Are poor debt-to-income ratios among law school graduates a sign of institutional challenges?

I recently blogged about debt-to-income ratios among recent law school graduates from Department of Education data disclosures. Of course, such figures are imperfect. They only account for loans taken out while a law student, not undergraduate loans or interest on loans accrued during law school. They don’t make cost-of-living adjustments for earnings. It’s at best a rough ratio.

I suggested a “good” ratio would be less than 1.0 (i.e., total debt is less than total entry-level salary), which is a good rule of thumb for college. Professor Milan Markovic noted that it may not be the best rule of thumb of law graduates—earnings tend to rise much faster for lawyers than college graduates in one study he conducted, and perhaps higher ratios would still be “good.” It also doesn’t account for IBR and PSLF, alternative ways of serving debt. All good and fair points. I hope more will come out about ideal ratios as we move forward.

I wanted to look at the other end—what do particularly poor debt-to-income ratios tell us? Actually, quite a lot. I noticed that several of the schools with the worst ratios had faced what I identify as “adverse situations.” First (identified in the chart as *), schools that have faced multiple years of sub-75% ultimate bar passage rates, which places them at accreditation risk under the ABA’s new ultimate bar passage requirement. Second (**), schools that have lost their ABA accreditation recently and become state-accredited. Third (***), schools that have closed.

I sorted the chart by the worst debt-to-income ratios, those schools with such ratios of 3.0 or higher (i.e., median reported debt is at least three times the median reported income).

School	Debt-to-Income Ratio	Median Debt	Median Income	Adverse situation
Florida Coastal	5.63	$198,655	$35,300	*
Whittier	5.31	$196,008	$36,900	***
Thomas Jefferson	5.24	$195,892	$37,400	**
Charlotte	5.11	$188,985	$37,000	***
Barry	4.65	$168,309	$36,200	*
Atlanta's John Marshall	4.6	$177,854	$38,700	*
Savannah	4.6	$177,854	$38,700	***
Cooley	4.5	$162,011	$36,000	*
Southwestern	4.3	$193,653	$45,000
Golden Gate	4.24	$166,264	$39,200	*
Elon	4.23	$160,285	$37,900
Arizona Summit	4.16	$188,191	$45,200	***
Ave Maria	3.89	$158,206	$40,700
St. Thomas Univ. (Fla.)	3.82	$149,322	$39,100
La Verne	3.81	$140,182	$36,800	**
Valparaiso	3.78	$139,821	$37,000	***
Appalachian	3.74	$117,964	$31,500
San Francisco	3.63	$195,820	$53,900
Charleston	3.62	$154,378	$42,700
Lincoln Memorial	3.46	$91,323	$26,400
Willamette	3.43	$154,190	$45,000
Campbell	3.36	$144,330	$43,000
The John Marshall Law Sch.	3.25	$154,079	$47,400
Detroit Mercy	3.21	$149,993	$46,700
American	3.2	$177,226	$55,300
Texas Southern	3.17	$117,935	$37,200
Loyola New Orleans	3.12	$130,522	$41,800
California Western	3.1	$147,095	$47,500
Nova Southeastern	3.09	$161,219	$52,100
Mercer	3.05	$140,818	$46,200
Mississippi Coll.	3.04	$128,722	$42,300
Samford	3.02	$135,438	$44,800

Virtually all of the law schools at the top of the list have faced adverse situations. Several have closed. Two (Thomas Jefferson and La Verne) recently announced they would continue to operate as California-accredited schools. Most of the schools I identified as facing challenges under the new ultimate bar passage requirement are on this list, too (undoubtedly because schools with disproportionately low bar passage rates have graduates taking in lower salaries in non-legal practice positions).

While we might not know a lot about the “best” rule of thumb, we do know that schools lower on this list are likely to face the most pressing challenges as an institution. It may be that they will be able to weather those challenges in the near future as enrollment climbs, bar passage rates improve, and the employment market sustains growth. But it’s worth considering whether these figures suggest the institutions facing the greatest challenges ahead.