Bankruptcy may not provide relief for law school graduates
For many decades, students who sought a law school degree and the significant debt that it entailed could take comfort in the knowledge that, after graduation, they would be able to secure a job with a paycheck near or above six figures. With the onset of the economic recession, however, all that changed.
In recent years, law school tuition has steadily increased, while the legal job market has plummeted. This has left law school graduates in Atlanta and throughout the country in deep debt and with very few, if any, prospects for employment or a salary with which to pay off their loans. As a result, many law grads have sought bankruptcy protection as a way to relieve some of the financial pressure. But because student loan debt is generally not dischargeable in bankruptcy, it has not been a significant source of relief for cash-strapped graduates.
Currently, law students borrow an average of $70,000 for public law schools and $106,000 for private schools. The average law school debt increased by a staggering 50 percent from 2001 to 2010, and will likely only continue to grow.
At the same time, the legal job market has steadily tumbled. One legal job tracker estimates that major law firms alone have laid off nearly 6,000 attorneys since 2008. And the law grads who are able to find jobs are earning less than in previous years, leaving them unable to make their sky-high student loan payments.
While a Chapter 7 or Chapter 13 bankruptcy may provide relief by discharging credit card and other personal debt, it will not discharge student loans. Clearly, some reform is needed, either in bankruptcy, student loans or legal education, to ensure that law school students do not end up in this dismal predicament after graduation.
Source: Reuters, “Law grads to go court for bankruptcy protection,” Leigh Jones and Moira Herbst, Feb. 3, 2012