Friday, September 28, 2007
Sam's post on the WSJ story last Monday on the gap between the supply and demand for law school graduates was chilling. The riskiness of students' investment in a law degree has spiked as the inevitable product of flat or declining demand for entry level legal services and rising law school tuition. Add this to your stiff drink and stir: Student loans are generally nondischargeable in bankruptcy. The Bankruptcy Code makes student loan debt unforgivable along with liability for filing a false tax return, "willful and malicious" tort injury, and "embezzlement or larceny." In contrast, entrepreneurial debt is generally dischargeable. So, if a twenty year old person borrows $100,000 to start a mobile dog grooming business and it flops, she can file for bankruptcy, get a discharge, and start again. The same person who borrows money to go to law school flies without the social safety net. True, educational debt can be discharged upon a showing of "undue hardship." But so far, the cases are fairly clear that failing to get a law job that pays enough to break even on the cost of law school is not grounds for an undue hardship exception.