Student loan debt–it’s one of the most pervasive concerns for young adults today. Approximately 44 million Americans have student loan debt–those Americans in total owe about $1.3 trillion. The average graduate of the Class of 2016 will hold $37,172 in student debt by the time they graduate. But how much do students actually know about the debt they’re taking on? A new survey conducted by LendEdu, a New Jersey-based company that calls itself the “Kayak of student lending” shows that they may not know that much.

One of the biggest revelations from LendEdu, which surveyed current college students, is that about half of college students surveyed think their loans will qualify for federal forgiveness after graduation–and most of them are probably wrong. In truth, there are very few ways to get your loans completely forgiven. One way is to go into public service work for a minimum of 10 years, but a relatively small percentage of the population follows that path. A few other (rare) ways that students manage to qualify for student loan forgiveness is by accepting certain teaching programs that place teachers in underserved areas, or if the university you attended shuts down while you’re a student or within 120 days after you graduate. For the record, death also qualifies someone for student loan forgiveness…but it’s probably safe to say that most students aren’t including that as a viable option when it comes to not paying back student loans.

Other questions on the survey indicated that the respondents don’t have a great handle on a few different aspects of student loans. According to the survey: “80 percent of college students could not identify the current interest rates on undergraduate federal subsidized and unsubsidized student loans.” Similarly, “79 percent of college students could not identify the current repayment term of a federal student loan” and “when asked, 64 percent of college students incorrectly believe that it is possible to refinance student loan debt with the federal government.”

This of course, isn’t to say that these are facts that all borrowers of student loans should have off the top of their heads. Student loans–from applying to paying back the debt–are complicated. But at the same time, it’s important to teach and encourage realistic expectations as student loan debt continues to grow.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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On Wednesday, Congress approved a bill to rescue Puerto Rico’s finances, only two days before the U.S. territory’s deadline on a $2 billion payment. But Governor Alejandro Garcia Padilla declared that the island would still not be able to pay bondholders.

“On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island’s senior credits protected by a constitutional lien on revenues,” he wrote on CNBC’s website.

Puerto Rico is in deep financial trouble; as Law Street previously reported, the island is $72 billion in debt, and is due to pay a big chunk of it this week. It has already defaulted on previous payments, but the payment due on Friday includes about $780 million of General Obligation bonds, which are the most important and supposed to be paid off first.

Since the island is not expected to make that deadline, this would be its first default of GO bonds, which it is bound to pay according to its constitution. The White House has expressed warnings that unless the U.S. steps in and helps, the island could face a possible humanitarian crisis and complete financial chaos. Since Puerto Rico is not a U.S. state but a territory, it can’t file for bankruptcy, which would allow it to restructure their debt.

Last Minute Bill

The bill that was voted through, called the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), will provide protection from any creditor litigations that could be brought to the Puerto Rican government. It will also put together a control board that will supervise restructuring of debts and finances. Both Republicans and Democrats unanimously supported it.

“If we don’t act before the island misses a critical debt payment deadline this Friday, matters will only get worse — for Puerto Rico and for taxpayers,” said Senate Majority Leader Mitch McConnell.

And President Obama said “This bill is not perfect, but it is a critical first step toward economic recovery and restored hope for millions of Americans who call Puerto Rico home.”

Puerto Rico’s Governor Padilla has mixed feelings about PROMESA, and wrote in a commentary on CNBC:

PROMESA is a mixed bag. On the one hand, it provides the tools needed to protect the people of Puerto Rico from disorderly actions taken by the creditors. The immediate stay granted by the bill on all litigation is of the utmost importance in this moment. Most importantly, the authority to adjust our debt stock provides the legal tools to complete a broad restructuring and route Puerto Rico’s revitalization.

On the other hand, PROMESA has its downsides. It creates an oversight board that unnecessarily undercuts the democratic institution of the Commonwealth of Puerto Rico. But facing the upsides and downsides of the bill, it gives Puerto Rico no true choice at this point in time.

The bill will provide some hope for the people of Puerto Rico. Thousands have already fled their homes on the island, while hospitals can’t treat patients without advance cash payments. Obama has promised to sign the new bill before July 1.

Emma Von Zeipel

Emma Von Zeipel is a staff writer at Law Street Media. She is originally from one of the islands of Stockholm, Sweden. After working for Democratic Voice of Burma in Thailand, she ended up in New York City. She has a BA in journalism from Stockholm University and is passionate about human rights, good books, horses, and European chocolate. Contact Emma at EVonZeipel@LawStreetMedia.com.

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Puerto Rico’s Government Development Bank defaulted on $422 million in debt on Monday, a small but important portion of the island’s $72 billion debt. This isn’t the first time Puerto Rico has failed to pay its debt; the country has been in dire financial trouble for a long time and its governor announced last June that the island’s debts were not payable. But Monday’s default marks the first time that Puerto Rico’s Government Development Bank will not be able to make a payment, a signal that the crisis in Puerto Rico is worsening by the day.

As the island continues to default, Peurto Rico faces increasing economic turmoil and may eventually fail to pay for the debt on its general obligation bonds, which are actually guaranteed by its constitution. The government in Puerto Rico has already taken harsh measures to cut spending and make some payments on outstanding debt. But as it reduces public services it threatens to weaken its economy even further.

Read on to learn how we got here and what’s in store for Puerto Rico’s future.

What Happened on Monday?

The entirety of Puerto Rico’s $72 billion debt is not due all at once, and on Monday, it only failed to pay most of the $422 million that it owed. Puerto Rico is a unique case in that there is not a single entity responsible for issuing all of its bonds, but the Government Development Bank is the commonwealth’s largest bond issuer–meaning its default is particularly significant.

The GDB did manage to make an agreement with credit unions to push back $33 million of its debt for another year, though much of the outstanding debt remains. In early April, Peurto Rican lawmakers passed a bill issuing a moratorium on debt payments, effectively allowing the government to stop paying its debts until 2017, though bondholders quickly took the issue to the courts. The island will continue to negotiate with its bondholders to the extent that it can, but because Puerto Rico cannot declare bankruptcy, there is no established process for doing so.

While the commonwealth has already defaulted on some of its debt, it has, so far,  managed to stay current on its general obligation debt–which it is constitutionally required to pay (there are several different types of bonds issued by Puerto Rico, but the general obligation bonds are considered to be particularly important). As the government continues to default, staying current on its general obligation payments will become increasingly less likely. Notably, the government will need to pay more than $800 billion in general obligation debt on June 1, which many consider the deadline to work out a resolution before the crisis peaks.

How did we get here?

Economic woes in Puerto Rico largely began after a 1996 law removed tax incentives for companies located in Puerto Rico. That law began a 10-year phase out of section 936 of the tax code, which had previously given significant tax benefits to companies with subsidiaries in Puerto Rico. Since then, the island has been in the throws of economic contraction and large numbers of Puerto Ricans have fled to the U.S. mainland.

The island has been in a recession for nearly 10 years, which has increased the local government’s cost of borrowing money. As a result, Puerto Rico has had to raise taxes and cut back on services to pay its bondholders. In 2014, Puerto Rico managed to strike a deal with several hedge funds to provide much-needed funding to keep the commonwealth solvent. But it was forced to take on short-term debt at a high interest rate, making its current situation even worse.

Underneath its current fiscal concerns, Puerto Rico has been dealing with ongoing economic contraction. A report commissioned by the government outlines many of the current challenges–from laws like the Jones Act, which inflates the cost of goods on the island by requiring all shipments to be made with U.S. boats; the federal minimum wage, which particularly high relative to the average income on the island and can prevent companies from hiring; and mismatching welfare needs relative to the mainland United States–that limit the island’s economic prospects. These problems have also caused many to leave the island altogether.

This chart from the Pew Research Center illustrates how the rate of population decline in Puerto Rico has been increasing in recent years:

Hope that Puerto Rico will one day be able to pay off its more than $70 billion debt is leaving the island as quickly as its residents. As the commonwealth’s population dwindles so too does its tax base, which is a crucial factor in the local government’s ability to increase its revenue and pay of future debt.

What about Wall Street?

Some argue that hedge funds exploited the situation in Puerto Rico by purchasing large amounts of government debt at very low prices. Economic troubles pushed interest rates on Puerto Rican bonds to over eight percent, which combined with significant tax advantages, made the island’s debt particularly appealing. Puerto Rico is able to issue triple tax-exempt bonds because Congress made the government and its public corporations’ debt exempt from federal, state, and local taxes.

That, combined with the constitutional guarantee–the general obligation bonds take precedence over all other public expenses–made Puerto Rican debt look particularly attractive to large investors. The New York Times summed this point up in an in-depth look at the situation last December:

There were plenty of reasons for the hedge funds to like the deal: They would be earning, in effect, a 20 percent return. And under the island’s Constitution, Puerto Rico was required to pay back its debt before almost any other bills, whether for retirees’ health care or teachers’ salaries.

Critics note that hedge funds have been taking advantage of attractive bonds issued by Puerto Rico and are now turning to the courts to ensure that they are paid the full price for bonds that they bought at a discount.

Is there a solution?

In light of Puerto Rico’s dire situation, the commonwealth’s fate lies almost exclusively in the hands of Congress. In light of its ongoing economic contraction and population decline, Puerto Rico will almost certainly be unable to stay current on its debt. Congress is now tasked with deciding if and how it will help the Puerto Rican government deal with the crisis.

The government in Puerto Rico is currently asking Congress to allow it to restructure its debts using the formal Chapter 9 bankruptcy process or something similar. Currently, Puerto Rico is unable to go bankrupt and has very little ability to negotiate with its creditors. Going bankrupt would allow the commonwealth to negotiate a plan to pay all or part of its debt over on a new time frame with different interest rates. U.S. Treasury Secretary Jack Lew argues that if Congress doesn’t act now and allow Puerto Rico to restructure its debts a bailout may actually be needed in the future.

Republicans in Congress have proposed a slightly more hands-on approach–creating a panel to manage and restructure the island’s debt obligations. The fiscal control board would allow the island to restructure its debts but would have a guiding authority to handle the politically difficult decisions involved with cutting back services and negotiating with bondholders. But that plan has faced opposition on both sides of the aisle.

Many conservatives have been wary of granting Puerto Rico the ability to restructure its debts, arguing that doing so could create a dangerous precedent and may amount to a bailout. It would not, in fact, be a bailout–debt restructuring would not involve any government funding–restructuring would merely allow the Puerto Rican government to renegotiate with bondholders without any taxpayer funds. Democrats argue that creating a control board would put too much control in the hands of an undemocratic entity. Puerto Ricans are also particularly wary of giving up control over their finances to a board of people installed by Congress.

While disagreements over how to deal with Puerto Rico’s imminent default persist, it’s important to note that such measures would only go so far in solving the island’s fiscal crisis. Even if it manages to renegotiate its debts, the commonwealth will need to rebuild its economy in the face of consistent population loss. As further cuts to public services are necessary to meet its debt obligations, the island will have an increasingly difficult time bringing money in to make future payments.

Kevin Rizzo

Kevin Rizzo is the Crime in America Editor at Law Street Media. An Ohio Native, the George Washington University graduate is a founding member of the company. Contact Kevin at krizzo@LawStreetMedia.com.

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If you are tempted to take out a payday loan you might want to take Sarah Silverman’s advice and try literally anything else. The trouble is, there are rarely other options and here in the United States there are 40 million Americans who are “unbanked,” without access to the formal financial system. Shockingly, these Americans spend the same amount just to use their own money as they do to purchasing food–10 percent of their income.

Payday loans may be an evil but unless and until they are replaced with a better alternative they continue to be a necessary one. Eliminating payday lenders would prevent borrowers from taking on that particular pernicious type of debt but does not solve the underlying concern that many unbanked Americans do not have access to credit.

One of the proposed solutions to provide access to banking services for the unbanked is to use the United States Postal Service. Progressive politicians are advocating this method as an efficient way to reach low-income citizens in their neighborhoods. But some are uncomfortable with a government agency, one which is facing some financial difficulties of its own, taking on a problem that should be dealt with by market forces.

So is the existence of the “unbanked” really a problem? If so should we be using the post office to combat it?

A Solution for the Unbanked?

For a primer on the issue of how many Americans are currently unbanked and would benefit from an alternative to payday loans, check out this TedTalk by Mehrsa Baradaran.

As Baradaran explains, postal banks are actually something we already had and used to great success. From 1910 to 1966, the U.S. Postal Savings system provided a place for Americans to deposit funds in order to save money and have a way of paying their bills other than with cash. That is one of the chief problems facing the unbanked–the inability to have easy access to their own money and the high percentage of their money spent on just using their own funds. Paying a fee to access your own money or even just check your account balance is a significant financial burden and a service that the banked get access to for free.

With the advent of community banks, which offered a more attractive interest rate to depositors, the postal banking system seemed unnecessary and was eventually abolished in 1966. But the community banks–which were also proposed as a solution to the problem of the unbanked–removed themselves from low-income neighborhoods and contracted the number of people they provided services for. Nature abhors a vacuum and payday lenders went into that space, which is why people in low-income neighborhoods are often forced to rely on these types of lenders as substitutions for the banking services that the banked take for granted.

For the unbanked, there is simply not a banking location that they can go to. And one of the beauties of using the postal system for banking is that convenient locations already exist. Fifty-nine percent of post offices are in zip codes where there is either zero or only one bank. Other industrialized nations already have postal banking. In the U.K., the postal service does not actually provide financial services but allows third-party providers (like the Bank of Ireland) to conduct business there. France has actually converted its postal service into a financial institution.

The postal banking systems have been imperfect. In Japan, the postal banking system drew heavy criticism for its inefficiency. Yet 80 percent of Japanese citizens over the age of 15 had a postal bank account. China and India are also seeking ways to increase micro-lending and financial services to their nations’ poor through the use of postal banking services.

Potential Concerns

The concerns regarding postal banking fall into two main camps. First, there is the question of whether a postal banking system would help and whether the U.S. Postal Service could operate it efficiently and fairly. The second concern is less a practical question of ability and more an assessment of whether we want to use the postal service to promote a specific financial ideology.

The U.S. Postal Service seems to think it would be able to provide this service. The American Postal Workers’ Union makes the argument that postal workers are already in the very places that community banks have abandoned and they currently provide some financial services, like money orders. They would be able to provide small loans as well–like a payday lender but without extremely high interest rates.

The video below outlines the case made by the American Postal Workers’ Union for postal banks.

But the argument goes beyond the mere logistics of whether post offices can provide these services. The core concern is whether they should. Whether we want a government institution to be providing a service that is traditionally left to the private sector. After all, should the government really be involved in trying to undercut the payday lending industry based on a largely moral argument about “fairness”?

True Competition 

The private sector might argue that payday lending is actually fair. It provides a needed service–credit–at a rate that people are willing to pay. With so many of these financial institutions out there it is hard to argue that the industry is not competitive and given that these rates are still being accepted by many borrowers that must be what the credit is worth.

But that argument may misconstrue what true competition, one that will actually produce a fair price for something in a healthy market, consists of. Critics of payday lending would argue that true competition involves choices between meaningfully different options, not the illusion of choice between virtually identical competitors. A person living in an area where there are 10 payday lenders and no banks is not truly living in a competitive market. The individual lenders may vary their terms slightly but from the perspective of the borrower, they are still going to have to choose a payday lender. QuickCash versus KwikKash does not, at the end of the day, matter very much to the borrower or to the pernicious effects of the system.

The implementation of postal banking would provide meaningful choices to borrowers and create a true alternative to the payday lending industry. Then, when faced with that actual competition, they will be forced to either adapt or die. If a 400 percent interest rate really is a reasonable price to pay for the service they are offering then payday lending will survive the introduction of postal banking.

When you discuss postal banking there are two main ways that it can be structured–a postal bank that provides access to credit and one that does not. In the past, postal banks did not provide the type of micro-loans that would compete with payday loans. While a modern version of the postal bank could include small loans it doesn’t necessarily need to. Postal banks can provide other valuable services; most importantly post offices can serve as a place to save and access your money. If postal banking was re-instituted without lending, it would likely go a long way in solving the problem of access for the unbanked and underbanked.

Currently, people who live in a community where there is no bank have three main options to cash their paycheck. Payday loan providers that usually charge a 10 percent fee, check cashing services (some are part of larger retailers like Walmart) that typically charge a lower flat fee, and prepaid card accounts that allow you to deposit your money into the account but then charge a monthly fee for you to use the card. Those of us with bank accounts can get all of these services for free.

The Government’s Role

Postal banking would, of course, involve the government taking on a role that is now filled by the private sector. One fear is that this will stop the development of private sector alternatives to payday lending and stifle innovation in the provision of financial services. We may hate payday lending, but many feel that if it is going to be replaced that should be done by the private sector–through innovation in technology or some other form of financial institution. The government’s role should be contained to regulating industries, not replacing them.

But the postal bank did not, when it existed, kill other banks. In fact, the opposite happened. The rate of interest for the postal banks was capped at 2.5 percent to weaken their ability to compete with other banks. When community banks offered better rates, not surprisingly, depositors moved there–choosing a private sector institution that they felt better suited their needs. Postal banking also would not eliminate advances in technology and electronic banking. Those advances are driven by thinking of better ways to provide services to already banked people.  Applications that transfer money instantly between bank accounts for a minimal fee on your smartphone only benefit people who have smartphones and bank accounts. To the unbanked, these advances are meaningless–21st-century innovations in banking don’t assist people who are still stuck in the 20th. Creating a postal banking system would help the millions of unbanked Americans enter into the formal financial system, but it may not have much effect on companies seeking to further cater to those who are already included.

Conclusion

Postal banking may seem to some like a governmental overreach into an arena where the forces of the market should be in charge. Undercutting a private sector industry in favor of a government run charity-bank makes some people uncomfortable. Some may ask where we should draw the line between public good and social engineering. But postal banking already worked once in our nation’s history. And while it is not a complete solution to the problem of the unbanked and underbanked it could be used as part of that solution.

Resources

NerdWallet: Where To Cash A Check Without Paying Fees

Huffington Post, Postal Banking : An Idea Whose Time Has Come Again

The Washington Post, Should The Post Office Be A Bank?

Bloomberg QuickTake, Postal Banking

Slate.com, A Short History of Postal Banking

Goodreads, How The Other Half Banks

The Ultimate History Project, Postal Savings Banks

The Atlantic.com, Bernie Sanders’ Highly Sensible Plan To Turn Post Offices Into Banks

The American Interest, The Return of Postal Banking

Salon.com, Two Words For Hillary…Postal Banking

Mary Kate Leahy

Mary Kate Leahy (@marykate_leahy) has a J.D. from William and Mary and a Bachelor’s in Political Science from Manhattanville College. She is also a proud graduate of Woodlands Academy of the Sacred Heart. She enjoys spending her time with her kuvasz, Finn, and tackling a never-ending list of projects. Contact Mary Kate at staff@LawStreetMedia.com

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Now more than ever, families need to seriously weigh the financial pros and cons of universities. But there are some tools that can help–for example, the development of College Abacus, a website that makes it easier for students and their families to compare financial aid packages before applying to schools. College Abacus has been deemed the “Kayak” of college financial aid, but it’s always been controversial, and some schools have not allowed College Abacus to use their information. Schools such as Skidmore and Oberlin have lifted their original bans on the site, but others such as Harvard, Princeton, and California Institute of Technology Schools still block the site from using their information. While some of the concerns are warranted, schools are doing a disservice to their students by blocking the site.

When it comes down to it, college is an investment. While the profitable gains of the college experience remain immeasurable, the amount of debt students incur can easily be measured by families and graduates alike years after memories have faded. Since October 29, 2011 the Higher Education Act (HEA) has required colleges to provide a net price calculator on their websites. The price generated by these net price calculators gives an estimate of what families will pay for college minus grants and scholarships. The calculator bases its information off of similar data from students at that institution from the previous year. College Abacus helps students easily see these net prices together, and cuts down the time of entering the same information into multiple calculators on school websites.

Image courtesy of [SemperDoctus via Wikimedia]

Harvard, Princeton, and Cal Tech are not alone in their refusal to participate in College Abacus’s services. Schools have a right to worry about the site’s accuracy. The service sometimes takes similar questions from the different schools’ financial aid calculators and groups them together for comparison. At one point, College Abacus made a mistake when rephrasing a financial aid question for Hamilton College, which the co-founder of Abacus sorted out within 24 hours after the financial aid director of Hamilton reached out. The staff at Abacus welcomes concerns from financial aid officers, and relies on the schools for accuracy. But by opting out, schools block the site from accessing their net calculators.

Truly, students and their families are hurt when colleges and universities block Abacus. It has simply created a platform for families to compare the financial investment of college. Money may be the most objective differentiate between two schools for an individual family. The debate goes on for hours about the right environment, professors, dorms, location, etc between two schools, but comparing the potential net cost does not need to be an additional ordeal. In this new age of technology, universities should welcome tools creating more transparency for their future students.

Dorsey Hill

Dorsey is a member of Barnard College’s class of 2016 with a major in Urban Studies and concentration in Political Science. As a native of Chicago and resident of New York City, Dorsey loves to explore the multiple cultural facets of cities. She has a deep interest in social justice issue especially those relevant to urban environments. Contact Dorsey at Staff@LawStreetMedia.com.

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Traditionally, other than poorly-veiled shots at press events, political opponents had to wait until debates in order to discuss the important issues directly. But that seems to be changing–social media tools make it way easier for candidates to directly interact with each other. Case in point, Democratic frontrunner Hillary Clinton and Republican contender Jeb Bush directly engaged in an argument via Twitter this Monday about Clinton’s plan to make education more affordable.

Here are the tweets from Bush and Clinton, in sequential order:

Hillary started with a pretty basic tweet promoting her plan to take on student debt.

Cost won't be a barrier to an education. Debt won't hold you back. Read Hillary's plan: http://t.co/A4pWb3fOf4 pic.twitter.com/KVyr8SlSVn

— Hillary Clinton (@HillaryClinton) August 10, 2015

Then, Bush fired back, attacking Obama’s approach to college debt and suggesting that Hillary will be the same.

@HillaryClinton pic.twitter.com/m6LAHYCLok

— Jeb Bush (@JebBush) August 10, 2015

Then, Clinton got personal and brought up Bush’s less-than-stellar record on education affordability when he was the governor of Florida.

.@JebBush Fixed it for you. pic.twitter.com/d4q9EWpXCA

— Hillary Clinton (@HillaryClinton) August 10, 2015

Finally, Bush fired back with a “redesign” of Clinton’s much-mocked arrow logo, but moved the conversation from student debt to taxes.

.@HillaryClinton fixed your logo for you. pic.twitter.com/141nXHQe4Z

— Jeb Bush (@JebBush) August 11, 2015

The back-and-forth got pretty nasty relatively quickly. While there’s no guarantee that it was Clinton or Bush behind these tweets, and not members of their respective staffs, the fact that both official accounts were willing to play ball is pretty indicative of the important role that social media will have in this race. Currently, Clinton has roughly four million Twitter followers, Bush’s campaign clocks in at just over 250,000. Both are almost certainly looking to grow those followings, particularly as surprise GOP frontrunner Donald Trump approaches the four million followers mark himself.

So, why are our politicians suddenly getting into Twitter spats a la Nicki Minaj and Taylor Swift or Drake and Meek Mill? It’s pretty simple–it’s tantamount to free advertising. Although it’s estimated that one billion dollars will be spent on online campaigning in 2016, attracting followers and conversation via silly photoshop jabs is pretty cheap. Given how expensive it is to run a campaign, attracting free press–after all, we’re all writing about the Bush/Clinton Twitter spat now–is a smart idea.

Bush and Clintons’ Twitter back-and-forth also falls directly in line with the kind of animosity that these two candidates have developed. For example, when both candidates appeared at the Urban League Conference on July 31, Clinton spoke first and took the opportunity to slam Bush’s “Right to Rise” campaign slogan, stating:

I don’t think you can credibly say that everyone has a right to rise and then say you’re for phasing out Medicare, or repealing Obamacare. People can’t rise if they can’t afford health care. They can’t rise if the minimum wage is too low to live on. They can’t rise if their governor makes it harder for them to get a college education. And you can’t seriously talk about the right to rise and support laws that deny the right to vote.

Bush’s camp responded to Clinton’s comments by accusing her of playing politics–a time-old jab that roughly translates to “the other candidate said something mean.” 

Bush hasn’t missed his opportunity to push back, however. Last night, Bush purported that current problems in Iraq stem from the actions of the Obama administration–which Clinton served under as Secretary of State. Bush said Obama and Clinton were too eager to pull troops out of Iraq and stated:

So eager to be the history-makers, they failed to be the peacemakers. Rushing away from danger can be every bit as unwise as rushing into danger, and the costs have been grievous.

Given Clinton’s dominance in the Democratic polls, and Bush’s strong second place standing on the Republican side, it makes sense they’re starting to snipe at each other. Doing so over social media might add a new facet to those interactions, but as this promises to be an incredibly long campaign, we can expect to see shade thrown from all sorts of directions–in person and over social media alike.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Same Fight, Better Photoshop: Bush and Clinton Take to Twitter appeared first on Law Street.

The United States Postal Service has been in financial trouble for the better part of a decade. As a society, we rely on the postal service in our everyday lives. Although email and social media are today’s go-to communication methods, we still expect some things to show up at the door whether it be bills, college acceptance letters, or items ordered from Amazon. Many give an extra tip to the mailman or mailwoman during the holiday season in thanks to that integral service all year round. Perhaps we should no longer take that service for granted. The Postal Service is in hot water with an ongoing deficit. So what actions are being taken today to rectify the budget crisis and how could it affect the average American?

 The U.S. Postal Service

Here is a brief background on how the U.S. Postal Service (USPS) came to be the organization it is today. The government created the United States Post Office Department, headed by the Postmaster General, in 1872. It was elevated from its post as a cabinet department from 1872 to 1971. The Postal Reorganization Act of 1970, signed by President Richard Nixon, replaced the U.S. Post Office Department with the current USPS. The Act came as a response to the 1970 Postal Strike. On March 23, 1970, President Nixon called in the National Guard and armed forces to counteract the large wildcat strike. The strike called for higher wages, better benefits, and safer working conditions. For example, Congress had allocated a 41 percent raise for members of Congress, while Postal Department workers only received a 4 percent increase.

The 1970 Postal Reorganization Act redesigned the branch. The newly created USPS, as we know it today, became an independent body of the executive branch with a legal monopoly over mail service. The USPS was restructured to achieve financial independence through postage sales, mail products, and services. Taxpayer money is only used in providing mail services to the disabled and Americans overseas. Although the USPS is legally responsible for its own budget, it may borrow up to $3 billion a year from the U.S. Treasury and retain a debt ceiling of up to $15 billion. As an independent but federal organization, the USPS receives many perks including exemption from vehicle licensing requirements, sales tax, local property taxes, and even parking tickets. To ensure universal service and a six-day delivery service nationwide, the USPS is granted a monopoly over first class and standard mail delivery. Competition, such as UPS and FedEx, are not allowed access to mailboxes.

 What is Causing the Deficit?

USPS has accumulated $47 billion in operating losses since the 1971 reorganization. This is even more shocking when you learn that the USPS has generated more than $700 billion in revenue. From 2007-2010 alone, the “USPS lost $20 billion, and its debt increased from $2.1 billion to $12 billion.” It has only increased since then. The USPS lost $5 billion in the 2013 fiscal year and $5.5 billion in the 2014 fiscal year. The USPS reached its legal $15 billion deficit ceiling back in 2012.

The primary factor for this likely depends on who you ask because there are a few different pieces to this puzzle. One major reason: the USPS is legally bound by Congress to “prefund more than $5.5 billion annually for health benefits for future retirees,” since 2006. As of 2013, the USPS set aside about $44 billion for this specific allocation. Frankly, it’s something the USPS can’t afford. When the mandate was implemented in 2006, the USPS was financially strong. It was before the 2008 recession and explosion of other communication outlets. In 2012, it defaulted on this payment for this first time.

That brings us to our second reason for the default: lower volume. In 2006, the USPS delivered 97 billion pieces of first-class mail. In 2012, it delivered 68 billion pieces. The decline isn’t surprising with today’s innovative technologies that are only expanding. Everything seems to be going online from bills to keeping in touch. Other factors include competition from FedEx/UPS, ballooned operating costs, and the demands of the unionized workforce.

President’s Obama’s Proposed Solution

President Obama has a plan for the 2016 fiscal budget and the USPS that would potentially save $36 billion over the course of 11 years. The plan is similar to a bill introduced by Sen. Tom Carper (D-DE) and former Sen. Tom Coburn (R-OK), previously killed in Congress. For starters, Saturday delivery would be cut. This would be implemented when volumes drop to the predicted amount in late 2018. It would also replace door-to-door service with a centralized or curbside delivery service. This would perhaps ultimately be safer for mailmen and mailwomen. The plan offers the idea of “increasing revenue by providing postal management with more flexibility in creating new business opportunities, as well as boosting cooperation with state and local governments to offer services at post offices.”

The White House also addresses the mandated prefund healthcare benefits of retirees, deferring the 2015 and 2016 payments. The payments would ultimately be paid out under a 40-year amortization schedule beginning in 2017. This would bring in “$13 billion in relief to USPS through 2016.” The plan would reimburse USPS an estimated $1.5 billion in over-costs to the Office of Personal Management for federal retirement payments. It also calls for more future investments and faster technology.

Increased Rates

Lastly, the plan calls to make the emergency price increase of postage permanent. This, however, has been struck down multiple times. The price of mail increased by three cents in January 2014, the largest rate bump initiated in 11 years. The rate of inflation should have called for a 1.7 percent increase, but it set a 4.3 percent increase. The current stamp price is 49 cents. The price increase was granted to allow the USPS extra revenue and was set as a two-year term. When the USPS initially asked for the increase to be permanent, they were rejected by the Postal Regulatory Commission. They explained that the increase was meant to counteract losses from the recession, not to alleviate losses caused by the expanding electronic industry.

In a recent development, the U.S. Court of Appeals for the District of Colombia Circuit ruled on June 6, 2015 that the priced increase could not be permanent. Circuit Judge Patricia Ann Millet wrote the following:

The Commission sensibly concluded that the statutory exception allowing higher rates when needed to respond to extraordinary financial circumstances should only continue as long as those circumstances, in fact, remained extraordinary,” Circuit Judge Patricia Ann Millet wrote on behalf of the appeals court. “The Commission permissibly reasoned that just because some of the effects of exigent circumstances may continue for the foreseeable future, that does not mean that those circumstances remain ‘extraordinary’ or ‘exceptional’ for just as long.

This ruling does not favor this one aspect of the White House’s overall plan.

Other Possible Solutions

There are a plethora of ideas circulating for the USPS to generate extra money. One idea is the reincorporation of the Postal Savings System. It’s a basic savings account for those who don’t wish to use a private bank. Lower-income families that don’t currently use a bank and pay bloated prices for transactions like cashing checks could potentially benefit from this system. There are more than enough post offices around the country to make this convenient for customers. Another idea is for the USPS to catch up to its communication competitors and offer email/internet services. The USPS could offer an affordable rate compared to its potential competitors. Other ideas include “a notary service, selling fishing and hunting licenses, and ending restrictions on shipping wine and beer.”

The USPS could also remodel its system to more resemble postal services in Europe. Countries like Sweden, Germany, and Finland only allocate a certain percent of the market to their national postal services. For example, the Swedish service Posten only accounts for 12 percent of Sweden’s post offices. This allows it to streamline and focus on certain aspects of the market like digital mail products. Whether this is a viable option is up in the air, but could be an idea worth considering.

Conclusion

The financial issues of the U.S. Postal Service have massive effects on our country from the thousands of employed postal service workers to everyday citizens receiving and sending mail. An increase in stamp prices severely affects businesses that allocate a certain amount of their budgets to sending out materials. All in all, it is a national issue. With certain actions already in place, the USPS saw a $569 million revenue increase in the 2014 fiscal year. This by no means offsets the deficit, but it proves innovative ideas can make a difference. With any luck, revisions made to the 2016 fiscal budget will provide promising results.

Resources

CATO: Privatizing the U.S. Postal Service

Government Executive: As New Postal Leader Takes Charge, Obama Calls for Major USPS Reforms

Huffington Post: The Plight of the Postal Service

PBS: The Postal Service

Smithsonian: 197o Postal Strike

Time: How Healthcare Expenses Cost Us Saturday Postal Delivery

USPS: Despite Revenue Growth and Record Productivity, Postal Service Loses $5 Billion in 2013 Fiscal Year

USPS: U.S. Postal Service Reports Revenue Increase, $5.5 Billion Loss in Fiscal 2014

Washington Post: Postal Service Gets Approval for a Temporary Increase in Stamp Prices

Washington Post: USPS Cen’t Keep Rate Increase Forever, Court Rules

Editor’s note: A previous version of this article stated that the Post Office was created by the founding farmers in 1972; it was created in 1872.

Jessica McLaughlin

Jessica McLaughlin is a graduate of the University of Maryland with a degree in English Literature and Spanish. She works in the publishing industry and recently moved back to the DC area after living in NYC. Contact Jessica at staff@LawStreetMedia.com.

The post The USPS Deficit Crisis: What’s the Plan? appeared first on Law Street.

The pageantry and anticipation surrounding the Olympic Games has subsided recently. The mismanagement by certain host countries (Greece and Russia among others) has had a sobering effect on future host-candidates. In other words, countries are still down to party at your place, they just don’t welcome you coming over and ruining their expensive city.

And no city makes headlines for being unwelcoming quite like Boston. Last Thursday, America’s bid city held its first community meeting on the 2024 Olympics at Suffolk Law School. The organization No Boston Olympics–a grassroots coalition that has seemingly summoned the hospitality of Louise Day Hicks–was a vocal participant at the meeting. Essentially, No Boston Olympics feels the cost of hosting the 2024 Games would financially cripple the city, and everyone within the blast radius would foot the bill via taxes. The group makes a strong point: spending lots of money often sucks. But like other groups of contrarian fiscal hawks (see: Tea Party), they don’t see the entire picture.

The truth is, the success of the Olympic Games usually depends on who’s hosting. Greece, a country whose debt is becoming as famous as its Baklava, has not rebounded from hosting the 2004 Olympic Games.  Russia, which is having difficulty financing its own imperialistic urges, is now also struggling to pay off the 2014 Sochi Olympic Games.

On the flip side, the 2008 Summer Olympics turned a profit in Beijing. The 2012 Games in London, which were not cheap, could generate up to £40 billion in economic growth for England by 2020. Are those examples too foreign for you? The good ol’ US of A turned a profit after the ’96 games in Atlanta. As we did for the ’84 games in Los Angeles and then again for the Salt Lake City Winter Olympics in 2002.  Don’t we have faith that an Olympics in Boston would follow the lead of England or prior American Olympics rather than those games in Greece and Russia?

Here are a couple of reasons why Boston could be a good spot. The CEO of the 2002 Salt Lake games–Mitt Romney–lives in the area, and Boston is where his venture capital firm is headquartered. Not only is he local, but he also could have some free time on his hands! This is not a joke. Speaking of saviors for winter sports, do you know who else calls greater Boston home? Bob Kraft, the Patriots owner who privately financed his new stadium and turned a moribund afterthought into a four-time Super Bowl winning machine. He’s also been fingered as an adviser for the 2024 bid. Another big name is Red Sox owner John Henry, who was one of the few people who made millions during the 2008 recession and has already approved of Olympic use for Fenway Park.

This really isn’t a coincidence. There are many people in Boston who manage money well and who know the business of sports. It’s also densely populated, connected by a major subway system, and has vacant college housing during the summer. You get the point. Now let’s hear some counter-points courtesy of Boston.com’s coverage of the committee meeting.

1. “Members of Boston Homeless Solidarity Committee questioned why  . . . a cure for AIDS couldn’t get the resources and attention that an Olympic bid might.” (You can host the Olympics when you cure AIDS. Deal, fat cats?)
2. “At one point during Mandredi and Blauwet’s presentation, they showed a rendering of the proposed beach volleyball stadium on Boston Common. That idea drew hissing.” (Boston Common is for ice skating and for smoking pot in between Emerson classes. Not beach volleyball.  GAWT IT? If Boston wins the bid, don’t be surprised if there’s a spinoff protest for this particular issue. #NAWTOWAHCAWMIN)

Being frugal about local resources is understandable. People want the T (subway) fixed. People want better infrastructure. And people want these things completed quickly, without being too expensive. Well you know what could potentially make that happen? The Olympics. This isn’t that novel of an idea. If the International Olympic Committee and the United States are pushing for a smooth, seamless Olympics, you’ll probably get outside funding to fix some of your local problems. Romney got $3 million from the federal government specifically to help extend Salt Lake City’s light rail for its Olympics. In fact, for the last three American Olympics the federal government has spent $1.4 billion to improve the host cities’ transportation and infrastructure, a figure that will increase considering the government knows how inflation works. This money comes in addition to the millions that these cities receive from outside investors and through corporate sponsorship.

I realize many in Boston still suffer from a Big Dig hangover. That mega-engineering project spiraled out of control and the debt won’t be paid until 2038. But one bad investment–and its badness is debatable–shouldn’t stop the city from taking some financial risks in the future. The list of potential hosts is getting smaller, which means the IOC will soon be forced to scale down the costs involved in hosting the Olympics, which means the possibility of profit could be even greater. So while this may not be an obvious opportunity for Boston, maybe we should fully evaluate the idea[r] before calling in the militia. I mean, who doesn’t love a pahty, kid?

Andrew Blancato

The post Boston Olympics Backlash Filled With Cowardice and Stupidity appeared first on Law Street.

Millennials seem to be constantly in the news, and when it comes to money matters that trend holds true. With high unemployment and underemployment, unprecedented levels of student debt, and the burden of supporting an aging population, Millennials face a unique set of financial challenges. Recent studies indicate that Millennials think about money differently than older generations. Are Millennials actually less financially savvy, or are they just a product of the Great Recession? Here’s what you need to know about Millennials, their approach to personal finance, and what it means for their future.

Who are the Millennials?

There is no official start and end date to the Millennial generation, but the general definition includes anyone reaching young adulthood around the year 2000. Popular studies define a Millennial as anyone born between 1978 and 1994. There are more than 80 million Millennials, which makes them the largest generational cohort in history. They comprise nearly a third of the population, and their habits are simply too influential to ignore.

Various claims about Millennials only culminate in one agreeable truth: this generation is full of contradictions. Millennials are less politically engaged, but they are interested in helping their communities and making a difference. They are more diverse and tolerant of others, but aren’t naturally trusting. They love technology, multitasking, and personal branding. Critics describe Millennials as over-confident to the point of entitlement. Millennials and their financial situation are incredibly important since they are expected to make up roughly 75 percent of the workforce by 2025. As they search for jobs following the Great Recession, Millennials are best characterized as financially risk-averse.

What is the financial situation of Millennials like?

According to Pew Research Center, the median net worth of a household of a person younger than 35 in 1984 was $12,132 in today’s dollars. Today it’s only $6,815. With less money, Millennials need to be frugal. They are keeping more cash and investing less.

Cash

According to data from Bankrate.com’s latest Financial Security Index, 39 percent of 18 to 29 year-olds choose to hold money they will not touch for at least 10 years as cash in their accounts. This is not too surprising, given that young people are historically more prone to keep money rather than invest. Millennials without jobs or 401(k) plans need to keep more money on hand for short-term needs, like paying bills. This is not just a Millennial phenomenon either. The Great Recession led people of all ages to hold more money in cash rather than make risky investments. However, some scold Millennials for their lack of interest in investment, and even describe them as the most financially conservative generation since the Great Depression.

Banking

Millennials are less likely to rely on traditional banking for their money needs. Most Millennials instead turn to newer forms of payment, such as prepaid debit cards and mobile devices. Millennials shun checks and hate paying monthly fees for things like credit cards. After growing up with one-click companies like Amazon and Apple, Millennials believe in convenience. They look for free shipping, free services, and online accessibility. According to a 2014 TD Bank Financial Education Survey, ninety percent of Millennials use online or mobile devices for everyday banking.

Following the Great Recession, Millennials are hesitant to trust big banks. Many Millennials feel that those on Wall Street do not share their values. After seeing their parents’ accounts depleted in the recent recession, Millennials continue to distrust the stock market. Wells Fargo reported that 40 percent of Millennials disagree that financial advisors have their best interests in mind.

Saving

The good news is that Millennials, if they have the capability, do try to save. On average, Millennials begin saving at age 22, in comparison to age 35 for baby boomers. The issue is that Millennials save three times as much in cash or bonds as they do in equities. Because of this, they get little return on their money. While three in five Millennials describe themselves as savers, 45 percent have not started saving for retirement. Most Millennials are more concerned about saving to weather the next financial storm than saving for their far-off retirements. According to BankRate.com, Americans age 18 to 30 are the group most likely to set aside five months’ worth of expenses in a rainy day fund.

Homeownership

Millennials are more likely than other generations to wait to buy a home. They are also more likely to live with their parents while trying to gain stable financial footing. An October 2013 Pew Research Poll showed that for the second consecutive year a record number of Millennials lived in their parents’ houses. Over 30 percent of 18 to 31 year-olds lived with their parents in 2012 and 2013. Many recent graduates return home as a way to save money and pay off student loans.

However, this lack of homeownership is not necessarily due to shaky finances–there are a couple other explanations. First, Millennials live a more transient lifestyle and are more likely to rent in big cities before settling down. Secondly, Millennials are waiting until later in life to get married and have kids. This means they are also waiting longer to buy homes equipped for family life.

What has caused Millennials’ financial distress?

Student Loans

The increasing need to take student loans to get through college cripples young adults. The burden of paying off student loans leaves Millennials pushing other goals, including investing, to the future. According to the Federal Reserve Bank of New York, the average student loan debt in 2003 was $11,000. The average class of 2014 graduate with student loans owes $33,000. After paying off loan bills, Millennials have little extra money to invest.

The debt takes a toll on Millennials’ sense of financial security. Forty-two percent of Millennials say debt is their biggest financial concern. Forty percent say their debt is “overwhelming,” compared to only 23 percent of baby boomers. Fifty-six percent of Millennials say they are living “paycheck to paycheck.” Fifty-nine percent worry they will never pay off their college loans. Click here to read an in-depth analysis of the American student loan crisis, and watch this clip for more information on student loan debt below:

NerdWallet conducted a study of Millennials’ predicted ability to retire. They found the median debt for a student at graduation to be $23,300. The standard repayment plan of 10 years would cost that student $2,858 per year. This projected debt load would then end up costing that person $115,096 by retirement, since they would miss out on their most important decade of retirement savings with the highest compounded returns.

Unemployment

The difficulties of paying back student loans are exacerbated by the fact that many Millennials spend some period of time unemployed or underemployed in the slowly-recovering job market. Young adults face a rate of unemployment twice the national average. According to a Gallup poll in 2013, only 43 percent of Americans aged 18 to 29 had full-time employment. Some of these young adults could still be in school and therefore not looking for work. However, of those with a college degree, only 65 percent had a full-time job. While the country’s unemployment rate is falling, Millennials still make up 40 percent of those who are unemployed and searching for work. Bureau of Labor Statistics data from June 2014 show the unemployment rate for those ages 18 to 29 is over 15 percent.

So, why is the Millennial financial situation so concerning?

Those in the financial industry worry about Millennials’ lack of investments. Early investment is necessary to meet retirement goals. However, many Millennials are saving in cash to build a “rainy day fund” rather than to fund their retirement still decades away. Most Millennials are aware they cannot safely count on Social Security for their retirement. However, Millennials are not saving enough to get by in retirement without Social Security.

Holding cash in a savings account currently yields negative real interest. By holding cash rather than investing it, Millennials are essentially losing money. The burdens on Millennials in terms of debt and student loans may be preventing them from investing, but financial planners worry this generation is missing out on their prime years of investment. The issue is all the more troubling because Millennials have time to take on the risks of investment since they are still decades from retirement.

Consider the following investing example involving two twin sisters posed by USA Today: one twin sister starts investing $5,000 a year in a Roth IRA at age 22, then stops at age 30 and doesn’t save any more money. The other sister also starts investing $5,000 a year, but begins at age 31 and continues every year until she is 67. With a 10 percent annual return, they both will have just under $1 million. But the sister who started early and stopped at 30 will have slightly more. With consistent returns, the first nine years end up being worth more than the next 36. Getting an early start is more important now than ever, because set pensions are nearly non-existent. Most people have to make 401(k) contributions on their own, where an employer may match a certain amount. Watch for more about retirement savings below:

There are greater concerns than Millennials’ lack of investment and retirement savings. For example, the fact that Millennials are waiting until later in life to buy homes has drawn some ire. Critics contend that Millennials are holding back the recovery in real estate because they are content to live at home rather than become homeowners. Spending on homes and greater investment would have a positive ripple effect on the economy.

Are Millennials just being ignorant?

Maybe. According to Kiplinger, nearly half of Millennials have used costly forms of non-bank borrowing, such as payday loans and pawn shops. These young people may not be aware that less expensive options are available. This lack of knowledge permeates their attitudes toward personal finance. Less than a quarter of young adults in a Kiplinger survey could answer four or five questions correctly on a basic financial literacy quiz. Specifically, Millennials struggle with the concept of mortgages, likely because many have not bought a house. Millennials also struggle with the concept of inflation, probably because they have only lived in an era when inflation has been under control. In a financial literacy assessment created by the U.S Treasury Department and Department of Education, Millennials scored only 69 percent on average. In another quiz, created by the Jumpstart Coalition for Personal Finance Literacy, the average score was just 48 percent. Watch college students answer some financial questions below:

Through both schools and their employers, Millennials are offered more financial education than other generations ever received. However, their participation rate is among the lowest of all generations. Most Millennials are simply content being frugal and trying to save what they can.

Regardless, most Millennials know they need to save for the future. The problem is their current financial situation leaves them little money to invest. They may think holding cash is the safe bet now, but any hope for a safe retirement will require greater levels of investment. The Millennial financial situation isn’t great–but hopefully they will be willing to learn.

Resources

Primary

Financial Industry Regulatory Authority: The Financial Capability of Young Adults–A Generational View

Brookings: How Millennials Could Upend Wall Street and Corporate America

Additional

TIME: Millennials are Hoarding Cash

Fortune: The Collapse of Millennial Homeownership Could be a Mirage

Vox: Why is it so Difficult to Teach People to Manage Money?

Investopedia: Money Habits of the Millennials

U.S. News & World Report: Why Aren’t Millennials Investing? Fear Isn’t the Only Factor

Kiplinger: Millennials Face Financial Hurdles

USA Today: Slow Start, Shaky Future for Millennials

U.S. Chamber of Commerce Foundation: The Millennial Generation Research Review

Nerd Wallet: 73 Will be the Retirement Norm for Millennials

Philadelphia Business Journal: Millennials are Very Conservative Investors–and Why That’s a Problem

New York Post: Frugal Millennials Save for Rainy Days: Study

Federal Reserve Bank of New York: Are Recent College Graduates Finding Good Jobs?

Gallup: In U.S., Fewer Young Adults Holding Full-Time Jobs

Wall Street Journal: Congratulations to Class of 2014, Most Indebted Ever

Editor’s Note: This post has been updated to credit select information to USA Today. 

Alexandra Stembaugh

Alexandra Stembaugh graduated from the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

The post Millennials and Personal Finance: A Lost Generation? appeared first on Law Street.

We’re having a debate here at Law Street over whether or not now is a good time to go to law school–this is Matt DeWilde’s argument against taking the leap, click here to read Brittany Alzfan’s opinion on why law school right now may be a good choice.

When it comes to the question of entering law school right now, unless you like gambling with over $100,000 on the line or you got into Harvard Law, you might want to hold your horses. Going to law school now will still most likely result in massive amounts of debt and only a small chance to get a job at a top law firm when you get out. I do believe that law school will one day be a smart choice again, but that day is at least several years down the road.

There are many reasons why now is not a good time to go to law school. For one, law school prices have started to trend downwards, but are still high across the board. You will most likely end up in massive debt, especially if you haven’t finished paying off loans you took out for your undergraduate degree. The best law schools are still going to set you back close to $150,000 and it is very hard to find a respectable school that will cost you less than $100,000. All that being said, it would be totally worth it if you could make six figures right after graduating, but you most likely won’t luck out in the job market. In fact, you will probably be happy if you can find a job that pays marginally better than one you could get with just your undergraduate degree.

Median pay out of law school is around $60,000 a year, $10,000 lower than it was in 2008. Also check out this graph from the Association for Legal Career Professionals. While it is true that there is a sizable percentage of graduates making good money–about $160,000 a year, they’re still in the minority. In fact, there was a high concentration of graduates making between $45,000-$55,000 out of law school in 2012, which is only marginally better than the $44,000 graduates averaged their first year out of undergrad.

The counterargument to these facts is that the job market has stabilized, and with a smaller law school class more students will get good jobs. But there are problems with this logic. One is that the best paying jobs are still only available to those who graduate from elite law schools, which have not had to drop class sizes to the same extent as mid-level law schools. So while it may now be less likely that you will be unemployed when you graduate, do not expect the big bucks. Also, just because the job market has stabilized now does not mean it will start improving over the next three years while you’re in school. Going to school with the assumption that the job market will improve is an incredible gamble.

While going to law school today might not be as bad as enrolling in 2009, it is still not a great option. But there are signs that we could only be a couple years away from a law school rebound. One is that law schools are starting to lower their prices.  There could very well be wide-scale tuition decreases over the next few years, meaning it would make sense to wait until those have come to fruition. As prices go down, so does the gamble.

So if your dream is to be a lawyer and you really want to go to law school, do not give up hope, but be patient. Prices should go down and the legal job market is likely to improve a bit–albeit in mainly lower paying jobs. Perhaps try to find a job as a paralegal for a few years, then go to law school. Paralegals can earn up to $50,000 out of undergrad and it’s great experience to put on law school applications. Gain work experience, and in a few years take advantage of lower priced law schools. While it may be better to apply to law school now than it was a couple years ago, it’s still a risky decision. Waiting a few years could very well improve your prospects.

—

Matt DeWilde (@matt_dewilde25) is a member of the American University class of 2016 majoring in politics and considering going to law school. He loves writing about politics, reading, watching Netflix, and long walks on the beach. Contact Matt at staff@LawStreetMedia.com.

Featured image courtesy of [thisisbossi via Flickr]  

Matt DeWilde

Matt DeWilde is a member of the American University class of 2016 majoring in politics and considering going to law school. He loves writing about politics, reading, watching Netflix, and long walks on the beach. Contact Matt at staff@LawStreetMedia.com.

The post Don’t Go to Law School…Yet appeared first on Law Street.

Actions speak louder than words. For a few years now, we’ve all been wringing our hands about the law school crisis. Enrollment is plummeting–from 2004-2013, the amount of law school applicants have almost been cut in half. Even worse, the lawyers that are being produced are unable to find jobs, barely over half were in jobs that required passage of the bar last year. These issues are exacerbated by the fact that law school is incredibly expensive. Students who go to private law schools borrow an average of $91,000. The stats aren’t much better for slightly cheaper public law schools; loans there are around $76,000.

Legal education and the legal industry as a whole are changing rapidly. They’re presented with a catch-22, because a large part of the prestige for a law school is claimed from rankings, like those by US News & World Report. But those rankings can be thrown into jeopardy by taking drastic actions, such as downsizing.

Brooklyn Law School, located in Brooklyn, NY, usually ranks somewhere in the 60s-80s in law school rankings by various publications. Specifically in US News and World Report, they clock in at 83. But a couple days ago, they announced that they no longer care about those rankings, and are now taking comprehensive steps to make a legal education more affordable and efficient. For the class that will matriculate in 2015, tuition will be cut by 15%. There will also be more types of financial aid offered, while merit aid will lessen. And the school will introduce programs that will make it possible to complete a legal education in 2 years rather than the ubiquitous 3. This will come just a couple years after they downsized through a voluntary early retirement program, and sold a few dorms and other buildings, yielding revenue for the school. But what’s so interesting about the actions of Brooklyn Law School is that they’re refreshingly extreme. Other schools have taken baby steps, but Brooklyn Law School is leaping forward.

There are a few other schools cutting costs, but Brooklyn Law School is still joining an incredibly small group. Some public law schools, like Penn State, University of Iowa, and University Arizona, have dropped costs for in-state students. On the private school front, Roger Williams University School of Law, in Rhode Island is dropping their tuition by about $8000.

What Brooklyn Law School is doing seems almost laughably obvious–they’re offering cheaper tuition in the hopes that it will attract undergraduates who see the merit in spending less money for a law degree. It’s a pretty simple move, business-wise. But in a law school atmosphere dominated by an obsession with rankings, it seems a bit riskier than it is. Students from law schools that are viewed as prestigious by their peers and by the legal industry are more likely to get jobs and clerkships after graduation.

Brooklyn Law School Dean Nicholas Allard is fine with that. He stated, “we’re not going to throw money at some artificial rankings. As far as I’m concerned, the U.S. News rankings may be good for lining the cage of a parakeet, but as a road map for students, they’re not useful.”

I absolutely applaud the gutsy move taken by Brooklyn Law School, but it’s important to remember that they also have a unique status. As an independent law school–meaning it’s not connected to an undergraduate institution, it does have more flexibility and ability to make broad moves.

I also think the choice to get rid of merit scholarships is incredibly interesting. According to this Forbes probe into the subject, often students that receive merit scholarships are ones who don’t necessarily need them. Refocusing attention to need-based scholarships can solve that problem, and Brooklyn Law School, among others, seem to get that.

The biggest question that is left is whether this will actually be successful. It’s innovative for sure, and cool, and I hope it makes positive difference. But throwing the rankings manual out of the window is risky, and for a middle of the pack school like Brooklyn, it could prove costly.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post Brooklyn Law School to Legal Industry: F*** Rankings appeared first on Law Street.