Bubble in Law School Tuition and Lawyers?

. Just as something about home ownership seemed intrinsically good, so did getting a law degree, from any law school. Strangely, most law school educations were priced similarly. Law schools with lower employment rates charged more money than some schools with higher employment rates. Price was not a clear signal of quality. Anyway, more and larger houses were built; more and larger law schools were built. Then, as if on a dime, the world changed and all of a sudden lots of people with law degrees were getting laid off, deferred, ignored.

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How can someone write off $100,000 or $200,000 in student loans as a bad call? Many of these loans aren’t federal loans — they are from private lenders at high rates. And, unlike homeowners, law students don’t have a “put” option — they can’t tell lenders to take their law degrees and quit calling them.

So, what’s the future of law school pricing? Will someone create an affordable model that doesn’t depend on third-party financing? Will some law schools start to look like culinary schools or technical institutes that provide financing of $40,000 a year for a law degree few employers are looking for? Or will law schools pride themselves not on inputs (LSAT, GPAs, you know — USNews stuff) and on outputs (where our graduates actually end up working, and how much they make).Thanks Christine. To answer your question … The future is tuition price deflation across the board (not just lawyers) and lower salaries for college professors and administrators. How and when that starts is subject to debate. That the current model is both broken and unsustainable is certainly not debatable.

Forget about lawyers for a second, step back and think about English majors graduating school, hundreds of thousands in debt. How can that ever be paid back? The answer is it can’t because there is no demand.

Are some with English degrees rolling the dice opting for Law School? Probably, yet the competition for jobs will only get tougher. Those who do not land good jobs will be debt slaves for life. Even those who do land a job may be hugely in debt for a decade.

For further discussion, please see For Profit Schools Turn Students Into Debt Zombies; It’s Time To Kill The Entire Pell Grant Program

I suggest that rather than throwing hard earned taxpayer dollars at programs that invite fraud and make debt zombies out of students, it’s time to kill the program entirely. Instead, Obama wants to expand the fraud, even indexing the fraud to inflation.

The inept policies of the Obama administration, increasing student grants, is one key reason the tuition bubble has not yet popped.

Regardless, all bubbles end by definition. The tuition bubble will be no exception.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
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