Feb 13 2014

The bursting law school bubble: Cash cow law schools are facing 30 year lows in applications as applicants confront high tuition and low wages.

Law school is no cheap proposition.  To get into law school requires someone to take three years out of their life beyond the typical 4-year undergraduate experience followed by preparing for and scoring a solid number on the LSAT.  There is also the tiny issue that law school graduates will end up coming out with $100,000 or more in student debt and the employment prospects for graduates are grim to say the least.  As you would expect many aspiring attorneys do have a good head on their shoulders and they have put the pieces of the puzzle together.  Why go into massive debt when the return on the investment is unlikely to pay off?  There is a clear reason why law school applications are now down to 30 year lows even though the US has grown to over 300 million people.  Many law schools around the country will unlikely last beyond the current decade.  Even good programs will likely have to reduce class size or lower tuition to confront the new economic landscape.  Yet no school wants to be the first to reduce costs as to appear as an inferior product so they will likely throw aid at qualified applicants.

Employment market for law students

The employment market continues to get worse for new law school grads:

law school

Keep in mind that over this timeframe the economy has been getting better at least as measured by the stock market and also GDP.  Yet some areas are clearly in a deep contraction signaling that something else is going on.  What is astounding about the data above is that many are not working in fields that require a law degree.  Also, the overall unemployment rate for the class of 2011 is actually worse than the overall unemployment rate for the rest of the country.  It becomes much more apparent why law school applications are down to 30 year lows.

Yet another thing is the high cost of tuition.  It is one thing to go to law school at an affordable price and struggle in the market.  That is very understandable.  Yet going into the debt that many students are taking on just does not make sense given the above figures.

A big consolidation in the industry has come from places like LegalZoom and certainly the internet has made legal options much more affordable for basic needs and paperwork.  So it really doesn’t make any sense why tuition should continue to go up for law programs.  Schools are merely trying to get whatever the market can support and with easy financing for student debt, this unbalanced bubble continues to expand.  Yet this trend is appearing to hit a threshold.

Even the public is becoming more aware of this.  Take a look at the hive-mind of the world, the internet:

law school bubble

There is going to be some serious challenges ahead for law schools.

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Feb 5 2014

Grade Inflation in the United States: Has our university system made it easier for students to get higher grades?

I came across a report showing the increasingly higher grades reported at our nation’s public and private universities.  What happens when no one is average when it comes to grades?  Is it that students are all of a sudden more intelligent?  I think a large part of this grade inflation is also coming from instructors adapting to a crowd that is simply more intolerant to lower grades because of what they pay for college.  Parents have inflated the perception of the newer generation and sadly, the current economy is like a cold towel on the perception of many young Americans.  Also, you have to wonder if because of the internet, is cheating simply more rampant?  Obviously technology can be both a gift and a crutch for many students.  The grade inflation data is actually stunning though.  In the 1930s the average GPA at American colleges and universities was something like 2.35.  In the 1950s it was up to 2.52.  Where do things stand today?

The Great American Grade Inflation

It is rather clear where things have headed when it comes to grades:
Grade Inflation

Source:  Grade Inflation

In 1991-1992 the average GPA was at 2.93.  For the most recent set of data, it is now up to 3.11.  What is more interesting is that at private schools, the inflation figures have gone up more quickly.  Obviously with many of these private institutions now charging more than $50,000 per year, you wonder if universities are making sure they keep their clientele happy instead of truly measuring intelligence.  After all, if the average is a 3.3 (a solid B) then that means there really is no true average at the school.  The vast majority are above average.

The long-term trend also highlights this change:

Grading US

What was interesting in reading through the data is that grade inflation at community colleges was not pervasive.  These are the lower cost alternatives of the higher education system but this also makes you wonder if higher costs are somehow associated with higher grades.  One of the big reasons cited for this is:

“(Grade Inflation) The author believes that the resurgence of grade inflation in the 1980s principally was caused by the emergence of a consumer-based culture in higher education. Students are paying more for a product every year, and increasingly they want and get the reward of a good grade for their purchase. In this culture, professors are not only compelled to grade easier, but also to water down course content. Both intellectual rigor and grading standards have weakened. The evidence for this is not merely anecdotal. Students are highly disengaged from learning, are studying less than ever, and are less literate. Yet grades continue to rise.”

This is probably the main reason.  We have a culture that is paying a very high cost for education and because of this, more is included to appease the customer.  Think of the mulit-million dollar gyms and complexes that are built at universities.  There is little to believe this makes one smarter at math or science but it is a direct reason for higher costs.

We seem to live in a culture where inflation is present in many areas, including tuition and grades.

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Jan 28 2014

Argentina financial crisis: What is going on in Argentina?

The economy in Argentina is undergoing another deep financial crisis.  When you have giant pools of money trying to exit your country you know you are in for a deep challenge.  The problem with Argentina is deep and complex but boils down to nepotism, a weak environment for growing businesses, and currency flight.  The latter usually occurs because of the other reasons.  Back in December the government imposed a tax on credit card purchases in foreign currencies.  In spite of this 35% tax money continued to flow out of the economy.  The market has gone fully into banana republic mode.  Inflation is out of control and the debt spiral is in full motion.  This isn’t the first time that Argentina has undergone a financial panic and crisis.  The last one was only in 2002.  The government has done an incredibly poor job and the economy is paying the ultimate cost.

It we look at the premium being paid for dollars we find that things can go bad rather quickly.  If we look at data on the unofficial dollar premium, we find that inflation in the real economy is much higher than is being currently reported:

Blue dollar premium in pesos


A good site to follow for the on the ground impact of economic collapse is this blog.

“The recent scenes of widespread anarchy due to the police strike across the country are still fresh in people’s minds.Due to recent blackouts, some people have been without power in Buenos Aires for three weeks and inflation according to independent firms is 30%, a very different tune compared to the one sung by the government that claims inflation is 10%.”

Not exactly a pretty picture but this should serve as a warning for those that think inflation is some kind of recipe for economic success.

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