Wednesday, May 1, 2013

Toxic Debt & No Intrinsic Value (i.e., Your J.D.)


Sorry to interrupt the usual psychopath vs. narcissist comment flame war on here . . .

Strike One of the J.D.: Toxic Debt

There ought to be more discussion of the nature of debt that law graduates "incur" in their "studies". The toxicity of Student loan debt is more dangerous than the media lets on: it is not just the amount but the manner of debt that kills. It is more deadly than slowly taking a bubble bath in pure quicksilver without so much as rinsing off afterwards. Student loan debt is a deadly added burden to law grads, even well-employed ones. It is one thing to lose one's savings—even a gamblin' fool, walking into a casino and losing his "investment", may still walk out without debt. So he is "even Steven" , as gambling debts are not legally enforceable. The legal structure we live under gives total immunity to gambling debts, but no mercy to student ones! LOL . . .They can't touch Gamblin' Bob, but TTT goody-two-shoes is screwed! Totes ratchid, d00d. No "MyEdAccount" or ICRP for Gamblin' Bob. His net value is $0.00, which is bad for his future retirement plan, but at least is better than a jobless J.D. holder's -$200,000.

The debt is toxic most of all because it is nondischargeable—there is no escape or excuse from paying it. Only the fact that debtor's prison no longer exists is in the indebted TTTT flaw stupent's favor. It is further toxic because a third party (the guvmint) paid the actual tuition and wishes to collect it back; the "tuition" was really not chosen by the future debtor. The student loan slave is even worse off than that "degenerate gambler" that lost every hand at poker on borrowed money and had to give his son's SUV to Tony Soprano's daughter avoid getting kneecapped. At least the degenerate gambler got to play with the money he borrowed—he was connected to the money and could ask for as little or much as he wanted, and had a chance to win. The law graduate does not even really get to handle the money; he never even sees it. It is all owed by him though, and he must pay the inflated tuition because of governmental student loan guarantees allows law schools to raise tuition to whatever they please; the graduate is then stuck in an unavoidable onslaught of debt since the government has the power (unlike a casino) to legally enforce its debt. Currently policy makes student loan debt immune from even a total bankruptcy claim.

Strike Two & Three: Intrinsic vs. Extrinsic Value 

A law degree, like any other credential, has both potential intrinsic & extrinsic value. A good degree (i.e., not law) has both: intrinsic value that gives the student a more developed mind for his long-term benefit, and extrinsic, consisting of useful training which society values and is willing to pay the graduate for. Uh-oh! 

We already know that law school does not teach you to practice law! (i.e., actually be a productive member of the profession). At least a philosophy degree teaches you "how to reason" or at the least, to cite depressing aphorisms from Schopenhauer to bide you through your unemployment. A J.D. does not even provide that much. But the degree lacks extrinsic value too, as has been discussed many times; it cannot get half of its graduates a job nor keep the few with jobs initially gainfully employed long enough to make the inflated "tuition" debt worthwhile. 

So we see that a law degree carries toxic debt while lacking both intrinsic & extrinsic value. Which leads to the disturbing and contempuous-laden question: Why are they still going to law school at all?

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My book-length satire/expos√© of law school, Smarter Than Socrates: The End of the Law School Era.

35 comments:

  1. Yeah, but you left out the other major difference between student loans and a casino: under no circumstances would someone EVER be able to take out an unsecured loan for $200,000 to gamble at a casino. The maximum size of such a bankruptcy would be maybe one-tenth of that amount. So there's a very good reason for treating the two debts differently.

    If, for example, you took your $200,000 in student loan money out of Sallie Mae and into a casino - and proceeded to lose it there - would that $200,000 suddenly become dischargeable in bankruptcy? No it would not - even though you gambling it away at a casino! It's not really the fact that it's a STUDENT loan that makes it nondischargeable - it's the fact that you borrowed 200 fucking THOUSAND dollars that makes it nondischargeable.

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    1. ^ edit: *gambled* it away

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    2. Not really. Student loan debt is nondischargeable because of some good lobbying efforts from private lenders, convincing lawmakers that there was this huge problem with doctors and professionals borrowing all this money and then filing for bankruptcy after graduation to get a fresh start and a nice debt-free career. Something which was never a problem, and never - to my knowledge - even happened once.

      That's the only reason that it's exempt from bankruptcy. Lenders got greedy, paid off lawmakers, and got what they wanted.

      And that move led to the shitty mess we have now, where everyone is in on the scam - banks and schools. Schools raise tuition to make the lives of academics more comfortable. Banks lend the money because they are guaranteed to get it back, with no risk.

      When there's no risk, nobody does a thing and the bubble continues to inflate. See real estate as a recent example - nobody thought that there were any risks.

      When this student loan bubble bursts (which it will at some point, although probably not soon), you'll see countless documents from Sallie Mae and other private student lenders that show these assholes knew exactly what they were doing, what the risks were, how damaging their products were, and how they were just in it for a quick buck. Just like the Wall Street banks with the mortgage crisis.

      These lenders know what the score is. Our job is to make sure that students know what the score is. We can't change the laws, or schools, or do much of anything really except stop fresh blood from getting into the system.

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    3. "It's not really the fact that it's a STUDENT loan that makes it nondischargeable - it's the fact that you borrowed 200 fucking THOUSAND dollars that makes it nondischargeable."

      The student loan is nondischargable because you borrowed it from a student lender for the purpose of getting an education, period, end of sentence. Amounts have nothing to do with dischargability. There are people who have run up unsecured credit card debt of 100k or more who've managed to discharge all of it.

      For a rich person, it isn't that hard to get approved for tens of thousands of credit card debt. Add in a gambling addiction and a sudden downturn in fortunes and it's not inconceivable to wind up with $200k in unsecured gambling debt.

      Heck, I know lower middle class schlubs (think 70k/year household earnings) who have had 85-90k in unsecured credit card debt. They can discharge their lobster dinners and Disney Vacations because they borrowed them from Capital One for "life." I cannot discharge my 85-90k because I borrowed from Sallie Mae for "education."

      That ain't right.

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    4. @733,

      Sure it's right.

      Amount may not matter, but the supercharged leverage you get on student loans DOES. Would you lend me ten million dollars, if I could simply blow it all on one fantastic vacation and then declare bankruptcy? Your position is obviously false and indefensible.

      Even the exceptions you cite - presumably the most extreme cases imaginable - involve far less money than the average law student can have for the asking.

      Rich people can borrow more because they are much less likely to declare bankruptcy - doing so usually means losing all of their houses and investments. So in a way, it's almost as if the loans to them ARE secured.

      Sorry to hear about your financial woes. I'm all for making gambling debts nondischargeable, but somehow I doubt that makes you feel any better.

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    5. "Would you lend me ten million dollars, if I could simply blow it all on one fantastic vacation and then declare bankruptcy? Your position is obviously false and indefensible."

      Whether I would lend you $10M unsecured has nothing to do with the purpose and everything to do with how much in assets and income you have. I would loan Bill Gates $10M unsecured. You are not a billionaire, so I would not loan you $10M.

      "Even the exceptions you cite - presumably the most extreme cases imaginable - involve far less money than the average law student can have for the asking."

      If you think 100k or 200k in unsecured debt is the "the most extreme cases imaginable" then you have no idea how bankruptcy works on a practical level and haven't seen a lot of CH. 7 bankruptcy petitions, especially from people with failed business ventures. And student loans are inherently limited to the cost of tuition and living expenses (unsecured debt isn't, and the hypothetical credit limit is irrelevant, anyway).

      "Rich people can borrow more because they are much less likely to declare bankruptcy - doing so usually means losing all of their houses and investments. So in a way, it's almost as if the loans to them ARE secured."

      No, that isn't security, and it has nothing to do with security. And rich people can file Ch. 13 and keep the house and cars (not to mention assets they can protect from a bankruptcy), still screwing the unsecureds. Rich people can borrow more on an unsecured basis because they're usually more credit-worthy. Again, finance companies don't work on the risk of filing bankruptcy; they work on the odds of timely repayment.

      "Sorry to hear about your financial woes."

      I don't have any.

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    6. 138,

      1. Then why would the government lend a huge sum to someone without first making it impossible for them to welsh on that enormous loan?

      2. Loans to businesses are more or less secured by the businesses themselves (physical plant, inventory, etc), much as a mortgage is secured by a house. What is a student loan secured by?

      3. They're "more credit-worthy" BECAUSE of the unlikelihood that they will go bankrupt or fail to pay back the money. Six of one ...

      4. If you have no financial woes, why is it that you believe your $90K in debt should be discharged, anyway? I'm guessing that you'd rather spend the money on a bitchin new car, right? Are people supposed to feel sorry for deadbeats like you?

      Or what?

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    7. 1. Poor policy. (You realize that it lends money that is dischargable in bankruptcy, too, right?)

      2. Student loans are unsecured. When I said "business debts," I don't mean secured business debts. I mean unsecured business-related debt. Again, if you've ever seen a person who had a failed business and filed Ch. 7, you'd see what I'm talking about. A lot of people try to keep restaurants, dry cleaners, construction companies, etc., floating on credit cards, and they always seem to find a few thousand here and there.

      3. No. They're more credit-worthy because they have assets and a history of debt repayment. A 90-year old widow is unlikely to file bankruptcy. That doesn't make her credit-worthy. People made student loans - often very high ones, relatively - even when they were dischargable. Bankruptcy is leverage in debt repayment, but it's not nearly as important in the lending equation. Otherwise, people who just filed would be offered considerably more short-term money than they presently are.

      4. I believe I should have the same power as someone with equivalent debts if my financial situation becomes dire.

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    8. ^ #1-3. The denial is strong with this one. I can't wake someone up when he's only pretending to be asleep.

      4. From your attitude, I'm guessing that most if not all of your bills are already paid by someone else.

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    9. What "denial?" If you deny what I wrote in 2 and 3, I strongly advise you to go to your local courthouse/PACER and check out some ch. 7 petitions.

      Bankruptcy in general is a serious social problem. It's supposed to be a balance between creditors and the individual's need to have a fresh start. I simply don't see a difference between classifying one category of unsecured debt (student loans) from other categories of voluntary unsecured debt. It's poor policy that leads to indebted young people being unable to contribute to the economy.

      There are viable arguments supporting it, but I see you've resorted to ad hominem (apparently, because no mature working adult can believe in bankruptcy reform?!?). Have a good day.

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    10. Considering the overall wealth imbalance between Wall Street and the working-class, I am not bothered by the flushing of any Wall Street-owned or held debts.

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    11. @645,

      I already explained why student debt is different. First post, dude.

      Congress sees the difference, too (that is, turbo-charged leverage for student borrowers). With that leverage comes a price: nondischargeability. Because it is far more destructive to the balance that you speak of to discharge such enormous amounts of money for millions of people.

      I'm sure that there is one homeless guy out there who - through some Byzantine, exotic method - somehow managed to run up half a million dollars in unsecured debt.

      The existence of that one homeless guy doesn't require Congress to tear up the bankruptcy rules and write out a $150,000 check to every law school graduate in America. Congress guaranteed the loan, not the borrower.

      Duh.

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    12. Student debtors "contribute to the economy" by paying back their loans. What, do you think the lenders set the money on fire when they receive it?

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  2. After law school, I swore I'd never go back again for a degree. But then I broke down and went back for an MBA (Top 10 program this time). Difference (and value) is night and day. While LS pits you against your classmates, thereby destroying any prospect of future business dealings because of ill will, b-school encourages team work, shared exertions and rewards, network bonds, etc. As a business executive, I'm more in touch with my b-school network (funding, ideas, unity of effort, teamwork, leadership, etc) than I am with the one from LS. So, the culture of LS is also a credit on liabilities (= losing proposition).

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    1. Agree about how LS pits you against your colleagues, at least at the TTTs. LS fosters a combative attitude that makes it tough for lawyers to work in a corporate environment.
      The folks in business school are out to do something productive with their careers and that usually means you have to get along with other people and learn how to influence others with softer skills. The "screamers" at the large law firms would get booted out of my company in about 5 hours. Many of the lawyers I work with literally cannot work in a collaborative environment.
      Where I work (large corporation), the attorneys are held in contempt. They are a cost-center and only suck money from the firm. They are not perceived as adding any value; rather, their sole purpose is to produce paperwork, consider all possibilities no matter how remote, and pad the bill. They are often paralyzed by indecision and rather than possessing good judgment skills, they are better at fobbing off responsibility while sucking the corporate teat.

      Anyone who is considering law school really needs to consider whether they would thrive in that combative, unproductive and "little benefit to society" environment.

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    2. This may be true at your company. I don't work there so I don't know. That said the view from the gc's office of a large outfit often entails watching business folks take idiotic risks on low or no profit deals despite advice from in house.

      In house is often held in contempt by the business side as a result of having to explain tough realities to people who'd prefer to listen to positive but meaningless corporate mantras instead.

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    3. Yes, you do have a good point. I work in IP and it is frustrating on the one hand to explain to the business folks that (1) their great ideas have been done already and they are wasting their time on filing patents and (2) they'll get sued for patent infringement if they proceed with making their widget.

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  3. Some people believe that they are "special snowflakes" - even though they went to community college, graduated from a garbage university, and crossed the country to enroll in a TTTT. They don't listen to facts, because in their sick minds, the odds don't apply to them.

    These are the same "determined" losers who pursue the girl who told them to screw off. Do these deranged fools let a simple restraining order stop them?! Of course not. Because the woman is "playing hard to get." She really doesn't know what she wants. And Loser Boy is going to make her realize that, even if he has to follow her on dates with other men.

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  4. I understand that lawyers are treated with despise by corporate folks. What about somebody with CPA/JD who worked in compliance for 7 years before law school. What are the perceptions of these people. I was looking for a compliance manager position and was just wondering.

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  5. Suuure. You people should really minimize the whole "gimme bankruptcy protection!" part of your message. One, it will never happen - ever. And two, it makes it look like you are just demanding money for yourselves, a fact that places you on the same moral level as the law schools themselves. Actually, it places you BELOW their moral level; the law school pigs at least APPEAR to be doing work in exchange for the payouts they receive.

    Open question for all: would you be satisfied if gambling debts were made nondischargeable in bankruptcy?

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    1. We ask for the same rights as other Americans who take on voluntary, productive debt. That isn't a "handout," you cretin.

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    2. Yes it is. You should just honor your obligations and pay the money back. Saying that you should be able to welsh is OBVIOUSLY asking for a handout.

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    3. "would you be satisfied if gambling debts were made nondischargeable in bankruptcy?"

      No. Have you ever heard of the Lord's prayer? Christianity, along with other major religions, provides for charity and kindness towards those with no reasonable means of repaying their debts.

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    4. Yeah right, Jesus did nothing BUT ask for people to give Him tax monies, right? In fact, there's a whole book in the Bible in which Jesus does nothing but say "Gimme gimme gimme gimme" the whole time. It's towards the back.

      Actually, Jesus called for people to render unto Caesar that which is Caesar's, SPECIFICALLY in the context of coins that bear his picture. Seeing as how most student loans are owed to the DoE, I don't think you'll get very far claiming that Jesus wants your loans to be discharged.

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    5. It takes two to tango. Why do these anti-scammers put all the responsibility on the borrower, but none on the lender? The lender can give to anyone, perform no underwriting, assume no risk, and pull in massive profits. It's called predatory lending.

      Maybe if the lender was taking into account the price of law school, the economy, and the job-market for lawyers, they would reduce their lending and be less susceptible to defaults. They have responsibilities too.

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    6. They don't have responsibilities to the borrower. That much, we know. I say, "screw them" when the borrower is irretrievably broke indefinitely.

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    7. The only responsibilities of a lender are to provide money to the borrower and to charge no more than the maximum legal interest rate.

      The borrower's responsibility is to pay back the money on or before the agreed-upon deadline.

      How strange that my focus is on the borrower!

      Payday lenders generally charge an APR of several hundred percent. The federal government currently charges 3.4 percent. That isn't "predatory lending."

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    8. If you guys can't see that lenders have a responsibility to lend only when there is a reasonable assumption to be paid back, then I don't know what to say. Student lenders do no research or underwriting before issuing loans because there is no risk, as loans (i.e. profits) are federally guaranteed.

      This is exactly the same thing that blew up the housing market-- issuing money to anyone with a pulse, regardless of creditworthiness; federal guarantees of all loans made; (and later, the unlimited inter-bank trading of obscure financial products would collapse the system).

      Yes, some borrowers couldn't pay their loans and that sucks. But maybe the loans should've never been made in the first place.

      We've seen it in housing and now we're seeing it in higher ed. Easy credit blew up prices astronomically until the bubble popped.

      Oh but I guess the bankers were totally innocent in the financial crash and it was all Joe Six-Pack, the borrower's fault.

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  6. Which leads to the disturbing and contempuous-laden question: Why are they still going to law school at all?

    AGREED. Yet as the verse in one of the testaments says, "My people perish for lack of knowledge." Keep up the good work of telling the truth everyone!! We must counter the lies of the law school establishment and industrial complex at every opportunity.

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  7. Why on god's green earth would someone be in favor of making gambling debt nondischargable in bankruptcy? Only a complete F-ing lunatic would support that.

    Student loans should be fully dischargable after a few years (5-7). That would prevent blatant gaming of the system but would allow people the chance to move on from mistakes and into more socially desirable activities - which is the entire purpose of bankruptcy discharge after all.

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    1. To discourage people from gambling, of course.

      Student loans should never be discharged.

      Maybe that way people will be discouraged from taking out student loans in the future.

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    2. "Student loans should never be discharged. Maybe that way people will be discouraged from taking out student loans in the future."

      That doesn't seem to be working so far...

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    3. It doesn't? Law school applications are at a 30-year low.

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    4. That's true, but how much of that decline is attributable to student loans being non-dischargeable? How many student borrowers even consider that as a factor on the way in?

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  8. One compromise might be to allow partial bankruptcy and partial loan guarantees. Maybe 50/50. That way there isn't complete moral hazard on the part of either students or the schools.

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