Friday, April 1, 2016

Apparently Not an April Fool's Joke

Reported by ZeroHedge, from a WSJ article apparently behind the pay wall:


In an opinion filed Thursday, Judge Carla Craig of the U.S. Bankruptcy Court in Brooklyn, N.Y., said bar-exam loan debt is “a product of an arm’s-length agreement on commercial terms” and doesn’t fall into the category of student loans that stick with a borrower who files for bankruptcy.

The decision, which is the most thorough recent ruling on the matter, contradicts the widely accepted notion that student loan-related debt can be canceled in bankruptcy only under rare cases of extreme financial hardship.

In her 20-page ruling, Judge Craig said bar-study loans were akin to commercial or consumer loans and weren’t an “educational benefit,” like a scholarship or stipend, and thus could be erased in a bankruptcy case.

The U.S. Supreme Court recently declined to hear a case that could have made it easier to get rid of student loan debt. The White House, however, said last year that it would examine whether it should be easier for student loans to be canceled by bankruptcy, opening the door for student debt made by private lenders to be treated on par with credit-card debt and mortgages.

“We’re starting to chip away at the absolute immunity of student loans from bankruptcy,” said Austin Smith, Ms. Campbell’s lawyer.

A Citibank lawyer declined to comment on the ruling or to say whether the bank plans to appeal.


An interesting development for interesting times, to say the least.  While I am a general fan of ZeroHedge and use their data and arguments at times, they are also well-known for their caveat-emptor view of the world. Read the comments at your own risk, although there is some interesting side discussion about wage pressure on STEM fields and H-1B Visas and other items if you work your way through.

More importantly, this is an initial shift away from "everything is a school educational purpose so it's non-dischargeable so pay your debts deadbeat slacker people born after 1970" rhetoric that we tend to see.  The TJSL's of the world may be able to escape allegations of fraud, but even they can't escape market forces, and this is just one small additional piece of evidence to that fact.

While ZeroHedge doesn't have much time for individual plights, they do attack the systemic issues head-on, especially where a Canadian educator "comes clean":

I teach mostly bored youth who find themselves doing something they neither value nor desire—and, in some cases, are simply not equipped for—in order to achieve an outcome they are repeatedly warned is essential to their survival. What a dreadful trap...[b]ut don’t worry—you won’t go bust because of this failure, not in the modern university. So long as your class is popular and fun, you’ll be favoured by the administration and probably receive a teaching award. This, even though your students will leave your class in worse condition than they entered it, because you will have pandered to their basest inclinations while leaving their real intellectual and moral needs unmet.

There is no clearer example of administrators’ contempt for faculty. But there is also no clearer example of their contempt for students.

"A system that piles debt on students in exchange for a marginal or even zero-return on their investment is morally and financially bankrupt," concludes ZeroHedge.  Well said, given the skyrocketing inflation in tuition, of which law schools are major offenders.  We of the scamblog camp have often warned about cynicism on the part of law school ScamDeans and LawProfs, and their view of students as so much student-loan-conduit cattle.  Sadly, the attitude has become infectious.




http://www.zerohedge.com/news/2016-03-31/higher-education-morally-financially-bankrupt


As discussed previously, some law schools are beginning to face facts, albeit slowly.  Let's see where it all goes. 

23 comments:

  1. That's nice, but a bar exam loan is chump change compared to overall student debt.

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    1. Amen, Nando, this is a sideshow to the big show.

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    2. All this will do is that it will guarantee a tuition hike to cover the cost of bar prep costs. "So, no more commercial loans for bar prep because the sophisticated consumers are defaulting? No, problem...at the TJSL's of the free world we provide this service for free"...and, wham! your tuition just jumped from 170K to 200K for three years.

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  2. Although most WSJ stuff is protected by a paywall, you can access this article free of charge - just do a Google search. As Nando already mentioned, $15K is chump change - especially when (like the idiot woman in the article), your are already $300K in debt for a worthless JD degree from a trash heap law school like Pace. Still, it's nice to see Citibank take a hit here. The student loan system - which hands out billions of dollars in loans without any risk analysis - is completely insane. The law schools and the banks need to be on the hook for the thousands of "bad outcomes" that occur every year. Until that happens, the scam will go on.

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  3. Somewhat-OT: I remember a while back, here on this blog, in the comments section of some post or another, someone warned about too many people trying to go into coding to escape a bad job market (much like how people flocked to law schools in the first place), and how that might have consequences. Well, now other sources are ringing the alarm bells on that one; look at what just appeared in my inbox this morning: https://www.linkedin.com/pulse/learning-code-yields-diminishing-returns-douglas-rushkoff
    Too many people trying to get in? People being replaced by robots? Cutting loose living human employees whenever possible? Sounds just like the field of law, doesn't it?

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    1. I was a STEM major but every time the systemic Millennial wage failure comes up you always see people, 95% of whom don't have STEM degrees themselves, mock Millennials for not having STEM degrees and citing that as the reason for low wages and horrible employment outcomes.

      The reality is the principles of economics, mainly supply, always hold true in any type of free market. The government destroyed the supply curve for education, and also really for housing. This was mostly financial fraud on the public, who are too dumb to understand that it's being done.

      Medicine is one of the last remaining good fields because entry is restricted. But there is also restricted supply of elite lawyers, bankers and quite a few other fields. Physicians just happen to be probably the only field with a restricted and merit based supply equation, likely because the elites don't actually want to do the work anyway.

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    2. Captain Hruska Carswell, Continuance KingApril 3, 2016 at 2:28 PM

      I am an elite high faluten lawyer. I handle retail thefts for three bills. You steal a pair of panties, I get you court diversion for three bills! As soon as the Tesla "store" opens up tomorrow, I going to put my 1K deposit on that overhyped Model 3.

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    3. @7:36,

      I was also a STEM major and ended up getting a good job...due to connections I developed while in college and where my major subject was irrelevant.

      Really, the issue there is, as you said, due to supply and demand. What wage premium STEM commands (and it depends heavily on major) is due to the fact that not everyone does it. If we allow more H-1B visaholders in and get more people to graduate with these degrees, the end result is that STEM workers will lose that wage premium.

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  4. You said: "The TJSL's of the world may be able to escape allegations of fraud, but even they can't escape market forces, and this is just one small additional piece of evidence to that fact."
    Thank you for putting into your own words what was already on my mind, ever since the TJSL verdict: Even if the law school toilets can depend on the justice system itself to bail them out, even they must still yield to market forces.

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    1. "Market forces"...lol. How quaint. Give me a single market that's not rigged, starting with the FED making direct stock purchases.

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    2. I think what I meant to say was that even if some crooked judges and stupid juries were to bail out the law schools in these lawsuits, they still need to deal with that annoying yet significant problem of the shrinking pool of foolish applicants (and the loan money which they bring in).

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  5. I only post here to say I posted under the thinking like a lawyer thread, disagreeing with MA's position and he refused to publish my post. This is the second time in maybe two years I had a post rejected. Both times MA was the op.He is not worthy of being a contributor here. People who are unable to recognize there are differing opinions are children in mind if not in body.

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    1. Sorry pal. I'm not the one who's been rejecting your comments.

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    2. I rejected it, Professor Child-in-Mind. It was an abusive and taunting post with a highly familiar tone.

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    3. Dude, this entire blog is centered on the law, of which you know very little. Lawyers are always required to make their case using rules, evidence, and reasoning. Simply whining that their opinion is different and must be considered isn't nearly enough.

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    4. That was not the main point of my argument. I don't care if the lawyer's opinion is different.

      My main issue is that many of the lawyers I deal with are unwilling or unable to consider the consequences of their advice, which leads to unnecessary work on the operations side of projects.

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    5. Sad dybbuk, you admit to quashing dissenting opinion and yet blast the professors website, or that guy at UC for refusing to allow comments or at least dissenting comments. Is that not hypocrisy?

      The opinion I posted was not taunting, it was an opinion that the thinking like a lawyer post is insulting to so many practitioners who give good, commonsense advice to their clients, and personally I believe thinking like a lawyer is a valuable skill. It helps protect from being abused by the oligarchy we all live in. Whether it's worth the cost is a totally different matter.

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    6. "Is that not hypocrisy?"

      No. Having not seen the original post, I'm unable to comment, but that we criticize other sites for their quashing of reasoned opposition opinion in now way bars us from having minimum standards of decorum. Contrary to your accusations, there are numerous comments on that post that disagree in various ways with the author and that disagree with each other.

      As a substantive issue, you call the original post "insulting." Why? As someone who ostensibly values "thinking like a lawyer," do you not see the value in dispassionate skepticism? Surely, you understand the goal in debating precise definitions of key terms. And if you see "good, commonsense advice" as synonymous with "thinking like a lawyer," did you really read and think through the post "like a lawyer?"

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    7. I do not recall ever blasting "the guy at UC" for refusing to allow anonymous comments on his demented blog. Rather, I think "the guy at UC" is blastworthy on other grounds.

      http://www.readmorewritemorethinkmorebemore.com/2014/09/archive-of-meltdown.html

      See e.g. https://sites.google.com/site/septemberstatement/

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  6. Captain Hruska Carswell, Continuance KingApril 2, 2016 at 8:31 AM

    When one raises these issues on the law school Prawf's Faculty Lounge Blog, other posters accuse one of being "unprofessional," "a troll," or being "abusive." They have stated their desire to limit or block posters. Very Trumpish.

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    1. But I think the worst law school blighter is a confirmed Berniebot.

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    2. It's true but at least there is some recognition there that the system is broken for he reasons everyone has discussed here -- lack of transparency, professors who don't care about or have experience with practice, not enough emphasis on getting graduates jobs, etc.

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  7. I agree that it does seem like there is at least some acknowledgement of the issue there. But no much has really changed. Tuition is still high and your point about legal practice is not reflected by reality -- people who teach and run law schools still don't have any meaningful background experience with the real world.

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