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Too Much Law School Debt to be a Lawyer?

Okay, so I’m not the first to get to this. Or the second. In fact, it kind of feels like everyone I know or read on the internet has commented on the NYT piece about the guy who was denied admission to the New York bar because he had too much debt. But it’s very appropriate for MSS’s readers, and I have my own reasons for following this story with some interest, so here goes.

The apparent facts, such as they are:

Robert Bowman apparently didn’t have much money. He thus had to work and borrow for his education, from community college to Hastings Law School, accruing some $230,000 in student loan debt along the way. While this might sound like a large sum, it isn’t unimaginable when tuition alone for graduate schools is creeping towards $40,000 a year.

He failed the New York bar three times before ultimately passing in February of 2008. This also sound egregious, but it’s more common than you’d think. After having passed one would expect, Mr. Bowman would on his way to paying down these loans, but he was denied admission to the bar when a committee rejected his moral character and fitness application, because Mr. Bowman “…has not made any substantial payments on the loans.”

Apparently, Mr. Bowman didn’t make a single payment on his student loans since their origination. Sallie Mae subsequently sold his debt to a collector, who added on 25%. It was then sold to another collector who added an additional 25%. With penalties, Mr. Bowman now apparently owes some $430,000. If that’s true, it sucks terribly.

If it matters, Mr. Bowman apparently has a number of serious injuries. The NYT piece reports that he spent six years in rehabilitation after being run over by an all-terrain vehicle. Much later, he was run over by a Jet-Ski which broke his leg in four places. (Mr. Bowman, if you’re reading, it’s time to stay away from recreational vehicles.)

Also, if it matters, there are some large gaps in his educational timeline. Some of his loans are more than 20 years old. He graduated from SUNY Albany in 1995 and UC Hastings in 2004, yet just recently passed the bar. Even his very serious injuries might not explain all of these gaps, though again, this might not matter in one’s evaluation of his circumstance.

The coverage, such as it is:

I feel as if everyone has heard about this story and people’s opinions strike me as a bit strange. My pal, and (more significantly) former University of Chicago Law School Dean of Admission, Anna Ivey, briefly questioned the lender’s wisdom in extending Mr. Bowman all of these loans. Lawyer blog Above The Law was critical of the committee’s decision to reject Mr. Bowman because of his debt. Among the hundreds of comments on ATL’s story, opinions ranged from outrage at the committee’s rejection to the conviction that Mr. Bowman was a deadbeat who never intended to pay any of his loans back.

It seems as if everyone has an opinion about this matter, which is itself more disturbing than Mr. Bowman’s story. For my part, I feel strongly that the NYT story just doesn’t give us a sufficient foundation to render these sorts of judgments about the case.

Here’s what I think we can conclude from the NYT’s piece:

1. Mr. Bowman has had a tough road, and that sucks.

2. It took him a long time to get through school.

3. Whatever forces caused his loans to spiral from $230,000 to $430,000 in four years are ungodly, and should be struck down.

4. Even if the ethics committee passed him, Mr. Bowman would be most unlikely to find employment with a major firm paying him anything like $160,000 a year. In the current economy, he’d be lucky to find employment at all. (More on that in a moment.)

Now, is he a deadbeat who never intended to pay his loans? The NYT piece doesn’t begin to justify any conclusion on that question. One is tempted to believe that he could have made at least some progress during all of these years. Nevertheless, between his long educational road and his injuries, he wasn’t going to pay much of the principle during this period.

Was the bar justified in rejecting him? The NYT piece suggests that the loans were at least a factor in their rejection, but we can’t know if there were additional reasons, so we can’t conclude much about this, either.

Ex hypothesi discussion:

Whether Mr. Bowman can justify not having made any payments is an open question, but for the sake of argument, I’m going to assume that he can’t justify his lack of payment and that he should have paid more than he did. Whether his failure to pay hitherto indicates that he would never have made any payments is another question entirely.

It’s obviously speculative, but I think that if he were able to find decently compensated employment as a lawyer, it’s likely that Mr. Bowman would have paid back his loans (whether he wanted to or not). Student loan debt is generally not dischargeable in bankruptcy and thus the debt would follow him. Not paying would thus decimate his credit, making it far more difficult to acquire the furniture of an adult life (i.e. houses, cars, startup capital for any business venture).

Furthermore, I don’t think that someone can maintain a legal practice while having defaulted on substantial loans (though I’ll stand corrected if someone can show otherwise). Either his wages would get garnished or he’d have to somehow live outside the credit system. Moreover, the bar could take action against him for not paying these loans.

A caveat. Through viewing the supporting documentation for the NYT article, I did learn that Mr. Bowman had notified the bar that he expected to accept employment as counsel for a shipping company in Singapore. This might entail relocating outside the US and thus it’s conceivable that he could move beyond the reach of his lenders. But the bar could sanction or revoke his license if he didn’t pay his loans, and this would be a very strong deterrent against defaulting. There’s reason to believe that Mr. Bowman does need bar certification for whatever legal work he intends, else he would not likely have gone through the unpleasantries of taking the New York bar four times.

Some might claim in rejecting Mr. Bowman’s application, the bar took precisely the action I described above. But if their rationale in denying him admission to the bar was that he hadn’t paid his loans sufficiently, their reasoning is profoundly strange. By denying him the chance to pursue legal practice, they’ve absolutely assured that he will default on his loans. Given the loans’ ridiculous interest rates and penalties, their rate of growth so far outstrips his ability to pay that he would be irrational to try to pay them. Unless he has some talent that has thus far remained unmentioned, he’s unlikely to ever find work outside of law that would allow him to service his debt.

What the ethics committee should have done, in my opinion, (assuming the debt was the only problem) is admit him provisionally and make it clear that they’d rescind him admission if he didn’t make substantial progress on his loans. Instead, they’ve left him with some rather unpleasant options. And in our world, people with unpleasant options tend to unpleasant things. (See below).

Further Grumblings:

With regard to the issue of whether the lenders should have extended Mr. Bowman this level of credit, I believe that even our creditors are drunk on the increasingly suspect platitude that education is always a good financial investment. You should know that lenders are generally more than willing to lend students money for their education because students can never absolve themselves of this debt. Anna Ivey suggests that lenders should be more scrutinizing in their case by case assessments of whether educational loans are likely to be paid off. Their current strategy seems to be simply charging unrealistically high interest rates, and rest in the satisfaction that the students will either find a way to pay off loans or die in debt.

Here’s a question, though… If we are bailing out the thousands of homeowners who apparently didn’t read or understand the terms of their incredibly risky, variable-rate mortgages, should we then bail out the students who’ve accrued more debt than they can reasonably pay off? I’m not suggesting we should bail out either group, but really, Is the former more innocent than the latter?

On my view, the guy who didn’t realize that it was a bad idea to get a negative amortized, adjustable-rate mortgage for 105% of the purchase price of his house seems more culpable that the student drunk on false dogma that education is always a good investment. The former is just a gambler who didn’t leave any room for market fluctuations; the latter is the vestige of an American Dream that left without telling us it had gone.

Moreover, the former can just declare bankruptcy, give up the house, and walk away from his debt. The latter can’t simply declare bankruptcy, give back his degree and be be free of debt. If, by the way, that were magically made possible tonight, tomorrow morning you’d see thousands of degrees stacked in front of every university in the US.

Back to Bowman, here are my predictions:

Mr. Bowman will sue someone, for something.

That lawsuit will never reach a courtroom because…

Mr. Bowman will settle for some undisclosed sum and as a consequence…

His debt will be substantially reduced, and…

Mr. Bowman will be admitted to the New York bar, at least provisionally, and someone is going to suffer for his rejection. But…

Even after being admitted to the bar, Mr. Bowman will be unable to find a high-paying job (at least for the foreseeable future). And even if he does…

Sadly, I expect Mr. Bowman will not enjoy legal practice enough to feel that his long journey was, in his own, final estimation, worth the suffering he’s endured (even if some of it was self-inflicted). Ultimately…

His regret is likely to be more inescapable than his debt.

Here’s what we got in the end:

A would-be lawyer is very likely to become a litigant.
The lenders will probably never be paid in full.
Years have been wasted, and more waste is coming.
Everyone involved will feel that they lost far more than they ever got from this.

Well played by all. Really.

The takeaway: Seriously monitor your debt. You’re literally mortgaging your freedom. Make sure you’re okay with the terms.

Article by Trent Teti of Blueprint LSAT Preparation.