraveled.”

Funded largely by mandatory lawyers’ dues, the bar is a public corporation that regulates, disciplines and licenses attorneys, subject to the approval of the state high court. Becoming a bar leader is considered a steppingstone to a judgeship and a way to enhance a resume or attract clients.

Dunn, a former trial lawyer hired four years ago, was earning $259,000 a year when he lost his job, overseeing 500 employees and an organization with a $138.6-milllion budget.

Shortly before Dunn was fired, he filed an anonymous “whistle-blower” complaint alleging, among other things, that a bar official was manipulating records to hide a huge backlog in untended complaints against lawyers. Dunn later identified himself as the whistle-blower and said he was fired in retaliation for the complaint.

The bar suggested in a prepared statement that Dunn knew he was going to be fired before filing the complaint, a charge Geragos called “totally untrue.” The statement said Dunn was being investigated because of a complaint by a high-level executive — the same bar official Dunn had accused of misconduct.

The highly public fight is expected to cost the bar hundreds of thousands of dollars in legal fees and could lead to efforts to restructure the organization. The Legislature must pass bills each year authorizing the bar to collect dues, and two governors have vetoed such bills, calling the bar wasteful, partisan and racked by “chronic disharmony.”

“I think there are going to have to be major changes,” said Arthur L. Margolis, who defends lawyers before the bar and advises other attorneys on legal ethics, “to protect whatever credibility” the bar has left.

Dunn’s lawsuit alleged “ethical breaches, prosecutorial lapses and fiscal improprieties” within the bar.

He accused the bar of paying a private law firm $300,000 — with three law partners each billing $800 an hour — to investigate him even though a former judge had offered to do it for free. The purported hourly fee galled many lawyers, who must pay bar dues. Most earn far less than $800 an hour. The bar has refused to confirm the amount spent on the investigation.

The target of Dunn’s wrath was Craig Holden, a partner at Lewis Brisbois Bisgaard & Smith, one of L.A.’s largest law firms, who became bar president in September in an uncontested election. Dunn, who reported to the bar’s board, accused Holden of orchestrating his ouster, possibly because Holden wanted the job himself.

Holden, whose bar position is volunteer, said he laughed at that charge. The bar said Dunn’s lawsuit was “baseless.”

After Dunn filed his lawsuit, details of the outside law firm’s confidential investigation into Dunn became public. People with access to the report shared its contents with The Times and two legal newspapers.

The investigation, ordered by the bar’s trustees, found that Dunn had submitted an expense report for $5,600 for an event in July at 10e, a Los Angeles restaurant owned by Geragos. Geragos said the expense was for a going-away event for former bar President Luis Rodriguez, a Los Angeles deputy public defender whose one-year term ended in September.

The report also said Rodriguez submitted an expense for $1,000 at Tiffany. Rodriguez, asked about the expense, said any suggestion of impropriety was “maddening.”

Rodriguez said bar presidents are given $30,000 annual stipends, and he used part of that to buy gifts for the bar’s trustees as a gesture of appreciation as he was leaving. He said the gift giving was a tradition.

“Every president before me has given a gift, and he or she is free to use that money,” Rodriguez said.

Rodriguez presented the trustees with pens from Tiffany. He referred further questions to his lawyer.

A bar spokeswoman said presidents have been given up to $30,000 a year since 2006 for “secretarial assistance, miscellaneous expense and travel expense.”

The money for the stipend and the going-away party came from mandatory bar dues, which this year cost most practicing lawyers $420 each.

Under a 1990 U.S. Supreme Court ruling, mandatory bar dues may be spent only on regulating the profession and improving legal services to the public. A spokeswoman for the bar said expenses such as gifts and dinners will be paid from other revenues in the future — a policy instigated by Holden when he became president.

Disclosures from the confidential report infuriated Dunn’s supporters. Geragos described the ouster of Dunn as “a power play” and said Dunn was never allowed to hear or respond to the charges, which included cronyism and misleading the board.

Geragos blamed the bar board for revealing the contents of the report on Dunn to journalists, and warned that any lawyer who divulged the findings could face legal discipline.

The feud is drawing attention in legal circles in California and elsewhere.

“Lawyers in California and legal ethicists around the country are wondering if there is something systematically problematic with the state bar,” said John Steele, who teaches legal ethics at UC Berkeley’s law school.

Or, Steele added, the internal squabbling may amount to just another particularly bad bout of turbulence,

Posted in ABA, Ethics, Law

Lawyers of reality TV

by Lauren Etter

Last year, Kim DePaola of the Real Housewives of New Jersey was hosting the grand opening of her designer dress shop when a brawl broke out. One of the guests got punched and then nailed with a stiletto heel, leaving a bloody gash on his forehead.

In true reality TV fashion, the cameras kept rolling, capturing all the gory details of the unfolding drama. The man who was hit with the shoe later filed a lawsuit, claiming that the brawl was staged by the show to amp up the drama.

“This was something that was done for a reality show gone awry,” the man’s attorney, Nicholas Sekas, told a New Jersey newspaper. “It was done for a ratings grab.”

The lawsuit settled.

While reality television on-screen may often seem devoid of substance, the legal inner workings behind the scenes are anything but.

Lawyers touch nearly every aspect of reality TV production, from the mundane-vetting ideas, acquiring talent, negotiating contracts and ensuring a safe set—to the juicy—keeping talent from leaking plots, preventing producers from rigging contests and going to bat for celebrities who relish filing lawsuits to grab headlines.

And business is booming for lawyers who specialize in this once niche area of television programming.

“If you just look through any channel guide, you’ll see how many networks that air nonscripted programming there are now,” says Brian Raymond, an entertainment attorney who specializes in reality television at his Los Angeles-based firm, Raymond Legal. “I certainly don’t see it going away anytime soon, and for my own benefit I hope it doesn’t.

Reality TV is experiencing a golden era. The format has evolved from the advent of Candid Camera in the 1940s to Unsolved Mysteries in the ‘80s, to MTV’s Real World in the ‘90s and then Survivor, which first aired in 2000. Since then the genre has taken off. Today every facet of life—ordinary or otherwise—is game for a reality series. There’s Keeping Up with the KardashiansThe BachelorThe Biggest LoserAmerica’s Next Top ModelSurvivorPawn StarsJersey Shore—the list goes on and on into the dozens, if not hundreds. (Attention, lawyers: U.S. production company GRB Entertainment is on the hunt for an “everyday attorney” to host a new legal reality show.)

The proliferation of reality TV is partly a function of taste. Americans love peering into the private lives of others and seeing a good conflict. It’s also partly a function of necessity. The cost to produce an hourlong reality show is a fraction of the cost of a scripted cable show, and the ratings are often higher. “If you can make a show like Jersey Shore that gets as much ratings as scripted television that is five times more expensive to make, then you’ve hit the jackpot,” Raymond says.

There are several genres of reality TV. Well-known docudramas, like the various Real Housewives shows or Jersey Shore, often have at least some element of staging, with writers shaping the story’s overall arc. And then there are shows, like Cops, which follow a less structured format and generally have no scripting whatsoever (although there have been some famous court cases challenging the authenticity of shows purporting to be unscripted).

In those shows, “the only time the camera guys are supposed to be involved is if it’s a matter of life and death,” says Ethan Bordman, an entertainment attorney based in Ridgewood, New Jersey. And then there are the competition shows, including The Amazing RaceChopped and Top Design. Generally these shows have people competing in various feats involving physical stunts, intellectual challenges and artistic pursuits.

Increasingly, there are hybrid shows that take the traditional unscripted format and combine it with an element of competition. Survivor is a classic example. So is the popular show Big Brother, in which “houseguests” live together and compete for a cash prize awarded to the last person who avoids “eviction.”

The Real Housewives of New Jersey pose on setPhoto of The Real Housewives of New Jersey by Manny Carabel/Getty Images

LEVELING THE PLAYING FIELD

While attorneys are involved in all types of shows, they are especially needed for those based on a competition. They watch over the game to ensure that the rules are fair and that the set is liability-proofed, because many competition shows have contestants performing strange, often death-defying, feats. “You’ve got producers there that are trying to make the best dramatic and most compelling program as possible,” Raymond says. “With that, there’s certainly the opportunity for their eye to fall off the actual fairness of the contest, and even I suspect there’s the possibility—although I’ve never witnessed it—of producers faking or rigging a contest in order to have the best dramatic TV result.”

Raymond recently found himself on the set of The Great Escape, a now-canceled reality show that involved teams competing to be the first to break out of unusual settings, such as the former federal prison on Alcatraz Island. Along the way, contestants had to endure a series of challenging mental and physical obstacles. The winners took home a cash prize of $100,000. During the taping of one episode, Raymond climbed aboard an aircraft carrier and walked the entire course with a producer before the contest began. That took him to the ship’s brig, from which contestants were supposed to escape to a ledge on the vessel where a giant box was to be hoisted up, and finally to the side of the ship where contestants would rappel down nearly 200 feet into a small boat.

“I visualize myself basically playing the game,” Raymond says. “Looking at each location, saying, ‘OK, they’ve got this there.’ ” I carry around measuring tape with me and pen and paper.”
When production attorneys arrive on the set, they’re often seeing for the first time how the set is designed for a particular competition. That means they may get there and realize some of the rules quickly need to be changed.

Jerry Glover of Chicago sits in an office window
Photo of Jerry Glover by Nima Taradji

Jerry Glover, an entertainment attorney at Leavens, Strand & Glover in Chicago, has represented reality television producers like NBC Universal and Warner Bros. Television. He once worked on the set of a show where contestants had to perform stunts inspired by scenes in famous Hollywood movies. In one competition, the stunt was based on a scene in the movie Fargo, in which Frances McDormand plays a cop catching the bad guy feeding a dead body into a wood chipper. In the competition, the producers set up a wood chipper and instructed the teams to have one player feed big hunks of red meat into the chipper while another stood on the other side holding a basket. The team that caught the most shredded meat by weight in their basket won.

When Glover arrived on the set, he noticed that the placement of the wood chipper among the trees was problematic.

“The trees would actually be catching most of the meat,” he recalls.

Quickly, he and the producers had to tweak some rules. They ended up changing the angle of the chipper “spew” to avoid the trees. Also, with safety in mind, he recommended that the contestant with the basket stand farther back than originally projected “because of the potential liabilities associated with the wood chipper itself going crazy. It was a large contraption—much larger than I expected it to be.”

Fairness on these competition reality shows is taken very seriously. In fact, ensuring the integrity of a game or contest is one of the biggest jobs for reality TV attorneys. That’s because there is a federal law that makes it a crime to rig a game show.

Set of SurvivorPhoto of Survivor’s cast and set by Timothy Kuratek/CBS via Getty Images

THE QUIZ SHOW SCANDAL

The law dates to the 1950s, after it came to light that some of the era’s most popular shows, including The $64,000 Question and Twenty-One, had been rigged in a bid to boost ratings. In some instances, producers prepped contestants by giving them answers and coaching them on how to act to conceal the deceit.

Eventually the truth came out, and it prompted widespread public outcry. Congress held hearings into the “quiz show scandals” and eventually passed an amendment to the 1934 Communications Act to outlaw rigging or unfairly affecting the outcome of a game or a competition show. (For more, see Precedents: “Quiz Show Hearings Begin.”)

In general, the statute rests on the idea that the program being called into question is not simply a contest, but a very specific type of “bona fide contest” that hinges on “intellectual knowledge, intellectual skill or chance,” according to the law, 47 USC § 509. That typically applies to traditional game shows or quiz shows, such asJeopardy or Who Wants to Be a Millionaire.

The law has rarely been invoked since the ‘60s, and when it is the cases often settle out of court. That has led to uncertainty as to exactly how or whether the statute applies to reality TV.

In 2001, a contestant on Survivor invoked the quiz show statute, saying that producers intervened in the voting process, resulting in her being voted off the show instead of a competitor who she says was favored to keep ratings high. The case settled.

A more recent case involved Storage Wars, the reality show that chronicles professional buyers who bid on abandoned storage lockers at auctions and then flip their contents. Last year a star of the show, David Hester, sued A&E Television Networks and the show’s producers, claiming that producers “salted” the storage lockers with valuable goods to increase the drama of the show.

“Although the series is intended to be a truthful ‘reality series’ depicting people bidding at auctions of abandoned storage lockers, A&E has committed a fraud on the public and its television audience in violation of the Communications Act of 1934, which makes it illegal for broadcasters to rig a contest of intellectual skill with the intent to deceive the viewing public,” according to the suit, which was recently settled.

Kimberlianne Podlas, an attorney and professor of media law and pop culture at the University of North Carolina at Greensboro, says the quiz show statute likely doesn’t apply to most modern reality shows. “We’re not back in that quiz show era,” she says. “There are so many no-skill, nonintellectual components that a lot of the competition shows don’t fit into the quiz show statutes anymore.”

Either way, producers and networks aren’t taking a chance. Oftentimes, to doubly ensure there is no question of fairness, producers will hire a “compliance expert” to work on the set. This person can be a lawyer, but often is not.

Alan Gerson, president and CEO of Enteractive Solutions Group, is a former practicing attorney. A division of ESG, the Sullivan Compliance Co., provides advice on major game and reality competition shows, including Wheel of Fortune and Jeopardy.

Pawn Stars on setPhoto of Pawn Stars on set by Associated Press

THE ART OF FAIRNESS

Gerson’s Burbank, California-based company makes sure that the shows aren’t rigged, and that everyone is attempting to produce them in the most equitable fashion possible. In many cases, compliance experts actually help write the rules with the producers.

“We tell [participants] it is a crime for anybody to ask you to do anything that would be unfair or dishonest,” he says. “You need to tell us in case you are approached by anyone asking you to do anything that is untoward.”

The Sullivan Compliance Co. recently was on the set of the Food Network’s Cupcake Wars, where contestants vie for a prize of $10,000 in a series of bake-offs. SCC addressed many aspects of the show’s fairness, ensuring that the contestants were of a similar baking skill level, that the time allotted to bake and decorate the cupcakes was sufficient, and that the judges were qualified.

From the standpoint of producers, Gerson’s a good guy to have on their side. “Most of these things don’t go to court,” Gerson says. “You might think that you were treated unfairly, but oftentimes we are able to convince the contestant that under the rules and after reviewing the videotape they were not in fact treated unfairly.”

Attorneys are critical to the reality show business in many other ways as well. For example, a common role for production counsel is to make sure that the talent doesn’t leak any information about the shows, because most shows are taped in advance. Leaking “would destroy the commercial value” of the show, Glover says. “Especially if one winner is chosen—to reveal who the winner is would destroy any reason for somebody to broadcast the show or for somebody to watch it.”

There have been several high-profile lawsuits that touch on whether those who leak “spoilers” should be held legally liable. In 2011, the producers of The Bachelorsued the proprietor of a popular website called Reality Steve, whose principal purpose was to leak plotlines before they aired on a variety of shows, including Jersey Shore and Survivor. The suit alleged that Reality Steve fraudulently induced contestants to breach their confidentiality contracts by offering them money to dish secrets.

Kim DePaola
Photo of Kim DePaola by John Lamparski/WireImages

THE $100 MILLION IDEA

The rise of reality TV has also spawned an entirely new breed of television stars—including Snooki, Honey Boo Boo and the Robertson family from Duck Dynasty—who have become famous for no other reason than simply appearing on one of these shows. This new class of “talent” has shaped how networks draft their contracts.

Increasingly, networks and production companies are claiming they deserve a cut from whatever fame their cast members achieve. For example, after Bethenny Frankel appeared on The Real Housewives of New York City she went on to found the Skinnygirl Cocktails business, write several books and host her own talk show. She reportedly sold her cocktail company for more than $100 million.

“Production companies are saying if we put you on the show and you end up doing an endorsement deal or write a book, we’re going to participate in your windfall of revenues,” Raymond says. “If the network’s going to be paying $3 million or more to be producing a show and provide a platform and essentially a commercial for you or your business, it makes sense for the networks to want to get a part of that.”

Being a lawyer to the reality biz requires a special type of personality. While serving as an on-set attorney for one of these shows may seem exciting, it also involves a lot of hard work. On-set attorneys are often the new guys on the scene. That means they have to deploy a lot of diplomacy and grace so as not to ruffle feathers while doing their job.

“You have to very much read and navigate personalities and egos, and be very flexible,” Raymond says.

Glover echoes that sentiment.

“You’ve got to get along with the crew just to get the job done,” he says. “When you get on set, immediate stereotypes set in, like you’re there just to say no. You’ve got to get around those stereotypes. When you are on set, it’s up to you to make them realize that you are one of them. Because you are. You’re there to do the same thing they are—get a show on the air.”

Lauren Etter is a freelance journalist based in Chicago.

Source: ABA Law Journal

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Posted in ABA, Career, Entertainment, Law, Legal Education, Millennials

Student Debt As An Asset Class: A $1 Trillion Opportunity?

It’s a chilly autumn evening in trendy Williamsburg, Brooklyn, and 28 Millennials are gathered in the Greenhouse private dining room of farm-to-table restaurant Wild, washing down gluten- and hormone-free gourmet pizza with free-flowing wine. Like 55% of their college-educated peers, the partygoers carry student loan debt; unlike their less fortunate peers, they’re not being dunned but wined and dined by their lender, the venture-capital-backed CommonBond.

“This is not what you picture student debt to look like,” remarks Zoe Fuller-Young, who is earning an M.B.A. at New York University with the help of a CommonBond loan.

That’s because Fuller-Young and her fellow partygoers are what might be called the indebted 1%–folks with five- or six-figure student debt racked up earning pricey and prestigious graduate degrees. Their earnings potential and expected low default rates make them such attractive borrowers that smart private investors can lend to them at less than Uncle Sam’s one-size-fits-all student loan rates and still make a nice return, even after the cost of free organic pizza and such extras as career counseling.

“It’s a trillion-dollar opportunity. You don’t get a lot of those,”  gushes Brian Hirsch, cofounder of Tribeca Venture Partners, an early investor in CommonBond. (He sits on its board.)

Well, maybe not a trillion, but hundreds of billions. About 75% of the $1.2 trillion in outstanding student loan debt is eligible to be refinanced, and the creditworthy tranche of this debt–the part private investors are eyeing–totals at least $200 billion. So far CommonBond has made some $100 million in loans to current students and graduates of 109 M.B.A., J.D., M.D. and engineering programs at 50 brand-name schools. Another VC-backed company, three-year-old SoFi (for Social Finance), has refinanced more than $1 billion in student debt held by 13,500 graduates of 2,200 schools, making it the largest refinancer in the market.

By cherry-picking the best borrowers, these fast-growing upstarts could leave the federal government with an even higher default rate on its portfolio. That “has the potential to undermine the confidence in the student loan system,” worries David Bergeron, vice president for secondary education at the Center for American Progress and a former official at the U.S. Department of Education.

Maybe. But meanwhile, Millennials with good prospects look to save some nice bucks on their student debts, while older, established folks, maybe even their parents or grandparents, have a new fixed-income investment to consider–with a feel-good kick.

This year a graduate student can borrow up to $20,500 in a Stafford loan from Uncle Sam at a fixed rate of 6.21% and the balance of his school’s costs in a Direct Plus Loan at 7.21%. (Direct Plus Loans made from 2006 until 2013 carried an even steeper rate: 7.9%.) The government offers no refinancing deals for high earners but charges no penalty for early repayment.

That makes it easy for SoFi and CommonBond to refinance and undercut federal loans. Both now offer five-year fixed-rate refinancing that ranges from 3.625% to 5.99% (depending on their judgment of a student’s creditworthiness); ten-year fixed rates of 4.74% to 6.625%; and a buffet of longer-term and adjustable-rate loans. SoFi estimates that its average borrower this summer refinanced $71,000 in debt and will save nearly $12,000 in interest over the life of a ten-year loan.

The upstarts are out to disrupt traditional banks, too, figuring they can use student loans as an entrée to long-term relationships with young bank-wary high earners (71% of Millennials say they’d rather go to the dentist than talk to a bank). SoFi, which says its average borrower has an income north of $130,000, recently started offering mortgages of up to $3 million in six states, including California and Texas, with down payments as low as 10%.

Mike Cagney, CEO of SoFi

The tenant directory of 1 Letterman Drive, a brick office building tucked away in San Francisco’s lush Presidio Park, reads as a partial who’s who of venture capital funds: On the third floor is Trulia investor Polaris Partners; one floor up is Tesla backer Tao Capital Partners and billionaire Peter Thiel’s eponymous Thiel Capital. And on the ground floor is SoFi, which counts Thiel among its more recent investors. (It has raised a total of $161 million from VC and angel investors.)

SoFi’s CEO and cofounder is Mike Cagney, a 43-year-old with curly auburn hair and a ruddy complexion who began his career as a proprietary trader for Wells Fargo, rose to head trader and then built Finaplex, a wealth-management software company, selling it off to Broadridge in 2007. In 2010 he was running his own hedge fund, Cabezon Investment Group, when he decided to recharge his entrepreneurial batteries at Stanford Business School’s Sloan Fellowship program for midcareer execs. In the school’s famed “Startup Garage” class Cagney and his three SoFi cofounders (two are still at SoFi) conceived it as a peer-to-peer lending operation organized around university affinity groups: Prosperous alumni would lend to borrowers from their alma maters.

With startup investments from Joseph Chen, founder of Chinese social-networking site Renren, and Baseline Ventures founder Steve Anderson (both sit on its board), SoFi launched in the fall of 2011. Its first project was a $2 million fund for Stanford students raised from 40 alums who qualified as accredited investors (meaning they had investable assets of $1 million-plus or annual incomes of $200,000-plus).

Other elite school funds followed. Still, Cagney wanted to grow faster, and to do that, he figured, he needed to focus on refinancing the big debts of those who had already graduated–rather than making smaller semester loans–and to tap institutional as well as individual investors. He approached Wall Street in 2012 but got a chilly reception. “Student loans? Good luck,” one Bank of America official scoffed, recalls Cagney. Still, he kept pitching away and hired experienced execs: His CFO is the former CEO of KKR Financial, a subsidiary of private equity megalith KKR, and his general counsel spent a chunk of his career at Sallie Mae.

Finally, in March 2013, SoFi secured a $60 million line of credit from Morgan Stanley. In December 2013 it completed a $151 million securitization of refinanced graduate student loans–the first such securitization by a peer-to-peer lender. It sold another $251 million in notes in July and $303 million in November, with an A rating from S&P and A2 from Moody’s.

About 20% of SoFi’s loan money so far has come from accredited individual investors, who can elect to invest in a general pool or one where returns are linked to the performance of loans from their alma maters. (About half pick a single school.) They can also buy SoFi perpetual preferred stock, which carries a 6.5% qualified dividend if 99% of their chosen school’s loans are paying on time but 0% if less than 97% are in good standing.

MIT graduate Chris Neil, a 48-year-old senior vice president at San Jose-based semiconductor maker Maxim Integrated, has put $125,000 into the loan pool for his alma mater. He’s been earning 4% to 5% (double what bank CDs are paying), and knowing that MIT loans back up the notes “helps me sleep at night,” he says. (Another selling point for investors: Unlike normal consumer debt, student loans are almost impossible to discharge in bankruptcy.)

As for those once standoffish banks, they’ve shown an “insatiable” appetite for SoFi’s paper, Cagney boasts. Why don’t they just refinance loans themselves? Discover Financial has a pilot program going, and Citizens Bank expanded its offerings in September, with fixed rates as low as 4.74% for those who set up automatic payment from a Citizens checking account. Wells Fargo also offers loan consolidations, giving borrowers a chance to apply for a lower rate. But the big banks would likely be skewered by consumer advocates if, like SoFi or CommonBond, they offered lower rates to graduates of more prestigious schools.

SoFi doesn’t lend solely based on a borrower’s degree, however. It requires each to have a job or job offer in hand (law school grads must have passed the bar) and looks at salary and credit scores. If a borrower loses his or her job through no fault of their own, SoFi will suspend monthly payments and help with the job search, reaching out to its well-connected investors. It boasts that it hasn’t had one default in its entire re-fi book. By contrast, 14% of federal student loan borrowers default within three years of beginning repayment.

Cagney’s next goal is an IPO in 2015. Beyond that, he says, he wants to create “self-sufficient” school-centered lending machines. Harvard graduates would borrow from other Harvard graduates and, once they repay their loans, reinvest in the next generation of Harvard grads. “That way there’s something rewarding and meaningful about that social aspect,” he says, “but it’s still done at market rate.”

School ties are nice, but return is key. “Under almost no circumstance has any of my investors ever looked at this as a gift,” says Cagney. “They’re constantly focused on return, liquidity and getting paid back. It’s almost draconian.”

Like SoFi, New York-based CommonBond was born from a prestigious M.B.A. program; unlike SoFi, CommonBond emerged from the debts of its founders. David Klein, 34, Mike Taormina, 31, and Jessup Shean, 32, met at Wharton and bonded over dissatisfaction with the rates and service on their own federal and private student loans. All had experience in finance: Klein at American Express and the other two at JPMorgan. They launched in November 2012, shortly after graduation, with $1 million in angel equity investment and a $2.5 million loan kitty raised from accredited-investor Wharton alums, using the money to refinance debt of their classmates. Klein is now CEO and Taormina CFO. (Shean joined M&A advisory firm Greenhill & Co.)

CommonBond is taking growth slower than SoFi and has yet to lend beyond the academic elite. Last year it raised $100 million in a combined debt and equity offering led by Tribeca. Among the new investors: former Citigroup CEO Vikram Pandit and the Social + Capital Partnership.

“Not to be glib about it,” says Tom Glocer, former Thomson Reuters CEO and a CommonBond equity investor, “but if you’re coming to me for a loan and you’re a dentistry student at the University of Pennsylvania, I’ll be more willing to make a loan than if you tell me you’re an art history major at Texas Christian.”

CEO Klein defends staying focused, for now, on only 50 schools. “You could argue,” he says, “that part of the reason we got into the financial crisis was that lending was happening because people were knocking at the door without appropriate underwriting happening.” Still, he expects to have $500 million in loans out to graduates of the 200 top schools by the end of 2015, financing that growth with institutional capital.

Meanwhile, both startups face a risk that Uncle Sam could somehow ruin their party. If there’s one thing that scares him, Cagney says, it’s the prospect that the government will start refinancing loans at rock-bottom rates. That seems unlikely for now, with Republicans in control of Congress.

There’s also the possibility that larger peer-to-peer lenders like Prosper and Lending Club might elbow their way in. CommonBond investor Glocer suggests the student refinancers might end up as acquisition targets for peer lenders or for the likes of Amex, which could see it as a way into the wallets of the educated elite. “You get someone early enough, they’ll stay,” he says.

This story appears in the December 29, 2014 issue of Forbes.

Posted in Department of Education, Economics, Ethics, Financial Planning, Student Loans

Why I Just Bet a Professor Money That at Least One Law School Will Close

By Jordan Weissmann

In a more fair universe, the Thomas Jefferson School of Law in San Diego would be dead and buried by now. One of the more wretched citizens of legal academy, the small, private institution is known for its miserable employment results and embarrassing bar-passage rates, as well as for having the most highly indebted students of any law school in the country (the average graduate with debt finishes $180,665 in the hole, according to U.S. News & World Report). When the job market for young lawyers collapsed during the recession, it was the first law school to face a class action suit claiming it had used misleading job stats to trick students into attending.

This year, it briefly looked as if Thomas Jefferson might get its just deserts. Enrollment had tumbled, as law school applications evaporated in general. Meanwhile, the school was heavily in debt, due to the $127 million it borrowed to construct a nice new building, and interest payments were devouring its falling revenue. In June, it defaulted on its bonds. The end appeared nigh.

And yet, it wasn’t. As Steven Davidoff Solomon, a University of California–Berkeley law professor, wrote in the New York Times last month, Thomas Jefferson worked out a “sweetheart deal” with its creditors, which cut the school’s debt, took its building, and leased it back to the institution for a reasonable price so it could stay in operation. Why would they do such a thing? They “had no choice,” Solomon writes. Picking Thomas Jefferson apart in bankruptcy court would have been useless, because it only had one significant asset: That building, which creditors would have had to either convert into offices with an expensive renovation or lease to another law school (which, of course, would be hard to do). Better to simply keep Thomas Jefferson as a tenant.

Solomon’s lesson from this? “A troubled law school is like Dracula: hard to kill. Creditors will not do so because even keeping a struggling school alive means there is some possibility of repayment.”

This is why Solomon says I’m wrong that a few law schools are bound to close in the coming years, due to the enormous enrollment drops of the past few years. Other than their real estate, stand-alone law schools like Thomas Jefferson (which aren’t affiliated with any larger university) are worthless to creditors, so they won’t force them through bankruptcy. Bigger universities have no incentive to close their law schools, even if they’re losing a bit of money, because that would just leave empty facilities sitting around gathering dust on campus.

So he and I now have a $2 wager. Solomon says no ABA-accredited law schools will close or merge by the end of 2018. I say at least one will.* I know, high stakes. But at least we’re both on record.

Anyway, here’s why I don’t think Thomas Jefferson’s lessons are generalizable. First, we don’t really know what the lessons are. Yes, it’s possible the school will come back as Dracula, a vigorous undead monster. It’s cut back its expenses and its enrollment has already recovered a bit. But the school could also turn out to be more like zombie Khal Drogo, brought back from the edge of death through black magic as a catatonic shell of its former self. The stigma of the past few years could drive away future students. Given that schools are now handing out tuition discounts left and right to attract competent students, it’s not clear the school will be in a financial place to compete. (Law schools need to maintain a minimum bar passage rate to stay accredited, though I’ve been told by the ABA that no institution has yet lost accreditation over that issue.) In any event, Thomas Jefferson has survived a brush with mortality. It may survive long term. It may not.

Even if Thomas Jefferson does hold on, its ordeal may be an exception rather than a rule. By Solomon’s logic, you would think that colleges almost never close. After all, a small bible or liberal arts college doesn’t have many valuable assets other than real estate, either. But in fact, at least a few institutions of higher ed go bust every year. Colleges don’t always get saved by creditors via lease-back agreements, and I wouldn’t expect every stand-alone law school to either.

What about law schools that are nestled in larger universities? Solomon writes: “If a closed law school is worth nothing and a nice big building without students is useless, then keeping it open remains the only option.” The odd assumption here is that a college can’t find a new use for a “nice big building” if it’s currently housing a legal program that’s hemorrhaging money and attracting lower caliber students than in the past. It’s not as if law schools have some special architectural quirks that would prevent an administration from inserting, say, an expanded business school into its old digs. I’m sure most administrations will do everything in their power to cut costs first by laying off professors and staff, but at some point, if the books won’t balance, or the quality of the program declines, killing it might well seem like a rational choice.

In any event, the bet’s on. Side wagers are welcome.

Source: Slate

Posted in Debt, Department of Education, Ethics, Legal Education, Student Loans

Bill Would Give Prosecutors, Public Defenders Help With Student Loans

State Sen. Jeremy Ring is throwing a life preserver to young prosecutors and public defenders buried in law school debt.

Ring, Parkland-D, filed a bill (SB 150) which would offer thousands of dollars a year to help prosecutors and public defenders pay off student loans, according to the News Service of Florida.

Lawmakers have long heard complaints from courthouses across that state that the relatively low pay of prosecutors and public defenders make it hard to hire attorneys, who are facing big law school loans. The low salary also leads many prosecutors and public defenders to leave their jobs and go into the private sector just as they are gaining experience.

Ring’s would help assistant state attorneys, assistant public defenders, assistant attorneys general and assistant statewide prosecutors make their loan payments.

Prosecutors or public defenders who have had their jobs three to six years would get $3,000-a-year. The amount climbs to $5,000 for attorneys who have served six to 12 years.

The program, of course, would need to be funded in each annual state budget. The loan payments would be prorated if not enough money was set aside to pay the maximum amounts.

Ring was elected to a two-year term as chair of the Broward Legislative Delegation earlier this month.

- See more at: http://www.browardbeat.com/bill-would-give-prosecutors-public-defenders-help-with-student-loans/#sthash.Zf3DynuU.dpuf

Posted in ABA, Debt, Education, Government, Legal Education, Student Loans

Law School Is Buyers’ Market, With Top Students in Demand

By: Elizabeth Olson 12/1/2014

Summer was waning and students were already packing for the fall semester, but Prof. Daniel B. Rodriguez, dean of the Northwestern University School of Law, was still fielding phone calls from incoming students seeking to bargain down the tuition at the elite school.

“It’s insane,” Professor Rodriguez said. “We’re in hand-to-hand combat with other schools.”

In the new topsy-turvy law school world, students are increasingly in control as nearly all of the 204 accredited law schools battle for the students with the best academic credentials. Gone are the days when legal educators bestowed admittance and college graduates gratefully accepted, certain that they were on the path to a highly paid, respectable career.

Now, financially wobbly law schools face plunging enrollment, strenuous resistance to five-figure student debt and the lack of job guarantees — in addition to the need to balance their battered budgets.

To entice new students, some middle-tier schools have reduced tuition, including the law schools at the University of Arizona, University of Iowa and Pennsylvania State University. In Detroit, Wayne State University Law School, seeking to stanch falling enrollment, recently announced that it would freeze tuition at least through the 2015-16 academic year, guarantee a minimum of $4,000 in scholarships for all incoming students and offer nearly $1 million in new scholarships to current students.

The Roger Williams University School of Law in Bristol, R.I., slashed tuition by 18 percent, to $33,792 from $41,400 through the 2015-16 academic year, and locked in the rate for three years for first-year students.

“We realize we are not returning to the frothy enrollment days,” Michael J. Yelnosky, the school’s dean, said, adding that the school had shaved costs by combining some activities with its parent university, Roger Williams. “We had to right-size to be able to deliver the same education.”

Once seen as cash generators, many university-affiliated law schools now lean on their parent institutions to survive a rough period. They fear that they could end up like Western Michigan University Thomas M. Cooley Law School, which laid off staff and announced in October that it would close its Ann Arbor campus, one of four, because of shrinking enrollment.

Law school enrollment has been tumbling because the economic recession has reduced the number of legal jobs. In the economic fallout, law firms began to cut positions and have not restored them.

In New York, Albany Law School has cut faculty members — who had been sacrosanct at most law schools — in the face of a 34 percent decline in enrollment in its entering class this year, to 123 from 187 first-year students a year ago.

The number of first-year law school students fell 11 percent in fall 2013 from fall 2012, part of a striking 24 percent decline in just three years, according to the American Bar Association. The incoming class in 2013 stood at 39,675 students, the smallest first-year class since the 1970s, when law school enrollment began to rise substantially. About two-thirds, or 135, of the association’s accredited law schools, registered a drop in first-year enrollment that year — and little has changed this fall.

Nine months after graduating, only 57 percent of the 2013 class had full-time jobs that required passing the bar, the association said. Law schools are left in the unenviable position of trying to allay students’ fears that they will not be able to find a job that pays enough to repay $150,000 to $200,000 in education loans.

“Students are voting with their feet, and demanding a better deal,” said Professor Rodriguez of Northwestern, who is also president of the Association of American Law Schools. “And they are willing to spend less,” he said, meaning they are seeking the best deal.

Northwestern, in Chicago, like some other well-financed schools, has increased financial aid, calling on alumni for donations, so that 74 percent of first-year students this academic year got aid, compared with 30 percent in 2009. But the sticker price for annual tuition is $56,134, up from $47,202 five years ago.

The law school has 244 first-year students this year, down from 271 in 2009. Enrollment is up at other schools that have cut tuition, including Roger Williams, but that has come at a price — students at some schools have lower admissions test scores and college grades.

Students, too, have a more pragmatic view toward legal education. Emily Trieber, 24, a first-year student at Roger Williams, for instance, said she saw her relationship with the school “as a business contract.” After two years of saving for law school while she worked for a private ambulance company in Connecticut, she was accepted by the Rhode Island law school with a scholarship that lowered the $33,792 annual tuition bill.

“Then, I asked for more,” she said. “It doesn’t hurt to ask.” She said she got more and was paying $20,000 to $25,000 annually, with her scholarship money taken into account.

Ms. Trieber, who wants to become a family or elder law practitioner, said talk of discounts was common among her fellow students. Even if she does not keep her scholarship, she said, “I’m still paying a lot less than I would have been at the other schools I applied to in the Northeast.”

People who are skeptical of across-the-board tuition cuts contend that some schools are padding enrollments with students who have lower Law School Admissions Test scores — the top score is 180 — and lower undergraduate grades. Lower academic scores raise concerns about whether the students will be able to pass the state bar exams that are mandatory to practice law.

Even Northwestern and some other prestigious law schools have seen a slight decline in average academic scores, with a 168 median L.S.A.T. score for first-year students this school year compared with 170 in 2009. The median grade point averages for Northwestern students were better, though, at 3.75 this year, up from 3.72 five years ago.

At Roger Williams, the median L.S.A.T. score was 148, and the median undergraduate G.P.A. was 3.16 for the most recent entrants, down from a 152 median law test score and a 3.26 G.P.A. score for those who entered in 2009. Scores are keenly tracked because law schools vie for academic stars to maintain their standing in the national rankings, though the pool of prospective students is shrinking. The number of people taking the L.S.A.T. test was 8.1 percent lower this fall than last year, and about 50 percent below the comparable testing period in 2009, the Law School Admissions Council said.

With the declining interest, law schools have been working hard behind the scenes to trim their operations and to expand their offerings of joint degrees in, say, law and medicine. Still they are trying to avoid wholesale cuts in faculty or degrees, steps that would publicly eviscerate their business model and reputation.
“I don’t get how the math adds up for the number of schools and the number of students,” Professor Rodriguez said. “We all know it’s happening, and we are all taking steps that urgent, not desperate, times call for.”

Source: NYTs

Posted in ABA, Career, Legal Education, Statistics, Student Loans

12 Things No One Tells You About Student Loan Debt

November 2014

I graduated law school with $206,000 of student loan debt (woof). While I have paid off $50,000 in three years, I still have $156,000 to go. For all you student-loan-debt-sufferers out there, no doubt your student loans affect your life in ways you never expected.

12 things no one tells you about your student loan debt.

You have to rent a cheap apartment because so much of your pay check goes toward your loans
You are not living in a hip part of town (in walking distance to your favorite places) because you have to live somewhere more “affordable.” You live in what can be described as a “college-like” environment even though you are in your late 20s.

You still have to drive the car you got in college
You cannot afford to trade in your car because all your extra money goes toward paying off your student loans. The thought of your car breaking down terrifies you because you have no plan B.

You cannot afford to take vacations because of your debt
When your friends want to go on a trip, you have to pass because the thought of spending hundreds of dollars just for fun makes you feel incredibly poor.

You probably will never be able to afford a house at this point (at least it feels this way)
Although your parents think you “need to buy a house” soon, you scoff at this idea. You barely have a few thousand dollars in an emergency fund, let alone money for a down payment on a house. And how would you fill the house with furniture anyways?

Your rich friends do not understand
Your friends who have money think you care too much about your student loans and don’t get why you live like you are in college. They constantly forget you are broke and continue to ask you to go out to eat.

Everyone expects you to be well off because of your degree(s)
People know you are a professional with a good job, so they expect you to spend money accordingly. What they forget is that your “good” salary is dismal compared to your mountain of student loan debt.

Student loans affect your dating life (you are less of a catch because of your loans)
You realize that being good with money is a desirable trait in a partner. But all of the people who are good with money are turned off by your massive student loan debt. You don’t really blame them, but it still stinks.

Your net worth is negative
In your effort to become financially savvy and responsible, you begin tracking your net worth only to find out it is negative. This is depressing.

The interest on your loans accumulates so fast that it feels like you aren’t making any progress
You get really excited when you make a student loan payment and see the principal amount go down. Then, 30 days later, you come back to make another payment only to see the principal back up to nearly the same amount. You get mad that mortgage interest rates are so low while your student loan interest rate is 8 percent.

Your student loans will be around for forever (or so it feels)
Either you accept the fact that your debt will be around forever (25+ years), or you really buckle down and get on a 10 year plan. But then you realize 10 years is still a freaking long time.

You have to take a second job to afford your life
Who said babysitting was for teenagers? You decide to pick up side jobs or a second job all together. The only problem is that society really does not accept this model and is very judgmental. And of course, all your free time is gone.

If you want a new car, a house, or to take a vacation, you have to make financially unwise decisions
Eventually, peer pressure starts to have its effect on you. But the only way you can upgrade your car, your home, or take a vacation is if you start putting off paying your debt. After all, Joneses are hard to keep up with.

Source: Huffington Post

Posted in Career, Debt, Economics, Financial Planning, housing, Legal Education, Millennials, Psychology, Retirement, Student Loans

The Toppling of Top-Tier Lawyer Jobs

 JULY 16, 2012 10:00 AM

The median salary for graduates of the law school class of 2011 was $60,000, which was 17 percent lower than it had been just two years earlier, according to a new report from the Association for Legal Career Professionals (NALP).

But if you know anything about the bizarre market that is legal hiring, you know that the median salary tells you zilch.

Few newly minted lawyers actually earn salaries close to the median (or mean) — their pay tends to fall much higher or lower. In other words, the salaries for have for years been “bimodal,” meaning they’ve generally sorted into two levels: the $160,000 earned by first-year associates at big, white-shoe law firms, and the $40,000-to-$65,000 range earned by lawyers at smaller law firms, government jobs and so on.

Based on 18,630 salaries reported for full-time jobs lasting a year or more. A few salaries above $200,000 are excluded from the graph for clarity, but not from the percentage calculations. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by just over 6 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.NALPBased on 18,630 salaries reported for full-time jobs lasting a year or more. A few salaries above $200,000 are excluded from the graph for clarity, but not from the percentage calculations. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by just over 6 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.

Across the board, big law firms have been offering starting salaries of exactly $160,000 since 2007.

Talk to just about any partner at any major law firm, though, and they’ll tell you that first-year associates know basically nothing when they start out. Plus, a tiny fraction of the new grads they hire and train intensively actually stick around to become partners seven or so years later. And during the financial crisis, clients balked at paying the hourly rates that firms had to charge in order to cover those $160,000 salaries. There’s also a huge surplus of new lawyers right now, even from the top schools.

With all those factors put together, you might expect salaries to fall, at least a little, at some of the big firms.

Instead law firms have been reluctant to lower their starting pay for these first-year associate slots, partly because they worry they’ll miss out on the best talent (even though that seems to be abundant) and partly because they are afraid of losing face. Not paying the standard top-tier salary is a tacit admission that you’re no longer top-tier.

Lawyers are by training (and nature, one might argue, given the choice to go to law school) risk-averse. Because no one wants to be the first mover in lowering that entry-level salary, firms have kept the salary and just hired fewer new lawyers.

It’s the perfect example of a “sticky wage” depressing employment, even though  the “sticky wage” concept usually applies to jobs that people already have, not jobs they’re applying for.

You can see the shrinking pool of $160,000-salary first-year-associates pretty clearly in the NALP data. Here is the salary distribution for 2009:

Based on 19,513 salaries. A few salaries above $200,000 are excluded for clarity. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by about 10 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.
NALPBased on 19,513 salaries. A few salaries above $200,000 are excluded for clarity. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by about 10 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.

And for 2010:

Based on 18,398 salaries. A few salaries above $200,000 are excluded for clarity. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by about 9 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.
NALPBased on 18,398 salaries. A few salaries above $200,000 are excluded for clarity. More complete salary coverage for jobs at large law firms heightens the right-hand peak and diminishes the left-hand peaks — and shows that the unadjusted mean overstates the average starting salary by about 9 percent. For purposes of this graph, all reported salaries were rounded to the nearest $5,000.

Compare those to the graph for 2011 posted earlier.

The spike on the right-hand side is in the exact same spot in all three charts, at $160,000. But the height of the spike — which represents the percentage of lawyers who got that starting salary — has fallen. In 2009, 25 percent of new lawyers reported receiving starting salaries of $160,000. In 2010, that share fell to 18 percent, and then in 2011, to 14 percent.

(The trends are probably even worse that those numbers suggest, by the way, since those percentages refer only to share of new lawyers who got full-time jobs. And plenty didn’t.)

You’ll also notice that the other cluster of salaries, the one on the left side, has gotten a little larger. In 2009, salaries in the $40,000-to-$65,000 range collectively accounted for 42 percent of reported salaries; in 2010, 48 percent; and in 2011, 52 percent.

The growth in that left-side hump reflects not only fewer $160,000 jobs, but also the creation of new second-tier, nonpartner-track jobs.

Orrick, for example, hired a bunch of lawyers for new nonpartner-track jobs at its hub in West Virginia at salaries around $60,000. These lawyers perform a lot of the same kind of work that their $160,000 counterparts used to, but at lower cost to the firm (and to clients).

On the other hand, these career associates also have much more manageable and flexible work schedules than the traditional partner-track, first-year associates do. Rather than working 80 to 100 hours a week, these career associates can expect closer to 40 hours. Other firms have created or expanded similar positions, with fewer hours at lower hourly pay.

If you want to put a positive spin on these trends, you could argue that these new types of jobs are a potential benefit of the implosion in the legal hiring market: law firms, risk-averse as they are, realized that the one-size-fits-all, standard partner-track system was broken, and they have been getting more creative about establishing alternate work arrangements. The work-life balance benefits of these new jobs are certainly what the firms themselves emphasize, anyway. New and heavily indebted lawyers may not get the six-figure salaries they expected, but at least more choice in career path may be available to them later on.

For more information on the evolution of legal salaries, I recommend this paper by Judith N. Collins, NALP’s director of research. It shows that the bimodal salary distribution really began in 2000, when a few big firms started offering $125,000 to new hires.

Above the Law, a legal-news Web site, also has extensive coverage of developments in lawyer salary structures.

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Posted in ABA, Millennials, Student Loans, Wage
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