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How Deans Should Game the Above the Law Rankings
May 1st, 2014 / By Kyle McEntee
The popular legal news website Above the Law just announced its 2014 Top 50 Law School Rankings. ATL’s methodology focuses exclusively on outcomes: only jobs, total cost, and alumni satisfaction matter.
I generally disfavor rankings. Ranking systems appeal to a desire for clear answers even when clear answers don’t exist. Through a simple list format, rankings project the appearance of authority and value even when they provide neither.
Inherent issues aside, ATL’s rankings at least focus on elements that should and do matter to prospective students. As a result, the ATL rankings incentivize schools to act in ways that measurably help students. That’s a welcome change.
If you’re a law school dean that wants to increase its standing in the ATL rankings, here are the two most critical steps:
1. Lower Tuition
The ATL rankings factor in total educational cost, which combines living expenses, tuition, inflation, and the interest accumulated during law school. Unless a law school moves across the country, student living expenses are relatively inflexible. To compete on the education cost metric schools must either lower tuition or convince ATL to use net price instead of sticker price.
In using sticker price, ATL penalizes schools that use a high tuition, high discount model. That’s basically every school (but maybe changing). Schools that shift to a more transparent pricing model will benefit in next year’s rankings without taking in less tuition revenue.
2. Maintain or Reduce Class Size
Although class sizes are not directly measured by the ATL rankings, each employment metric either controls for graduating class size (SCOTUS clerkships; Article III judges) or relies on an employment percentage for which graduating class size is the denominator. Graduating class size is a function of incoming class size, net transfers, and students dropping out or taking longer to finish school than anticipated.
Smaller incoming classes demonstrate a modicum of social and professional responsibility in a visible manner. This buys trust from incoming students. But the urge to take more transfers to generate more revenue must be appealing these days as schools try to make up for lost 1L revenue. After all, transfers pay more, do not impact LSAT or GPA medians, have low marginal cost, and integrate rather silently. Large transfer classes also seem appealing if you believe that enrollment cuts have been too deep—an increasingly common, yet disturbing belief.
Due to ATL’s methodology, schools cannot hide from enrollment levels that adversely affect employment outcomes. Neither can schools make up for over-enrollment by funding jobs for graduates. As such, resisting the temptation to grow enrollment will benefit schools on rankings that unapologetically penalize schools for graduating too many students into a crowded entry-level market.
Schools game rankings. That’s just a basic fact about modern higher education. At least with ATL’s rankings, gaming the rankings produces measurable, positive results for students and the profession. It sure beats an incentive to burn money on blackacre to secure a higher ranking.
Support for Layered Legal Education
November 29th, 2013 / By Deborah J. Merritt
Since writing about multi-tiered legal education, including an undergraduate component, I have discovered several other scholars and practice experts with similar ideas. Here is a round up of proposals related to “layered” legal education with an undergraduate component. Please add to the collection by sending links to similar proposals.
Jordan Furlong’s BA plus MLP
Jordan Furlong, an internationally recognized expert on innovations in the legal market, proposed a BA/MA structure for legal education in 2010. As Jordan recognized, current JD programs do not effectively teach either professional skills or theoretical inquiry at the graduate level. Today’s law school offers a second bachelor’s degree masquerading as a professional or graduate degree.
Jordan, like me, proposes that we move much of the current JD program into the college curriculum: “Four years of undergraduate work would be enough to provide a healthy grounding in legal theory, legal history, aspects of justice, all the things that law schools now teach, in a mixture with Torts and Contracts and Business Associations and so forth.” Jordan also notes the positive impact of these courses for a wide range of students: “[A] a four-year Law undergrad would be a terrific grounding for any number of disciplines — don’t we always tell law students that a law degree opens up vast new career horizons to them? Better yet, students in other fields could minor in Law, or even take a handful of law electives. Think of the boost that would give to legal literacy among university graduates of all kinds, and to public legal education as a result.”
To prepare practicing lawyers, Jordan would establish “an MLP degree, a Masters of Legal Practice to mirror the Masters of Business Administration.” The master’s would build on the undergraduate degree, which would already have grounded students in “the theory and the basics.” The MLP would then “add business skills, professional responsibility training, client focus, project management, and the other hallmarks of a competent practitioner.” Sounds like a plan. (Jordan also notes the possibility of local bar associations creating training programs, perhaps jointly with private firms. That’s another excellent idea worth pursuing.)
Benjamin Barros’s Competency Exams
Benjamin Barros, Professor and Associate Dean for Faculty Research and Development at Widener Law School’s Harrisburg campus, has proposed a different mechanism for moving part of the JD curriculum to the undergraduate level. Rather than create a specific undergraduate major, Benjamin would allow prospective students to take competency exams in law school subjects. If a student achieved a sufficiently high score, the student would receive credit for the corresponding law school course.
As Benjamin notes, these exams would function much like Advanced Placement exams do at the college level. As with AP exams, Benjamin would allow students to develop their competency in any way they chose. Colleges, certainly, could offer courses preparing students for law competency exams; law schools might also enter that market. Students could also study on their own or use online courses. Test performance would offer feedback on the efficacy of these methods, while allowing students to choose methods suiting them best.
Benjamin, like Jordan and me, stresses multiple advantages of this system. Students could obtain a JD with less investment of time and money; a common path might include four years of college (including law-related courses) followed by two years of law school. Those law school years, meanwhile, could cover more sophisticated material. The nature of that more advanced material “might vary – it could be more practice oriented, more theory oriented, or remain doctrinal, but on a deeper level.” Whatever the content, JD students would obtain better preparation for their legal careers. College students would also benefit from law-related “AP” courses, even if they chose not to attend law school.
Benjamin first proposed a version of this idea in 2009. The original post, the more recent one, and the comments on both are well worth reading.
McGinnis and Mangas: BA Plus Apprenticeship
John O. McGinnis, a professor at Northwestern Law School, and Russell Mangas, a recent Northwestern grad practicing at Kirkland & Ellis, propose creating an undergraduate law degree that would include about 60 hours of legal study and 60 hours of general liberal arts courses. Like the other proposals discussed here, their approach would move traditional law school courses (including the first year) to the college curriculum.
McGinnis and Mangas would then require practicing lawyers to complete a year-long paid apprenticeship and pass the bar exam before qualifying for bar admission. Lawyers, therefore, could qualify for law practice after paying for just four years of education. They would devote a fifth year to qualifying, but receive income (rather than paying tuition) for that work.
McGinnis and Mangas, notably, would not eliminate current JD programs; they would maintain those programs alongside the new BA/apprenticeship track. Market choices by employers, clients, and students would determine the popularity of the two tracks.
McGinnis and Mangas, like others proposing layered legal education, note the financial advantages of their proposal. Students could qualify as lawyers with just five years of opportunity cost, four years of college tuition, and a paid apprenticeship. Even if apprenticeships paid low wages, new lawyers would carry much less debt than they do today–and might possess more professional skills.
Writing an article, rather than a blog post, McGinnis and Mangas develop the economic argument more fully. In particular, they contend that alternative educational paths would benefit consumers as well as new lawyers. A less expensive educational path should reduce the price of legal services; it might also enable services for markets that are currently underserved. The full McGinnis/Mangas article deserves a read.
The Kahn Plan
Douglas Kahn, of the University of Michigan Law School, advocates the boldest move toward the undergraduate curriculum. Kahn advocates moving the full three years of legal study to the undergraduate curriculum. Under his plan, students would begin law school after a freshman year of college. The law school curriculum would remain largely as it is today, but students would begin that study three years earlier.
Anticipating cries that his plan would sharply curtail liberal arts education, Kahn notes that law schools offer a good deal of that education within their three-year curricula. Most JD programs also allow students to take some courses from other disciplines, so students could assemble a well rounded education within the confines of a college degree that includes a JD.
Kahn does not advocate the addition of graduate education or apprenticeshps; he would allow students to qualify for the bar exam and law practice after just four years of higher education. His proposal thus moves more aggressively than any of the others discussed here, including my “four plus two” plan. Even if Kahn’s idea proves too radical for a consensus, he firmly supports the feasibility of beginning legal study during the college years.
A Plausible Path?
Each of these plans differs somewhat from the others, but all share a belief that we should begin legal education in college. Although constructing that path would require changes in state bar admission and ABA accreditation rules, these are changes well worth considering. I will continue to post on the practicalities, benefits, and costs of undergraduate “law school” courses and layered legal education.
Meanwhile, please forward links to other authors discussing these issues.
Reframing the Two-Year Debate
October 5th, 2013 / By Deborah J. Merritt
The debate continues over the virtues and drawbacks of a two-year JD. Much of the discussion has raised useful questions about the goals we try to achieve within the JD program. What purpose does the first year serve? How do the second and third years build on those objectives? How do students best learn the doctrine, policy, analytic skills, and problem-solving capacities they need to become effective lawyers? Can it be done in two years?
Most comments, however, have focused narrowly on the JD program itself. Few participants have addressed the skills that students learn (or could learn) in college; the ones they gather in the workplace before, during, and after law school; or the academic study they might complete after graduation in a world of MOOCs and other online instruction. If we want to provide the best possible legal education–an education that serves graduates, clients, and society–we need to think of law school as part of a much larger educational system.
A recent essay by my co-moderator, Kyle McEntee, begins to add that perspective. Kyle argues that a two-year JD is plausible if we expand the notion of legal education beyond the law school walls. Most professional and graduate programs require students to complete prerequisites in college. If law schools followed that lead, we could deliver more focused, sophisticated content from the first day of classes. Similarly, law schools might address the need for specialized doctrinal training by creating post-graduate on-line courses for practicing attorneys.
These suggestions carry significant force. Could we, in fact, construct a worthy two-year JD if we better integrated that degree with the education that precedes and follows it? That question deserves further examination. Rather than pursue it today, however, I’d like to use Kyle’s insights to reframe the discussion.
A New Frame
I suggest reframing our discussion of legal education by asking four fundamental questions: (1) What does law school currently teach? (2) Which members of our society would benefit from all or part of that education? (3) Does our society need new types of law-related education? (4) How can our educational system most efficiently and effectively address the educational needs identified in response to these three questions?
Exploring these questions could take legal education in many directions. We might identify new ways to address our nation’s need for cost-effective legal assistance. We might also contribute to better workforce preparation among non-lawyers. We might even find ways to enhance high school education. For today, I’ll outline just one proposal that has emerged from my own pursuit of these questions: Create an undergraduate major based on the first two years of law school.
Law as an Undergraduate Major
This major would not be a “pre-law” one; nor would it be law school lite. I propose literally transferring the first two years of law school to the undergraduate curriculum. Like our current 1L and 2L years, the major would include a large number of required courses along with some electives. Undergraduates could share some of the electives with post-BA law students, just as undergraduates in other fields share some electives with graduate students.
Undergraduate law majors would complete several writing projects, just as today’s law students do in the second and third years. They might complete a law-related internship during the summer between their junior and senior years, again following the practice of today’s 1Ls. To graduate with honors, law majors would write a publishable law review note–analogous to the senior thesis required for honors in other undergraduate fields.
This new LLB would not qualify graduates to take the bar exam or practice law. To obtain a license, LLB’s would have to complete additional work in classrooms and workplaces; I plan to examine that work in future posts. The LLB, however, would serve many purposes short of admitting students to law practice. The law major would educate students in the critical thinking and problem solving that we teach during the first two years of law school. The major would also introduce students to the basic principles of our legal system, and it would give them experience interpreting cases, statutes, and other legal materials.
Like other liberal arts degrees, the law major would accomplish four related functions: It would develop the type of critical thinking that prepares graduates for citizenship, it would lay an intellectual foundation for work in many fields, it would give students intermediate-level knowledge in a particular field, and it would prepare students for graduate study in that field.
This proposal follows quite naturally from the four questions I posed above.
The Four Questions
1. What do we teach in law schools? Among other matters, we teach critical thinking, problem solving, and the use of policies and precedents to address complex social issues. We also teach fundamental principles of the legal system (torts, contracts, criminal law, civil procedure, business associations, etc.) and the basics of legal writing. We teach students how to find and interpret judicial opinions, statutes, constitutions, regulations, and other legal materials. We teach them how to relate legal issues to principles of economics, critical theory, philosophy, social work, and other fields of study.
Notably, we do much of this work during the first two years of law school. We continue this education during the third year, but most students make significant progress toward these educational goals during the first two years. Even interdisciplinary perspectives arise frequently in basic courses; we no longer save these insights for advanced seminars.
Law schools teach other material as well. We provide at least some education in client counseling, negotiation, drafting, and clinical representation. We expand upon the doctrinal and interdisciplinary insights of the first two years. We also offer a wide range of courses in advanced legal doctrine. These, like the subjects noted above, are essential parts of lawyer preparation. I omit them from further discussion here, because my current focus rests on the first two years of law school.
2. Who benefits from the education that occurs during the first two years of law school? Future lawyers undoubtedly do, and I would not eliminate any of these elements from legal education. But other citizens and workers would also benefit from this education. We have always recognized that fact in law school, noting the benefits of our degree program for business people, government officials, nonprofit leaders, and citizens of all types.
3. Does our society need new types of law-related education? Undoubtedly it does. Citizens lack representation in life-changing matters, including criminal prosecutions and child custody disputes. We need either to educate citizens to represent themselves or to educate more lawyers who will assist them. Regulation, meanwhile, is so ubiquitous that workers in many fields regularly address legal issues. Businesses can’t afford to hire lawyers for all of these matters; we need to educate other professionals to handle many of them.
If we consider critical thinking, creative problem solving, and clear writing as “law-related” skills, then our society needs even more types of law-related education. These skills are fundamental to today’s workplace; they appear at the top of most employer’s wish lists.
4. How can our educational system as a whole efficiently and effectively address these needs? Law school is effective in teaching 1L and 2L content to future lawyers, but it is not particularly efficient at the task. Students don’t encounter this material until they have attended (and paid for) four years of college; often, they also pay more per credit for this law school instruction than they do for college courses.
Why is this delay and extra expense necessary? Undergraduate majors in astrophysics, biochemistry, linguistics, comparative literature, neuroscience, and other fields master very complex material during their third and fourth years of college. They often receive that instruction in small classes taught by renowned scholars. Professors teaching in some of these fields could earn higher salaries in industry, just as some law professors could earn higher salaries in practice. If colleges can educate students in these fields, as part of the normal college program, why can’t we match that performance in law?
Future lawyers could learn the basics of critical thinking, legal reasoning, and legal doctrine in their last two years of college. They would still be able to devote at least half of their college credits to other fields, including subjects that would complement their legal education. Is it better to take introductory economics four years before studying Torts and Contracts, or just two years earlier? Wouldn’t it be beneficial to take economics and contracts from professors who are colleagues within the same college of arts and sciences? We could teach the first two years of law school just as effectively–perhaps even more effectively–in college as in law school. We certainly could reduce student costs by doing so.
Meanwhile, creating a rigorous law major would address some educational needs that go unmet today. Law schools have created one-year LLM’s for non-lawyers, but these programs are both expensive and unwieldy. The HR professional would benefit more from an undergraduate major in law than from a one-year master’s in the same subject. The latter costs more and delivers less. Compliance officers, similarly, would benefit from undergraduate legal education. So would some social workers, scientists, entrepreneurs, and software engineers.
It remains to be seen whether an undergraduate law major would help us meet the legal needs of low- and middle-income Americans, but it might. Creating an undergraduate law degree might spawn new ideas about educating professionals to meet these needs. At the very least, shortening the path to a law license would reduce costs for lawyers hoping to serve the under-served.
Conclusion
Legal education faces significant challenges, but so do colleges, workplaces, and the economy. We’ll reach the best solutions by thinking broadly. What do we teach? Who would benefit from that education? What other law-related education does our society need? How can we address all of those needs most effectively and efficiently?
Deliberations for a prospective law student
August 21st, 2013 / By Kyle McEntee
This piece was published in this month’s National Jurist PreLaw Magazine.
If you’re thinking about applying to law school, you likely have two main questions. Can I get in? and Should I go? Lately, the answers have shifted for many individuals. A higher percentage of applicants are getting into law school; fewer are deciding to attend.
Getting into law school remains an achievement. It signals intelligence and determination. But before deciding to attend, you need to examine your options and aspirations carefully. Don’t choose law school just because you just because you got in, you like to argue, you’ve always wanted to help people or you don’t know what else to do. Think more specifically about what you hope to achieve with a law degree.
You can find that clarity through more than your imagination. Law school is a professional school, so go see what the professionals do. Shadow a variety of lawyers, meet dozens more and do anything you can to peer into the career paths of those who came before you.
Once you’ve developed some ideas about the type of career you want, check out employment outcomes for specific schools. The American Bar Association has a website with recent employment information for every accredited law school. Nationwide, only 56 percent of 2012 law graduates found full-time, long-term jobs requiring bar admission within nine months of graduation. But employment rates and job patterns vary across schools, so look carefully.
Geography matters. In recent years, about two-thirds of employed law graduates obtained their first job in the state in which their school was located. Think not just about where you want to attend school, but where you want to build a career. My nonprofit organization, Law School Transparency, developed a tool that will help you find the schools that send graduates to the cities or states where you want to work, www.LSTScoreReports.com. Employment data from the ABA and other sources are available on LST school profiles too.
Understand your student loans. The federal government originates almost all law school loans these days. Research how these loans work, such as what amount you’ll have to pay and when you will have to begin repayment. Also look at the tax implications. Boston University and Georgetown law schools have developed user-friendly calculators to help you compute debt loads and repayment plans. Consider what life will be like with debt, from the impact it may have on your career choices to your family planning or psychological well-being.
Finally, ignore all U.S. News & World Report law school rankings. At best, these rankings proxy various traits — all of which are better measured through analyzing raw data on LST, the ABA, or in the ABA-LSAC Official Guide.
Helping You Deliberate
Even with all of the sources listed above, it’s hard to make good decisions about investing in law school. When you look at salary statistics or other information on a law school website, how can you be sure they’ve presented the data fairly?
Law School Transparency recently announced a law school certification program that builds on the resources provided by the ABA and individual schools. The program centers on assuring fair representations about financial education and job statistics. We’ll certify the inaugural group of law schools in the coming months. Certified law schools will partner with LST to help students make educated decisions about whether and where to begin their legal career.
As participants, these schools will use our certification mark to signal their compliance with best practices for publishing vital employment and financial information. “LST Certified” will also demonstrate the school’s commitment to enrolling an informed student body.
Two primary goals inspire our program. First, we want you to have access to the information you need to critically evaluate your life-changing decision. The ABA’s law school accreditation standards require some important information, but not all that you want to know. The new LST Best Practices fill the gaps.
Second, we want students like you to trust the law schools that deserve your trust. Prospective students typically struggle to distinguish between schools that claim a comprehensive picture of job outcomes and costs, and those schools that actually provide one. These days, all law schools put their best foot forward to convey their value and distinctive offerings. But fierce competition drives questionable marketing tactics.
Law school is a huge investment that requires you to balance complicated costs, potential job and educational outcomes, and intangible benefits. ABA data, law school websites, the LST website, and LST’s new certification can all help you make the best decision. None of these sources can tell you whether to attend law school — or which school to attend — but they will aid your decision-making.
Crucial Weaknesses
July 19th, 2013 / By Jack Graves
Clearly, Simkovic and McIntyre’s article has given new life to those who would defend the status quo. However, even assuming the statistical methodology is sound (which I do, as I have no reason to believe otherwise and no time to recreate it), the study suffers from a number of crucial weaknesses.
First, Part IV makes the assumption that current market challenges reflect no more than the historically cyclical nature of the legal market. If you do not agree with this assumption (and I do not–I think Susskind’s view on this issue is far more sound), then the entire study is fundamentally flawed. However, even if you buy this assumption, there remain further issues with the study.
The title itself, the “Million-Dollar Law Degree” is misleading at best. This million dollar figure reflects the mean value, where the mean is skewed significantly higher than the median. Thus, it overstates the value for significantly more than half of all JD grads. It also reflects “pre-tax” value, a point that the authors do not address until near the end of the article at Part V.C. There, the authors acknowledge that their calculated benefit must be divided between private “after-tax” earnings and public tax revenues. (more…)
New Study on Economic Value of Law Degree
July 17th, 2013 / By Kyle McEntee
I won’t spend much time summarizing the new paper by Michael Simkovic, an associate law professor at Seton Hall University School of Law, and Frank McIntyre, an assistant professor of finance and economics at Rutgers University Business School. Inside Higher Ed summarized the report just fine.
Instead, I want to comment on what I see as a misguided attempt to quell critics claiming that the law school investment is not a sound choice for many people. I hope Professor Simkovic and Professor McIntyre are correct that, on average and even down to the 25th percentile, the law school investment makes financial sense.
It just completely misses the point and grossly under-appreciates the human element.
Rather than viewing law degree holders in isolation, we can get better estimates of the causal effect of education by comparing the earnings of individuals with law degrees to the earnings of similar individuals with bachelor’s degrees while being mindful of the statistical effects of selection into law school.
Unfortunately, law degree holders are individuals who are sometimes (perhaps often) hurt by going to law school. Talking about groups necessarily smooths over the stories underneath the data—the ones that make you feel good and the ones that make you sick to your stomach. The reality is that there are many people that have been hurt and are hurt right now as a direct consequence of the costs associated with entering the legal profession (or trying to). These graduates very well may make more money in the long run. But this is hardly comforting to those considering law school and those who care about the people who do.
As I told Inside Higher Ed, law schools have made a habit out of capturing as much value out of their students as possible—and for a long time, used deceptive and immoral marketing tactics to do so. The dynamics are changing and should change because of the outrageously high price of obtaining a legal education. Even if an analysis shows an investment has a positive net present value in the long run, people are not like corporations. The short-term matters more for real people. Tens of thousands of law graduates leave school each year wondering how they’re going to manage to pay off their six-figure loans. That’s what motivates critics and frightens prospective law students.
Long-term value is not irrelevant, but using it to argue that education isn’t priced too high troubles me. If we think our society and our country are better for having an educated population, as these two authors do, then we had better stop pricing people out of education.
What’s driving change in legal education and why you should care
May 30th, 2013 / By Kyle McEntee
This piece was originally published by the ABA Journal.
Change is coming to a law school near you. Economics will drive the change, but the exact configuration will depend on choices made by law schools, state supreme courts, the ABA, and Congress over the next few years.
Without intervention, market forces are likely to segment law schools. Are schools and the profession content with that outcome? The question warrants serious debate.
Law schools have entered crisis mode as word spreads about their costs and job outcomes. In recent years, tens of thousands of graduates have struggled to enter the legal marketplace and find professional jobs with salaries that permit them to service student loan debt. As a result of a steep drop in applications and enrollment, schools face a budgetary crisis—one certain to change the face of legal education. We can bend the future, but only if reform happens through the lens of fixing law school economics.
The drivers of this change are on course to stratify legal education for lawyers into two layers.
One group of law schools—perhaps a few dozen “elite” schools—will continue using the traditional model. Research faculties will teach high-achieving students from around the country and world. Graduates from these schools will continue to obtain the most competitive jobs after achieving traditional market signals like high GPA and law review membership.
These schools will be cheaper by today’s standards, yet expensive by any reasonable measure. Classes will follow a curriculum designed using core lawyering competencies and will involve more simulations and more writing.
Overall, elite schools won’t look much different than today’s law school—a professional and graduate school hybrid that tries to simultaneously serve both the legal profession and the pursuit of knowledge. Nevertheless, they will feel different because the educational product will be more skills-oriented.
The second group of law schools—perhaps a few hundred “local” schools, including new ones—will use a model centered on teaching faculty. These schools will have similar educational approaches to the elite schools, but look much different. The faculty will be hired for their experience as lawyers, judges, regulators and policy wonks. Scholarship may not be part of the job description, but will endure because the desire to analyze the world around you is human nature. The schools may teach undergraduates, paralegals, and other professionals in addition to lawyers. Ultimately, local leaders and lawyers will shape an education that is less graduate studies and more professional development.
Affordability will be a feature, but local schools will be defined by the ownership the local legal community takes in educating future members. The result will be a faculty that fluidly moves between practicing and teaching.
A transient faculty will provide opportunities, but also a set of challenges for these schools, particularly how to ensure a high-quality, consistent product that’s capable of teaching each student what they need to succeed. To overcome some challenges, schools will share faculty—sometimes across town, sometimes across time zones—and course materials because it’s more efficient than trying to hire for every need and having part-time teachers reinvent the wheel each term.
Although it’s the broken economics of law school accelerating reform discussions, demands for change concern just about every aspect of law school and come from diverse perspectives. Many stakeholders view the crisis as an opportunity to shape the future. Not everything needs to or will change, but widespread dissatisfaction has put everything on the table.
There are three main drivers of change, each tied to the future I’m predicting:
First, the cost of becoming a lawyer is too high. Tuition skyrocketed because law schools operated in a completely dysfunctional market. Law students (and therefore law schools) had unfettered access to student loans with little downward pressure on the borrowing. Attitudes about student debt were unsophisticated and schools enjoyed an information asymmetry about post-graduation employment outcomes. While the loan system still provides blank checks, applicants now have credible employment information and are becoming increasingly price-sensitive.
As the applicant market becomes more functional, at-risk schools will cut their budgets to meet demand. Surviving schools will be those that accept the need to reinvent rather than rely on minor changes. Budgets are largely personnel-driven, so most schools will need to figure out how to more leanly deliver education. This will all but necessitate involvement from the local bench and bar.
This brings us to the second driver: the bench and bar. Practicing lawyers and judges are fed up with the quality of education. The steady drumbeat for more practical skills training isn’t new—in fact it’s a century old. But the opportunity for reshaping law schools is new because of the information about and coverage of their broken economics. The trouble: Creating a law school experience that the profession wants requires a redefinition of the law school mission. It must become more professional school than graduate school.
The opportunity stems partly from the third driver: the legal profession’s structural transformation. The media began paying attention to law graduate struggles when it became apparent that even graduates of the country’s most elite schools struggled in “the new normal.” This accelerated the decline in the JD’s perceived value and invited a multitude of skeptical voices to shout their discontent.
Yet the structural change has been more gradual. Over many decades, practice has grown more complex and specialized. Technology, globalization and the unbundling of legal services have accelerated the change. The legal profession of the future looks different; so too will the education system that produces its members.
Upholding the broad and often elusive principles of the American legal system—such as equality, opportunity, and justice—requires a legal education system that’s not merely subservient to market forces. Successfully addressing the drivers of change without flattening essential principles depends on whether the solutions explored and adopted provide more than lip service to the broken economics of the modern law school.
If we lose sight of what’s causing the change, we may lose the opportunity to bend the course for the better.
The Bleak House of Loan Repayment
May 26th, 2013 / By Deborah J. Merritt
Kyle wrote last week about the billions of dollars that the federal government invests in legal education. On the same day his post appeared, the Court of Appeals for the Ninth Circuit issued an opinion that illustrates the long shadow cast by these loans. Here’s what happened to one law school graduate, Michael Hedlund.
Michael grew up in Klamath Falls, Oregon, a small town in the scenic Northwest. He earned a BS in business administration from the University of Oregon, but had trouble finding a job when he graduated into the 1992 recession. Michael decided to obtain a law degree, hoping he might join the practice his father and brother had established in Klamath Falls. He enrolled in Willamette University’s College of Law and graduated in 1997, ranked in the middle of his class. Michael took a bar review course, sat for the July 1997 exam, and obtained work as a legal intern in the Klamath County District Attorney’s office. The DA promised him a full-time position once he obtained his law license.
Unfortunately, Michael failed his first two attempts to pass the bar. On his third try, he suffered the type of mishap usually reserved for television scripts: Mike stopped for coffee on his way to the July 1998 bar exam, locked his keys inside the car, and was unable to get to the exam on time. The DA’s office hired a different attorney, and Michael decided to end his legal career.
Despite these setbacks, Michael Hedlund obtained a good “JD Advantage” job. He became a counselor for the Klamath County Juvenile Department. In that position, Michael “reviews police records, meets with accused juveniles and their parents, recommends whether or not they need to be on probation, appears in court, at least in preliminary matters in juvenile cases, and supervises juveniles to ensure compliance with any probation order (p. 11).” Michael started working full-time for the Department in 1998 and still works there today.
Michael married in 2000 and became a father in 2001. According to his facebook page, his third child was born in 2009. Michael’s facebook profile shows him proudly posing with one of his daughters. The young family lives in the town where Michael grew up; grandparents and other relatives live nearby.
The only dark clouds in this sunny small-town sky were Michael Hedlund’s law school loans.
The Loans
When Michael Hedlund started law school in 1994, Willamette’s annual cost of attendance was $24,500. By his third year, the cost was $27,170. (Those figures appear on the original loan agreements.) Michael financed most of this cost through federally guaranteed loans.
Interest started to accumulate on some of the loans during law school; more interest accrued when Michael obtained deferrals while trying to pass the bar. Even after landing his full-time counseling job, Michael had trouble making payments. By 2003, Michael owed $85,246 to one loan servicing company (the Pennsylvania Higher Education Assistance Authority or “PHEAA”) and $18,755 to a second servicer (The Educational Resources Institute or “TERI”). When both servicers garnished his wages simultaneously, leaving Michael’s family unable to pay for necessities, he petitioned for bankruptcy.
TERI quickly settled with Michael, agreeing to accept $50 per month to pay down the loan. PHEAA offered to amortize its loan over thirty years, requiring Michael to make monthly payments of $417.67. It also offered to reduce payments to $307.43 per month during the early years, with higher payments later in the repayment course. Michael refused both of these options, maintaining that he couldn’t afford either one.
Why couldn’t Michael Hedlund make monthly payments of just a few hundred dollars a month? Even with his full-time, JD advantage job, he was earning just $19.17 per hour at the time of the 2003 bankruptcy hearing. After taxes and other deductions, Michael netted $2,317 per month. His wife worked a few hours a week but, with no college degree and a baby at home, she didn’t contribute much. $28,000 per year of net income for a family of three isn’t much. In fact, if Michael qualified for the Department of Education’s new “Pay As You Earn” program, he would pay no more than $90 per month on both the PHEAA and TERI loans. Unfortunately for Michael, that program didn’t exist in 2003, when PHEAA was demanding repayment.
Court Decisions
Since Michael and PHEAA couldn’t work out a repayment plan, the bankruptcy court conducted a trial in December 2003. The court made an oral ruling a few days later, finding that Michael could not afford to pay more than $225 per month to PHEAA. After examining the loan balance, remaining life of the loan (15 years), and interest rate (4.22%), the judge discharged the portion of Michael’s debt over $30,000.
PHEAA appealed, and a bankruptcy appellate panel reversed. Michael, in turn, appealed to the Ninth Circuit. The case languished in the court of appeals for almost six years. The court devoted some of that time to finding a pro bono attorney for Hedlund (who had appealed pro se) and to encouraging mediation between the parties, but other years just passed. In 2010, the court finally ruled that the bankruptcy judge had not made sufficient findings; it vacated the lower court decisions and sent the case back to the original judge. 2010 WL 737641 (CA9 2010).
The parties elected to proceed with the original 2003 record on remand. Judge Radcliffe, who rendered the original decision, died before he could issue a new ruling. The substitute judge, Judge Brandt, delivered his decision in summer 2011. Brandt’s ruling was virtually identical to the one delivered by Judge Radcliffe eight years earlier: He concluded that Michael could afford to pay $240 per month to PHEAA for fifteen years. He accordingly discharged all but $32,080 of Michael’s debt to PHEAA.
PHEAA appealed to the district court, which reversed the bankruptcy judge and reinstated Michael’s full debt. Michael appealed once again to the Ninth Circuit, which ruled for him last week. Barring a successful appeal to the Supreme Court, Michael Hedlund’s debt to PHEAA has been reduced. Where does that leave him? And what does the outcome tell us about educational loans, repayment plans, and the financial status of law school graduates?
Michael Hedlund Today
Michael Hedlund won partial discharge of his debt to PHEAA, but his financial status remains modest. If his salary from the Klamath County Juvenile Department kept pace with inflation–a dubious assumption for many state and local government jobs–he’s earning about $50,390 today. He’ll pay $240 per month to PHEAA, plus $50 per month to TERI, for a total of $3,480 per year. That’s almost 7% of his gross income devoted to repayment of law school loans, even after a partial discharge.
And, although Michael’s county job appeared secure ten years ago, Klamath County now faces a serious budget crisis. The county recently cut the Juvenile Department’s budget by 10.8%, and the department is transitioning to a “new, revenue-generating rehabilitation program.” Either of those changes might affect Michael’s job or salary.
Is Michael an Outlier?
It’s tempting to view Michael Hedlund as an unusual law graduate, one of the few who failed the bar and was unable to secure high-paying employment. Michael, however, is far from alone in his struggles.
Graduates of low-ranking law schools frequently fail the bar. ABA statistics, available in hard copy, show that Willamette’s bar passage rate for first-time takers was just 65% for the July 1997 Oregon bar, when Michael Hedlund first took the exam. Michael was one of 34 Willamette graduates to fail the Oregon bar on their first try that summer. The school’s most recent statistics show that 27.4% of its first-time takers fail the Oregon bar. According to data collected by US News, bar passage rates are even lower for at least 22 other law schools. Going to law school doesn’t guarantee a law license, as numerous graduates discover each year.
Nor is Michael Hedlund’s salary unusually low. Even if his wife cares full-time for their children, generating no outside income, Michael’s estimated salary almost exactly matches our country’s median household income of $50,502 in 2011. An occupational expert testified at Michael’s trial that “he was well-placed for his skills, that his wages and benefits were excellent for the Klamath Falls area, there were no higher paying jobs available to him, and that the area’s employment situation was unlikely to change in the near future (p. 16).” Even if Michael relocated, which he was willing to do, the expert concluded that increased living costs would outweigh any higher salary. This was true, not only because of the low cost of living in Klamath Falls, but because Michael benefited from free child care and subsidized housing provided by family members in that town.
What if Michael had persevered in his quest to become a lawyer? If he had passed the bar and found a lawyering job, both significant hurdles, he probably would be earning more today than in his JD advantage job as a juvenile counselor. But not that much more. A 2012 Economic Survey by the Oregon State Bar found that 25% of attorneys in Southern Oregon (where Michael lives) earn $63,000 a year or less (p. 15). It would be hard to stretch even $63,000 to pay back Michael’s loans while supporting his family.
The Klamath County District Attorney’s office, meanwhile, is facing the same budget crisis that is hurting the Juvenile Department. Attorneys in the DA’s office will take pay cuts of 5-14% during the coming year, just the first step in addressing an ongoing fiscal crisis.
The sobering fact is that some JD advantage jobs–and even some attorney positions–pay only $50,000 to $60,000 per year for experienced workers. For graduates who land in those jobs, law school loans are financially devastating.
What About IBR or PAYE?
Income Based Repayment and Pay As You Earn, two current programs for managing student loans, did not exist when Michael petitioned for bankruptcy in 2003. The government did, however, offer the Income Contingent Repayment Plan (ICRP). Both of the bankruptcy judges who reviewed Michael’s case concluded that ICRP would not give him sufficient relief. That plan would have demanded payments of more than $300 per month, more than the judges believed Michael could afford.
Judge Brandt, furthermore, suggested that no debtor should have to accept a program like ICRP. That program, Brandt declared, “simply is going to substitute a nondischargeable tax debt based on loan forgiveness for the student loan debt. And that tax debt is going to hit as much as 25 years further out, even when young debtors are likely to be dealing with their own children needing help with college or as they’re getting ready for retirement or hoping to get ready for retirement or potentially both (p. 31).” The ICRP solution, therefore, was no solution at all.
The government’s most recent loan restructuring program, Pay As You Earn, would have treated Michael much more favorably. As indicated above, he would have paid no more than $90 per month with a $40,000 salary and 3-person family. With a 5-person family and $50,000 salary–Michael’s likely situation today–he would pay no more than $72 per month. Of course, as Judge Brandt noted, Michael would owe taxes on the forgiven portion of his loan–a liability that would hit just as Michael and his wife prepared to send their daughters to college. More important, PAYE simply isn’t available to Michael: Congress limited access to graduates who obtained their first educational loans after October 1, 2007.
If Michael hadn’t defaulted on his loans, he would qualify for today’s Income-Based Repayment Plan and Public Service Loan Forgiveness Program. For the latter program, Michael wouldn’t be able to count any of the thirteen years he has already spent counseling juvenile offenders. He could, however, make reduced payments (currently about $108 per month, based on his income and family size) while working for another ten years in public service, then obtain full loan forgiveness. Those benefits, however, aren’t available to debtors who defaulted or settled with creditors under earlier, harsher loan programs.
Bleak House
This is Michael Hedlund’s Bleak House: Loan repayment plans that stretched more than thirty years past his law school graduation, ten years of bankruptcy-related litigation, and a partial discharge that will likely require payments until at least 2028–thirty-one years after Michael received his JD.
It is a bleak outcome for taxpayers and the economy as well. Here is a healthy, well educated father of three who lives modestly and has no addictions (p. 32). He is providing his family with the country’s median household income, while living in a low-cost town with other family nearby. Yet he is swimming in student debt, even after a partial discharge from the bankruptcy court. He won’t repay all of his federally guaranteed loans. Nor will he and his family buy the cars, dishwashers, ipods, and other goods that keep our economy healthy.
What can we learn from this story? First, large law school loans and unmanageable debt are not new phenomena. Michael Hedlund graduated from law school in 1997, more than a decade before the current downturn in legal employment. Law school was expensive even then; Michael’s total cost of attendance for three years at Willamette was $77,140. Given the school’s low bar passage rate, together with the salaries available for attorneys and JD advantage workers in Oregon, the price was simply too high.
Second, the changing tides of loan repayment programs have left some graduates–like Michael Hedlund–stranded on the beach. When Michael petitioned for bankruptcy, the government offered a repayment plan (ICRP) with payments that were too high for Michael to meet. Today, he would qualify for plans that would allow payments well below what he is paying under his partial discharge. Michael graduated at a bad time: law school tuition was already high, but loan repayment plans were still stringent. Politics, however, rarely looks backward to help those who are already in trouble.
Third, the very different repayment plans demonstrate the aimlessness of our loan repayment policies. After reviewing Michael Hedlund’s individual circumstances, two bankruptcy judges concluded that Michael could afford to pay no more than $290 per month (including the $50 owed to TERI) on his student loans. ICRP, the government program in effect in 2003, would have required payments of about $340 per month. Those payments would have paid off Michael’s loan, plus interest, in just over twenty years–but the payments were more than Michael could afford.
The repayment terms offered today, in contrast, would have allowed Michael to pay $92 (PAYE) or $134 (IBR) per month in 2003, based on his income and family size at that time. With his larger family and current salary he would pay only $72 (PAYE) or $108 (IBR) per month. These amounts are all less than half the amount that the bankruptcy court calculated Michael could afford–although they carry the prospect of significant tax liability at the end of the repayment period. A public servant like Michael, though, could avoid even that burden through today’s Public Service Loan Forgiveness program.
Where does the truth lie? Can Michael afford to pay $72 per month, $134 per month, $290 per month, or $340 per month? Do the lower amounts, offered by today’s repayment plans, represent thoughtful subsidies, political manna, bets that the economy will improve, or reckless accounting? Was ICRP too harsh or was the bankruptcy court too generous? What policies are driving these government programs and where are they taking us?
Finally, it is clear that law school was too expensive in 1997 for students like Michael Hedlund, and it is even more costly today. When law schools set tuition and admissions policies, they need to focus on the bottom quarter of their future graduates–not just the top quarter or even the median. Before classes start, of course, we don’t know who will fall into that bottom quarter. Class rank, furthermore, doesn’t correlate precisely with outcome; Mike Hedlund graduated in the middle of his class but may have obtained less than the median outcome.
Still, we know there will be law graduates who fail the bar, graduates who choose (or resign themselves to) JD advantage jobs, and graduates who earn less than $60,000 after years of experience. Law schools owe a duty to these graduates as well as to the more financially successful ones.
That reminder is especially important today, with law school applications significantly depressed. As schools struggle to maintain enrollments and budgets, will they admit more students at risk of failing the bar? How much will those students pay? Even with tuition discounts, many students pay more today than Michael Hedlund did. And with tighter job markets and inflation, entry-level salaries are lower–even for licensed lawyers. IBR, PAYE, and Public Service Loan Forgiveness offer tempting lifelines, but how long will those programs endure? Too many of our law graduates are living in bleak houses of bankruptcy, loan repayment, and underemployment.
The Federal Government’s Massive and Declining Investment in Legal Education
May 22nd, 2013 / By Kyle McEntee
Nowadays, law students borrow from the Department of Education Direct Loan Program for school. These loans are income-generating assets for the government. As such, I thought it would be interesting to see how large of an investment the federal government presently makes in law schools.
Based on my calculations, the total annual federal investment in law schools through student loans is currently $4.88 billion (2012-13 school year). Last year (2011-12), that number was $4.95 billion.
Calculating the annual investment required a sequence of estimates along with hard data. First, I used school-supplied data to calculate the government’s investment in 2012 graduates of ABA-approved schools. Second, I incorporated ABA-supplied enrollment data to estimate the government’s investment in all students enrolled during 2011-12. Finally, I used enrollment figures and tuition estimates to extend that projection to 2012-13, the academic year that just closed.
Students, of course, use their loans to cover living costs as well as law school tuition and fees. Law students, however, are forbidden from working during their first year, and find limited opportunities for paid work during the second and third years. Law schools can recruit students only as long as the students have a way to pay for both tuition and living expenses. It’s appropriate, therefore, to speak of educational loans to law students as an investment in law schools, not just students.
1. $4.43 Billion Federal Investment in 2012 Graduates of ABA-Approved Schools
Hard Data on 192 ABA-Approved Schools: $4.33 Billion. Students who graduated law school in 2012 borrowed at least $4.33 billion in federally-guaranteed and federal direct student loans to finance their legal education: that’s the amount of federal loan dollars processed and disbursed by 192 law schools to their 2012 graduates who borrowed for law school.
To calculate the amount loaned for each school (available in the table here), I took the number of graduates and multiplied it times the percentage of those graduates borrowing loans processed by the school. I rounded that number to the nearest whole graduate and multiplied it times the average amount borrowed for that school. The known federal government investment figures do not include students who never graduated and those enrolled in non-JD programs.
Here is a table that aggregates federal investment by school type:
| Type | Schools Accounted For | Avg. Debt/Student(% of all grads borrowing) | Total Federal Investment |
|---|---|---|---|
| Private (Non-Profit) | 110/113 (97.3%) | $125,963 (84.2%) | $3,064,183,905 |
| Public School | 77/81 (95.1%) | $89,078 (83.8%) | $1,110,978,434 |
| Private (For Profit) |
5/5 (100%) | $138,149 (91.7%) | $150,167,940 |
| All Types | 192/199 (96.5%) | $114,170 (84.3%) | $4,325,330,279 |
The following schools did not report sufficient borrowing data to U.S. News: Barry University (Private, 200 grads), Florida A&M University (Public, 160 grads), Indiana University – Indianapolis (Public, 295 grads), Inter American University (Private, 234 grads), Pontifical Catholic University of Puerto Rico (Private, 217 grads), University of Puerto Rico (Public, 202 grads), University of The District of Columbia (Public, 93 grads).
Estimated Investment in 2012 Graduates of Seven Other ABA-Approved Law Schools: $107 million. The seven ABA-approved schools (immediately above) had 1,401 graduates in 2012, but did not provide sufficient data about student borrowing. Three were non-profit private schools (with 651 grads); four were public schools (with 750 grads).
To estimate total federal investment in these graduates I used the average amount borrowed and average percentage borrowing by school type. The result is 548 graduates of the private schools borrowing an average of $125,963 and 629 graduates of the public schools borrowing an average of $89,078, or $125.2 million total. Because the three schools in Puerto Rico are on average much cheaper than their U.S. counterparts, I also discounted the amount borrowed 25% for the public Puerto Rican school and 30% for the private ones. This reduced the total for these seven schools to about $107 million.
Adding that total to the $4.33 billion discussed above yields a grand total of $4.43 billion that the Department of Education invested in students who earned JD’s at ABA-accredited law schools in 2012.
2. 2011-2012 Federal Investment in All Enrolled JD Students: $4.95 Billion
Estimating the federal government’s annual investment in all enrolled students, rather than just graduates, required some arithmetic gymnastics. Here are the calculations for 2011-12, the most recent year for which we have information about borrowing:
The 46,360 graduates in 2012 (with 84.3% borrowing) borrowed $4.43 billion, but that borrowing was over a period of three years during which tuition and cost of living rose steadily. In other words, the $4.43 billion estimate is for students who were first years in 2009-10, second years in 2010-11, and third years in 2011-12. (These numbers account for part-time and joint-degree students by assuming that, overall, their enrollment was steady from year to year.)
I next determined how much the 2012 graduates borrowed just for 2011-12. From the time those graduates entered law school, tuition rose on average about 7% each year. Under that assumption, 2012 graduates borrowed 31.2% of the amount borrowed for the first year, 33.4% for the second year, and 35.4% for the third year. So, 35.4% of the average amount borrowed for 2012 graduates came during 2011-12. Multiply 35.4% times total federal investment in 2012 graduates of ABA-approved schools ($4.433 billion) and the result is $1.569 billion for 2012 graduates during their last year—or an average of $40,146 for each of the students who borrowed.
Assuming that 1Ls and 2Ls followed the same borrowing patterns as the students who graduated, we could estimate the federal government’s annual investment in JD students simply by multiplying $1.569 billion (the amount loaned to 2012 graduates) by three. That yields a total of $4.71 billion. That initial estimate is low, however, because it doesn’t account for attrition. The graduating class is smaller than 1L and 2L classes.
To get a more accurate estimate of the federal investment in all JD students enrolled during 2011-12, I took the ABA-reported total JD enrollment for 2011-12 (146,288) and deducted the number of graduates (46,360). That left 99,928 students who attended JD programs in 2011-12 but did not graduate that year. If those students borrowed in the same percentages as graduating students did, then 84,239 (84.3%) of them took federal loans. Multiplying that amount times the average amount borrowed ($40,146) yields $3.382 billion. The total amount invested in all JD students enrolled during the 2011-12 school year, therefore, was about $4.95 billion.
Note the assumption that the average price paid did not vary by class year. Note, too, that my calculation does not include students at schools not approved by the ABA but nevertheless eligible for Title IV student loans. Nor, finally, did I include students eligible for federal funds who enrolled in LLM or other non-JD programs administered by law schools.
3. 2012-2013 Federal Investment in All Enrolled JD Students: $4.88 Billion
The estimate for 2012-13 faced several additional hurdles. The 2011-12 estimate must be adjusted for tuition rises (which increase the average amount borrowed), changes in total enrollment (which declined substantially), and the percentage of all students borrowing (which I assumed was steady at 84.3%).
In 2010, 2011, and 2012 law schools enrolled new classes of 52,488 students, 48,697 students, and 44,518 students. Based on prior graduation, enrollment data, and past attrition data, I estimated that 47,000 students graduated in 2013. We know that 44,518 were in their first year so, with total enrollment at 139,362 students, about 47,844 students were in their second year.
I next estimated how much these students borrowed in 2012-13. The 2012 graduate had borrowed an average of $40,146 for the last year of law school. If we assume that this amount rose due to tuition increases by an extremely modest 5% for the 94,844 upper-level students (with 84.3% borrowing), the federal investment was $3.37 billion for those students. However, the first-year students (in the aggregate, at least) did not feel the brunt of the tuition increases. Tuition discounts, financed through the upper-level students, were needed to sway prospective students. I assumed that students who began school in fall 2012 borrowed no more for their first year than the 2012 graduates borrowed for their last year. Using that assumption, I estimated that the federal investment in the 44,518 first-year students (with 84.3% borrowing) was $1.507 billion.
That brings total federal loans for JD students to an estimated $4.88 billion for 2012-13. That’s a substantial investment, but note that it’s $70 million less than the federal investment in 2011-12. JD tuition revenue declined significantly during the last academic year.
4. Bonus: 2013-14 Federal Investment Speculation
In 2011 and 2012, law schools enrolled new classes of 48,697 students and 44,481 students. For the coming fall, the most common projection is just 38,000. Based on prior graduation, enrollment data, and past attrition data, I estimate that 43,800 students will graduate in 2014. Using the projection of 38,000 first-year students, I estimate total enrollment at 125,300 students, which would be the lowest since 2000.
What will those students pay for law school, and how much will they borrow? Schools are competing to maintain first-year enrollments, so I predict that incoming students will borrow no more than the ones who just finished their first year (an average of $40,146). If 84.3% of the class continues to borrow from the federal government, then these incoming 1Ls will borrow a total of $1.29 billion. If we assume that the 87,300 upper-level students borrow 5% more than they did in the current year, and continue borrowing in the same proportions, those students will borrow about $3.18 billion. The estimated total federal investment in JD students during 2013-14 is $4.47 billion. That’s a lot of cash, but it’s $410 million less than the estimate for 2012-13.
Note that this estimate doesn’t include any changes in borrowing for living expenses–other than the reduction in the number of students. If inflation increases the cost of living, or if students have more difficulty finding paid part-time employment, total borrowing may be somewhat higher than this estimate. On the other hand, if students reduce living costs, borrowing may be even lower than my projection. The biggest story, here, however, is the reduction in number of enrolled students combined with modulation of tuition.
Putting all of the numbers together, I estimate that the federal government invested $4.95 billion in JD students enrolled in ABA-approved law schools during 2011-12; that it invested $4.88 billion in those students during 2012-13; and that it will invest $4.47 billion in 2013-14.
Conclusion
The calculations grow hazier as we move from hard data to estimates, but they are good ballpark figures for the amounts that law students borrowed from the federal government during the past two years, as well as for the amounts they are likely to borrow during the coming year. Two conclusions immediately stick out to me.
First, the federal investment in legal education is a lot. Compared to the $112 billion in federal investment in all of higher education in FY2012, law schools are disproportionately funded. As the conversation heats up about law school economics and student loans, and whether the federal government thinks such an investment is justified or fair, the estimates provide an idea about the magnitude of the federal government investment.
Second, law schools have a lot less money to spend and it is only going to get worse this coming year. My estimates for 2012-13 and 2013-14 suggest that fewer students are enrolling and that they are paying less tuition. The largest law school class ever enrolled just graduated and it will be replaced by the smallest class in 40 or so years. To enroll the upcoming class, schools will also likely offer larger discounts than ever before—a number that has been growing very quickly. My projections suggest that law students will borrow $480 million less during 2013-14 than in 2011-12 from the federal government. That’s a loss of almost a half billion dollars caused by lower enrollment and heavily discounted tuition. Information can do wonders, even in a dysfunctional market.
Schools may make up for some lost revenue through non-JD programs, which continue to expand unregulated and quickly. Others will have to cut costs. Most law schools will survive, but they have difficult decisions ahead.
Colleges Cut Tuition Costs
May 9th, 2013 / By Deborah J. Merritt
As the Wall Street Journal reported earlier this week, four-year colleges have been increasing their tuition discounts. According to a survey conducted by the National Association of College and University Business Officers, the average discount rate rose to 45% for this year’s freshmen. On average, therefore, colleges collected a little less than half of their list-price tuition from first-year students. That steep discount caps seven straight years of deepening discounts.
This news provokes several thoughts. First, colleges are caught on the same tuition-scholarship merry-go-round that law schools ride. We raise tuition, then raise scholarships–although never quite as much as tuition. Students pay more, and everyone is confused about what tuition really is.
Second, this tuition-scholarship shuffle transfers money from some students to others. Colleges offer more need-based grants than law schools do, but they provide plenty of “merit” scholarships. Colleges purchase high SAT scores, just as law schools buy impressive LSATs. Some day, I hope, educators will look back at this era and shake their heads at the sordidness of buying scores from paper-and-pencil tests that are taught in high-priced prep courses.
Third, the steady rise in tuition discounts suggests that parents and students are reaching their limit. They either can’t pay any more for higher education or they won’t. Colleges are moderating tuition increases while offering more scholarships.
That leads to a final question: What does this portend for law schools? When these freshmen apply to law school, will they be willing to pay higher tuition because colleges gave them a bigger break? Will their families have some cash in reserve to help fund law school? Or will these price-sensitive students demand even more discounts from law schools?
Responses may differ. Some students may be willing to pay more, while others remain stingy. A lot can happen in both the economy and higher education before these freshmen apply to law school. My guess, however, is that the steadily increasing discount rate for college tuition means that students are more concerned about the value of their higher education. That means that they may examine law school more closely as an investment and that, if they decide to apply, they will expect more discounts.
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