While it’s true that things have been spiraling downwards for law schools since the Great Recession, it wasn’t until 2011 that things really got out of hand. That was when the very first class action lawsuit about deceptive employment statistics was filed against the Thomas Jefferson School of Law. Little did we know that it would prove to be a harbinger of doom for the school.

About a year ago, we brought our readers the sad news that TJSL had conducted faculty and staff layoffs in an effort to free up funds. Not only had it suffered a blow to its enrollment, but it was also struggling to pay off the $133 million debt it accumulated after opening its new campus building in 2011.

To make matters infinitely worse, in December 2013, Standard and Poor’s released news that it had downgraded the credit ratings of a slew of stand-alone law schools. TJSL was one of the downtrodden schools whose credit standing was downgraded to B+, junk bond status with a negative outlook.

Now, we’ve got news that could have disastrous effects for the law school. It seems that TJSL has defaulted on its bonds, and it may be unable to remain in operation due to its financial predicament…

Please note the UPDATE at the end of this post.

Today, we received an Event Filing and Consent and Forbearance Agreement concerning TJSL’s bonds. Per the filing, TJSL defaulted on its bonds on June 26, 2014, by failing to make the required payments.

For those who are interested, here are the bond issuances and amounts in question:

Under the copy of the Event Filing and Agreement we received, the law school had until September 5, 2014, before remedial action would be taken by its Bondholders under the direction of its acting Trustee. That date has come and gone, and it’s safe to assume that the school will be held accountable for its failure to pay up. ( Ed. note : In its official response, TJSL states that a new Agreement is now in effect, and that it runs through October 17, 2014.) Thomas Jefferson Law may not be able to stay open if it can’t restructure its financial obligations, which currently total $133,390,000. As set forth in the Agreement, TJSL pledges that it will “work in good faith to diligently negotiate a reasonable restructuring of its obligations under the Loan Agreement that will enable TJSL to remain in operation.”

We’ve reached out to Thomas Jefferson School of Law, but have not yet received a response.

For the time being, we’re left to wonder what will happen to all of the students who currently attend the law school. Just 29 percent of TJSL’s most recent graduating class were able to get full-time, long-term jobs as lawyers within nine months of graduation. In the end, it certainly seems like TJSL’s financial ruin may be a good thing for students — they may be able to qualify for a closed-school loan discharge.

Look at it this way, TJSL students: if your law school doesn’t have to pay its loans, why should you?

UPDATE (8:45 p.m.): We received this official statement from a representative of the Thomas Jefferson School of Law after the original story was published exclusively on Above the Law:

Thank you for your interest in Thomas Jefferson School of Law. While it is correct that the School did not make a payment on June 26th, the School has paid most of the June payment and has engaged in constructive dialogue with its bondholders to restructure its obligations. Those constructive discussions have resulted in a series of agreements through which the bondholders have agreed not to exercise their remedies. The most current such agreement runs through October 17th (not September 5), and we are confident that a consensual restructuring will occur. For several months the School, its legal counsel, and financial advisors have worked closely with the bondholders, their representatives, legal counsel, and financial advisors. The parties have a mutual interest restructuring the law school’s debt in a way that will allow the school to remain in operation and prosper. As part of the negotiations, various potential structures and restructuring alternatives have been discussed. At the core of each alternative is ensuring the school can provide the educational experience required of an ABA accredited school and ensure the school’s long term success. The parties are currently considering the various approaches that have been developed by the advisors to the school and the bondholders, and are confident that an agreement will be reached in the near term. The School expects to have additional positive information concerning our work with the bondholders within the next few weeks. Because a restructuring of the School’s obligations to the bondholders is likely, the School believes that it will be able to continue to prosper. The School is disappointed that Above The Law chose to publish its story without providing the School with sufficient time to respond to its inquiry and that Above The Law chose to proceed with its story without all of the facts. The School requests that Above The Law immediately correct the factual inaccuracies, publish this response which more correctly describes the outlook for the future of the School.

(Flip to the next page to see TJSL’s Event Filing and associated Consent and Forbearance Agreement.)