ELON’S “GROUNDBREAKING NEW MODEL”

On October 9, the Elon University School of Law issued a press release announcing its “groundbreaking new model” of legal education. That’s an overstatement, but the plan has some distinctly positive elements. Unfortunately, it also continues to rely on the prevailing law school business model that has produced the profession’s current crisis.

Elon’s Brief History

Located in Greensboro, North Carolina, Elon was founded in 2006 and received ABA accreditation in 2008 — as the Great Recession began. In one sense, the timing was good because many undergraduates thought law school was a safe place to spend three years waiting for the economy to improve. At the time, that option looked especially attractive because the ABA didn’t require schools to disclose whether recent graduates were obtaining meaningful JD-required jobs. By 2010, Elon achieved a record-high first-year enrollment of 132 students. Tuition for 2009-2010 was $30,750/year.

As ABA-mandated disclosures began to reveal that almost half of all law graduates nationwide were not getting full-time long-term jobs requiring a JD, the overall number of applicants to all law schools plummeted — from 87,500 in 2010 to 59,400 in 2013. Some deans at less competitive schools lowered admissions standards and raised acceptance rates. Even in a collapsing market for new lawyers, the effort to fill classrooms was a rational response to financial incentives. Federally-backed non-dischargeable student loans for tuition generated revenues for law schools, but schools had no accountability for their graduates’ poor job prospects.

Lowering the Bar

According to U.S. News, Elon accepted 68.4 percent of applicants for fall 2013 and enrolled 107 first-year students — almost 20 percent fewer than in 2010. From 2010 to 2013, the median LSAT for its first-year class dropped from 155 to 150; the median GPA declined from 3.12 to 3.01. At the 25th percentile, from 2010 to 2013, Elon’s LSAT/GPA combination went from 153/2.80 to 146/2.75.

Even as first-year enrollment declined at Elon, tuition increased to almost $38,000/year. Average student debt for 2013 graduates exceeded $108,000. Meanwhile, Elon’s full-time long-term JD-required employment rate for 2013 graduates was 32.8 percent. The school was one of only 13 (out of 201) ABA-accredited schools that placed less than one-third of their graduates in such jobs.

Groundbreaking?

When the school’s new dean, Luke Bierman, joined Elon on June 1 of this year, the school was already more than two years into developing a strategic plan that now includes added experiential learning, residencies with practicing attorneys, faculty-supervised development, and a JD program of seven trimesters replacing three academic years.

Practical training, residencies, and student development efforts that give otherwise unemployed lawyers a few tools to help them scratch out a living with their JDs is a good thing. Everyone should applaud those initiatives. But especially with Duke, UNC, and Wake Forest nearby, such changes are not likely to create more JD-required jobs for Elon graduates.

Pushing students out the door more quickly is not particularly novel. Many schools, including the University of Dayton, Drexel, Pepperdine, Northwestern, Southwestern, and others, have two-year programs. But the really big reform — eliminating the third year altogether — isn’t happening because accreditation rules prevent it. Existing accelerated programs merely cram the requisite workload into a shorter time period.

Money-saving?

Elon claims that its new plan offers two economic benefits to students: they can enter the job market sooner and save money on tuition. Whether becoming eligible for JD-required employment is a benefit for Elon graduates in the current environment (or even a few years from now) isn’t clear. As for the tuition discount, it’s true that an Elon JD will now cost $100,000 for seven trimesters compared to the $114,000 for three years (at $38,000/year) — a nominal student savings of $14,000.

But Elon’s strategic plan probably includes a pro forma projection showing that its new pricing policy benefits the school at least as much. Take the total current cost of $114,000, divide it by nine trimesters (three years), and the result is a per-trimester cost of $12,666.67. If students were paying for seven trimesters at Elon’s current annual tuition rate, the total cost for the degree would be $88,666.67. They’ll now pay $100,000 (or $14,285.71 per trimester). Elon promises to freeze a student’s total cost for the program, but on a price-per-trimester basis the $100,000 fixed cost already includes a tuition increase.

The Real Problem

The short-term economic impact of Elon’s new program is less troubling than the school’s long-term business plan. Because the seven-trimester program will generate less gross revenue per student than its current three-year course of study, the school plans to recover those losses by adding — you guessed it — more students.

The Triad Business Journal reports: “From a business standpoint, Elon Law anticipates offsetting the loss of revenue from tuition reduction by gradually increasing the number of students joining the school each year, up from 112 this fall to about 130 within a number of years.”

Imagine the consequences if every law school that currently places fewer than one-third of its graduates in full-time long-term JD-required jobs were to increase enrollment by 20 to 30 percent “within a number of years.” For the profession, that would be like accelerating in reverse gear toward a brick wall.

The Quest for Meaningful Reform

Elon’s understandable approach to the economics of this situation is important for one more reason. After accepting the deanship in January 2014, Bierman became a member of the ABA’s Task Force on the Financing of Legal Education. If that task force develops a “groundbreaking” plan to supplement a glutted market with more new lawyers from schools where two-thirds of current graduates can’t find full-time long-term JD-required employment, perhaps the ground would be better left unbroken.

More about possible solutions in my address at the American Bankruptcy Institute Law Review Symposium at St. John’s University on October 24.

STUDENT LOANS, MORAL HAZARD, AND LAW SCHOOL LOANS – CONCLUSION

My most recent post in this series discussed manifestations of law school moral hazard at Thomas Jefferson School of Law and Quinnipiac Law School. Both institutions have spent millions of dollars on flashy new buildings where attentive students will have a tough time getting jobs requiring the expensive JDs they are pursuing.

The series now concludes with two more schools that illustrate another dimension of the dysfunctional law school market. Recent graduates of Golden Gate University School of Law and Florida Coastal School of Law live in the worst of two worlds: Their schools have unusually low full-time long-term JD-required employment rates and unusually high average law student debt.

Muddy Disclosure

The recent decline in the number of law school applicants has resulted in many schools struggling to fill their classrooms. When a school depends on the continuing flow of student loan-funded revenues, the pressure to bring in bodies can be formidable. One consequence is especially unseemly for a noble profession: dubious marketing tactics.

By now, most people are aware of ABA rule changes that require each school to disclose in some detail its recent graduates’ employment results, specifically, whether jobs are full-time, part-time, short-term, long-term, or JD-required. But those requirements don’t prevent Golden Gate University School of Law’s “Employment Statistics Snapshot” page from touting this aggregate statistic for its 2013 graduates “85.4 percent were employed in jobs that required bar passage…or where a JD provided an advantage.”

The school’s “ABA employment summary” link appears on the same page. But Golden Gate has supposedly made things easier for prospective students by showing its 2013 graduates’ employment results in a large pie chart. According to that chart, nine months after graduation, 38.2 percent of the school’s 2013 graduates had JD-required jobs.

Here’s what the chart doesn’t reveal: Even that unimpressive total (38.2 percent) includes part-time and short-term positions. Golden Gate’s full-time long-term JD-required employment rate for 2013 graduates was 23 percent.

Money to be Made

I’ve written previously about Florida Coastal, one of the InfiLaw system of private, for-profit law schools. Florida Coastal’s website includes all employment outcomes — legal, non-legal, full-time, part-time, long-term, short-term, and a large number of law school-funded jobs — to arrive at its “job placement rate” of 74.3 percent for its 2012 graduates. That number appears on the program overview pages of the school’s website. But you have to dig deeper — and move into the “Professional Development” section — to learn the more recent and relevant data: The overall employment rate dropped to 62 percent for the class of 2013.

However, those overall rates aren’t even the numbers that matter. Anyone persevering to the school’s ABA-mandated employment disclosure summary finds that the full-time long-term JD-required employment rate for Florida Coastal’s 2013 graduates was 31 percent.

The Cost of Market Dysfunction

At Golden Gate, tuition and fees have increased from $26,000 in 2006 to more than $43,000 today. During the same period, Florida Coastal increased its tuition and fees from $23,000 to more than $40,000. That’s why Florida Coastal and Golden Gate rank so high in average law school loan debt for 2013 graduates, with $150,360 and $144,269, respectively.

To its credit, Florida Coastal eliminates any doubt about the trajectory of law school debt for its future students. The median debt for its 2014 graduates rose to more than $175,000 — all of it consisting of federal student loans.

Searching for Solutions

My criticisms of current market failures should not be construed as an argument for eliminating the government-backed student loan program for law students. Were it not for federal educational loans, I could not have attended college, much less law school. The program was a good idea when Milton Friedman promoted it in the early 1950s, and it is still a good idea today.

But the core of this good idea has gone bad in its implementation. Shining a light on resulting market dysfunction should generate constructive approaches to a remedy. At the October 24 American Bankruptcy Institute Law Review Symposium at St. John’s University (and my related law review article appearing thereafter), I’ll outline my ideas.

Here’s a preview: Viewing the law school market in the aggregate — as a single market — obfuscates a reasoned analysis of the problem. It protects the weakest law schools from the consequences of their failures. They should pay an immediate price for exploiting the moral hazard resulting from the current system of financing legal education. At a minimum, the government should not be subsidizing their bad behavior.

The profession would be wise to lead itself out of this mess. The financial incentives of the current structure, along with its pervasive vested interests, make that a daunting task. Even so, human decisions created the problem. Better human decisions can fix them.

STUDENT LOANS, MORAL HAZARD, AND A LAW SCHOOL MESS: PART 2

Sometimes law school moral hazard assumes a concrete form — literally.

A School Making Unwanted News

For example, Thomas Jefferson School of Law is now coping with a widely publicized credit downgrade of its bonds to junk status and related concerns about its future. But those financial difficulties date back to late 2008. The deepening recession was decimating the employment market for lawyers generally and hitting Thomas Jefferson graduates especially hard.

That didn’t stop the school from breaking ground in October 2008 on a new building that opened in January 2011. California tax-exempt bonds financed the $90 million project. Government-backed student borrowing for ever-increasing tuition — currently almost $45,000 a year — would provide a revenue stream from which to pay bondholders.

In 2012, new ABA-required disclosures allowed the world to see the school’s dismal employment record for graduates seeking full-time, long-term jobs requiring a JD (63 out of 236, or 27 percent, for the class of 2011). As enrollment declined, so did revenue from student loans. Unfortunately, the building and the bonds issued to pay for it remain, as does the stunning debt that students incurred for their degrees.

Quinnipiac’s New Digs

Recently, Quinnipiac University School of Law celebrated the opening of a new $50 million building in North Haven, Connecticut. Its website boasts that the new facility “is 154,749 square feet and will include a 180-seat two-tiered courtroom with Judge’s Chambers and Jury Room.” The Law Center is one of three interconnected buildings on a graduate school campus that is “expansive and architecturally distinctive, with an array of shared amenities, a beautiful full-service dining commons, bookstore, ample parking, and convenient highway access.”

Quinnipiac’s students — including all 92 entrants to the fall 2014 one-L class — will have luxurious accommodations in which to contemplate their uncertain futures. According to the school’s ABA required disclosures, nine months after graduation only 51 of 148 students in the class of 2013 — 34 percent — had found full-time long-term employment requiring a JD. And a Quinnipiac law degree has become increasingly expensive as tuition and fees alone have risen from $30,280 in 2006 to more than $47,000 today.

Tough Numbers

Such dismal employment outcomes for Quinnipiac are not new. Only 41 percent of its 2012 graduates found full-time long-term employment that required a JD. The rate for the class of 2011 was 35%.

Both Thomas Jefferson and Quinnipiac are among many law schools that must yearn for the good ole’ days — three years ago — when deans didn’t have to disclose whether their most recent graduates held jobs that were short-term, part-time, or had no connection whatsoever to the legal training they had received. ABA-sanctioned opacity allowed law schools as a group to claim — without qualification — that the overall employment rate for current graduating classes exceeded 90 percent.

Back to the Future

At Quinnipiac, the culture of that bygone era apparently endures. The link to its ABA-required disclosures page takes prospective students to “Employment Outcomes” and this:

“82% of the graduating class was employed as of Feb. 15, 2014 in the categories listed below…Bar passage is required, JD is an advantage, other professional jobs, and non-professional jobs.”

But if prospective students want to know the whole truth, they have to click again, go to the school’s ABA questionnaire, and perform a calculation from the raw data that reveals the 34 percent employment rate for the most important job category — full-time, long-term, JD-required jobs.

Law School Marketing

Similarly, the “Career Development” section of Quinnipiac’s current prospective student “Viewbook” leads with the banner headline that its “Employment Rate” for the class of 2012 was a remarkable 84% — “127 of 151 graduates employed.” An asterisk adds this tiny note: “Comprehensive employment outcomes for the class of 2012, including all employment categories as defined by the ABA (full-time/part-time/short term/long term) can be found at emplyomentsummary.abaquestionnare.org.”

Can prospective law students discover the truth? Sure. Should they take the time to do so? You bet. Do all of them make the effort? Not a chance. If they did, the 80+ percent, big-font employment statistics wouldn’t be in Quinnipiac’s recruiting materials. For careful readers, those big numbers are a waste of space.

What, me worry?

Undeterred by its recent graduates’ employment track record, Quinnipiac wants to grow. “There’s a decline in the demand for lawyers,” university president John Lahey said. “Even with the decline, we’re the only school in the country to spend $50 million for a new law school.”

That peculiar boast reflects an “if you build it, they will come” mentality determined to maximize tuition revenues. Unfortunately, that attitude can lead to short-term mischief and long-run calamity. Just ask anyone associated with the Thomas Jefferson School of Law.

Market dysfunction

Law schools remain unaccountable for the poor employment outcomes of their graduates. As most schools raise tuition, many students incur increasing amounts of debt for a degree that won’t get them a JD-required job. Because the federal government backs the vast majority of those loans, you could say that the system is your tax dollar at work.

Quinnipiac didn’t raise tuition for 2014-2015, but 86 percent of its 2013 graduates incurred law school debt averaging $102,000. Down the road at New Haven, 80 percent of Yale’s 2013 graduates with far superior job prospects incurred debt averaging $112,000.

The More Things Change…

The perverse law school response to market forces is a predictable business strategy, especially for law schools whose graduates are having the greatest difficulty finding law jobs. In an interview with the New Haven Register, Quinnipiac University President Lahey said that he hopes enrollment will grow from the current total of 292 students to 500 — the design capacity for the school’s new building.

Now that they’ve built it, will students come? If they value a “beautiful full-service dining commons,” perhaps. If they consider footnotes, read the fine print, and assess realistically their JD-required employment prospects as they peruse recruiting materials touting a Quinnipiac law degree, perhaps not.

STUDENT LOANS, MORAL HAZARD, AND A LAW SCHOOL MESS

Throughout the summer, Massachusetts Senator Elizabeth Warren has been promoting legislation that would provide relief to students with educational debt. As the Senate concludes its work — and I use that word loosely — before the November elections, she is taking another run at the issue. Most recently, Senator Warren made her case in an article that appeared in the September 9, 2014 edition of the Huffington Post: “The Vote That Could Cut Your Student Loan Bills.”

Her point is simple: Students who took out educational loans prior to July 1, 2013 are locked into an interest rate of nearly 7 percent. “Older loans run 8-9% and even higher,” she writes. She’d like to bring that rate down by allowing graduates (and parents who co-signed their loans) to refinance them.

Politics, You Say?

Election year politics have rendered her proposal dead on arrival. That became clear in June when Senate Republicans filibustered the bill, even though three of them — Senators Bob Corker of Tennessee, Lisa Murkowski of Alaska, and Susan Collins of Maine — were among the 56-38 majority that was insufficient to bring it to the floor.

But the gridlock in Washington and resulting inaction may focus attention on a more important underlying problem: How does a system anchored in noble intentions evolve to produce such enormous and unsustainable levels of educational debt in the first place? Some law schools have become poster children for the unfortunate answer to that question.

Blame Professor Friedman

In the 1960’s, Milton Friedman argued that America would benefit if individuals had a way to borrow against future incomes and invest in becoming more valuable workers. In those days, a college education was the surest path to the middle class. To a large extent, it still is.

From Friedman’s idea came the federal student loan program. But over time, Congress and several presidents added features that became problematic. Imagined and unfounded fears of moral hazard — specifically, that students on the cusp of lucrative careers would declare bankruptcy to avoid paying their student loans — resulted in the rule that educational debt survives bankruptcy, except in extreme circumstances that courts rarely find.

Coupled with federal guarantees, the loans eliminated lender risk. That created a new moral hazard: Educational institutions themselves were at least two steps away from any financial accountability for their graduates’ outcomes.

Law School Misbehavior

For law schools, all of this has assumed special significance. Unlike undergraduate colleges that can claim to be creating well-rounded and better informed citizens entering a variety of careers, law schools exist to train people who want to become lawyers. Some law graduates may take rewarding non-legal paths, but undergraduates aspiring to careers in business, for example, typically attend business school. At least, they should.

If the ability of a school’s graduates to use their legal training initially in a JD-required job is an appropriate way to measure a law school’s success, then many are unambiguous failures. For the class of 2013, 33 of 201 ABA-accredited schools placed fewer than 40 percent of their graduates in long-term full-time JD-required employment (excluding law school-funded jobs).

But here’s the kicker. Thanks to the moral hazard that the federally-backed loan program creates, some schools with the worst employment records for recent graduates have students with the highest levels of law school loan debt.

For the class of 2013, three of the top ten schools with the highest average student loan debt at graduation placed less than one-third of their graduates in full-time long-term JD-required jobs (again, excluding law school-funded positions). They were: Thomas Jefferson ($180,000 average student debt; 29 percent employment rate), Whittier ($154,000 average student debt; 27 percent employment rate), and Florida Coastal ($150,000 average student debt; 31 percent employment rate).

Defying the Market

How do these schools and others like them accomplish this economically perverse feat? Large doses of prospective student confirmation bias combine with federally-backed student loans to create a dysfunctional market.

Marginal law schools seek to fill their classrooms to maximize revenues. Next week, I’ll examine a few schools pursuing this goal through recruiting materials that seem to obfuscate ABA-required employment disclosures. For now, the important point is that what happens to those students after they graduate becomes someone else’s problem. Once students pay their tuition bills, law schools have no financial stake in their graduates’ employment outcomes.

Searching for Solutions

This takes us back to Senator Warren’s bill aimed at giving past students a break. In the current low-interest rate environment, it’s reasonable to provide former students with the kind of refinancing opportunities available to homeowners, business proprietors, and other debtors. But that won’t begin to solve the real problem. The current system of financing legal education creates moral hazard that has produced — and will continue to produce — law school misbehavior at great expense, not only to affected students, but also to all of us.

In the coming weeks prior to my October 24 presentation to the American Bankruptcy Institute Law Review Symposium at St. John’s University School of Law, I’ll offer some ideas for dealing with that larger problem. Some people won’t like them.

THE BATTLE FOR CHARLESTON

On the heels of my post about two struggling law schools, the New York Times published Professor Steven R. Davidoff’s discussion about one of them. Davidoff argues that critics of InfiLaw’s proposed acquisition of for-profit Charleston Law School are missing a key point: Why is it any worse for the private equity firm that owns InfiLaw to operate Charleston School of Law than, say, the current owners who have already taken millions of dollars out of the school?

In fact, he implies, if the school winds up affiliating with the state-run College of Charleston, why would that be preferable? Profit is profit; what difference does it make who gets it?

Here’s Davidoff’s money quote: “Lost among the dispute is the fact that a lower-tier law school like Charleston — whoever owns it — can not only produce capable graduates but help students start careers they couldn’t have without a law degree.”

Really?

As I’ve reported previously, even the dismal market for new attorneys hasn’t slowed the growth of InfliLaw’s three law schools (Arizona Summit, Charlotte, and Florida Coastal) — from a combined 679 graduates in 2011 to 1,191 in 2013. According to the ABA, only 36 percent of the InfiLaw classes of 2013 (including all three of its law schools) obtained full-time, long term JD-required employment.

Disaggregation doesn’t make things look any better for the company, unless you’re one of its private equity owners. For example, Davidoff cites Florida Coastal’s improvement in the percentage of graduates who pass the bar — from 58.2 percent to 76.4 percent as evidence of InfiLaw’s “track record of improving schools.” He’s responding to a “fear about the acquisition — that a private equity firm will lower standards.”

Davidoff doesn’t cite a source for his 76.4 percent number. According to Florida Coastal’s website, only 67.4 percent of first-time takers passed the bar in July 2013 — down from 75.2 percent for the July 2012 test. For February 2014, 72.9 percent of first-time takers passed — down from 79.3 percent in February 2013.

But that’s a minor issue compared to the overriding problem: only 31 percent of 2013 graduates obtained full-time, long-term jobs requiring that degree. The rest are not starting “careers that they wouldn’t have without a law degree.”

Debt

Maybe most InfiLaw graduates aren’t getting full-time, long-term law jobs, but they’re acquiring a lot of educational debt. Annual tuition and fees at all three InfiLaw schools exceed $40,000. At Arizona Summit, median federal law student debt between July 1, 2012 and June 30, 2013 was $184,825. At Florida Coastal, it was $162,549. The Charlotte Law School median was $155,697, plus another $20,018 in private loans.

Davidoff’s defense of InfiLaw ignores the combination of big debt and poor employment outcomes that afflict most of its recent graduates.

His concluding thoughts make a valid point: “Instead of arguing about who will profit from them, Charleston’s students may instead want to ask who will give South Carolina’s residents the best opportunity to succeed as lawyers at an acceptable price.”

Based on its track record to date, the answer isn’t InfiLaw. And I would reframe the question: Why should anyone profit at all when non-dischargeable student loans are the source of those profits?

The new ABA Task Force on the Financing of Legal Education has an unprecedented opportunity to straighten out this mess and take the profession to a better place. But with the chairman of InfiLaw’s National Policy Board (Dennis Archer) chairing that committee, don’t hold your breath waiting for that to happen.

 

A TALE OF TWO LAW SCHOOLS

Two law schools in the news probably wish that they weren’t. They exemplify market dysfunction in the current system of financing legal education.

Indiana Tech

More than a year ago, I wrote about Indiana Tech Law School, one of several law schools founded after 2010. As proponents completed a feasibility study, newly required ABA disclosures demonstrated that only half of all recent law school graduates were finding full-time, long-term JD-required jobs. But some people thought that Indiana really needed a fifth law school.

Indiana Tech Law School opened its doors in 2013. It enrolled only 28 first-year students, far below the original target of 100. On May 21, 2014, its first dean and university provost Peter Alexander resigned both positions. According to the university press release, “Alexander cited the achievement of the goals he had established for the law school to that point in time and a desire to pursue other employment opportunities as the reasons for his decision to resign.”

An uncertain future?

In addition to promoting Indiana Tech as unique, the school’s website introduces prospective students to the doctrine of caveat emptor:

“Like any new law school, Indiana Tech must be in operation for one year prior to seeking ABA accreditation…The Law School makes no representation to any applicant that it will be approved by the American Bar Association prior to the graduation of any matriculating student.”

In early May, the school stated its intent to seek provisional accreditation. Perhaps ABA Accreditation Standard 201 will be relevant to that determination: “The present and anticipated financial resources of a law school shall be adequate to sustain a sound program of legal education and accomplish its mission.”

At Indiana Tech, tuition is $30,360; estimated living and other expenses and add another $17,800. No data exist on the extent to which the 28 students in the school’s inaugural class borrowed funds for their first year. But it seems likely that federal student loan dollars were central to the following prediction in 2011 — when projected enrollment for the class entering in 2013 was 100 and expected to grow thereafter: “The school [will be] breaking even in 2017, according to the feasibility study. By the fifth year, the law school is projected to start operating at a surplus.”

Without assumptions about growing student loan debt to fund operations, would anyone have thought Indiana Tech Law School was “feasible” in 2011? How about 2014?

Charleston School of Law

Charleston, a for-profit law school, reveals a different kind of market dysfunction. InfiLaw, a for-profit law school group, has been trying to acquire it since last summer. (Recently, I wrote about InfiLaw and one of its national board members who chairs the new ABA Task Force on the Financing of Legal Education.) On May 19, a committee of the South Carolina Commission on Higher Education voted to reject a recommendation that InfiLaw receive a license to operate Charleston Law School.

InfiLaw’s attorney, Kevin Hall, renewed the company’s effort in a public hearing before the full Commission. He described the school as “in a financial tailspin.” According to the Charleston Post and Courier, “The five judges and lawyers who started Charleston School of Law a decade ago with the lofty goal of training attorneys committed to public service… began draining money from the school [in 2010], withdrawing $25 million in profits by 2013 that they split among themselves.”

The three remaining owners “confirmed Hall’s description of the school’s financial situation, and they all agreed that it got that way because owners for years had been pulling profits from the institution.”

Follow the money

What was the source of Charleston’s now-distributed profits? The answer appears on the school’s website:

“Most students will depend on federal student loans to pay for tuition, books and living expenses while in law school. During the 2012-2013 academic year, 88% of our students borrowed student loans to finance their legal education. At graduation, the average student loan debt incurred for those borrowers while attending the Charleston School of Law was $146,595.”

Nine months after graduation, 53 percent of the school’s class of 2013 had found full-time long-term jobs requiring a JD. More than half of those were working in firms of 10 or fewer attorneys.

So at Charleston, student debtors finance profit distributions to law school owners who have no accountability for poor graduate outcomes. When the school later hits the financial skids, only InfiLaw, another for-profit organization, can rescue it.

Wealth redistribution takes many forms, but none produces results more perverse than the current system for financing — and profiting from — legal education.

MORE JOBS, EXCEPT FOR LAWYERS

During April 2014, job growth exceeded economists’ expectations. The recovery continues, but one line item in the latest detailed Bureau of Labor Statistics report should be particularly troubling to some law school deans and professors who are making bold predictions about the future.

The Facts

As the economy added 288,000 new jobs last month, total legal services employment (including lawyers and non-lawyers) declined by 1,200 positions from March 2014. A single monthly result doesn’t mean much. But over the past year, total legal services employment has increased by only 700 jobs.

In fact, according to the BLS, since December 2007 net legal services employment has shrunk by 37,000 jobs. Meanwhile, law schools have been awarding 40,000 new JD degrees annually for more than a decade.

The Denier’s Plight

Some law school deans and professors still object to any characterization of this situation as a “crisis” in legal education. In fact, one professor proclaimed last summer that now is still a great time to go to law school because a lawyer shortage would be upon us by the fall of 2015! Before rejoicing that we’ve almost reached that promised land, note that in 2011 the same professor, Ted Seto at Loyola Law School – Los Angeles, similarly predicted that the short-term problem of lawyer oversupply would lend itself to a quick and self-correcting resolution when the business cycle turned upward.

Well, the upward turn has been underway for several years, but significant growth in the number of new legal jobs hasn’t accompanied it. Nevertheless, tuition has continued to rise. For prelaw students now contemplating six-figure JD debt, law school deniers have a soothing argument: A degree from anywhere is well worth the cost to anyone who gets it.

Using aggregate data, the deniers ignore dramatic difference in individual outcomes for schools and students. Some deniers even use their lifetime JD-value calculations to defend unrivaled tuition growth rates for law schools generally. In somewhat contradictory rhetoric, they simultaneously promote income-based loan repayment plans as a panacea.

Leadership?

Recently, one dean assured me privately that deniers have now become outliers. If so, the overall reaction of deans as a group remains troubling. In particular, law schools have countered a precipitous drop in applicants with soaring acceptance rates. The likely result will be a fall 2014 class somewhere between 35,000 and 38,000 first-year students.

Likewise, law school sales pitches have devolved into cynical efforts at selling something other than the practice of law. They market the versatility of a JD as preparation for anything else that law graduates might want to do with their lives. But so is medicine. So are lots of things. So what? Medical schools train doctors. Isn’t the core mission of law schools to train lawyers? What will remain after we abandon that sense of professional purpose and identity?

Practicing Law? Oh, I Could Have Done That. 

All of this raises a question: How do the law school deans and professors in denial about the state of things deal with unpleasant facts that don’t fit the world view they’re trying to sell others? Ignore them. Pay no attention to the man behind the curtain, as the self-designated Wizard of Oz might say to Dorothy. Somehow, we’ll get you back to Kansas — where associate admissions dean Steven Freedman at the University of Kansas recently went public with his denial.

Like similar predictions, Freedman’s analysis is suspect. For example, his projections of a lawyer shortage by 2017-2018 ignore the excess inventory of new law graduates that the system has produced over the past several years (and is still producing). (In a follow-up comment to his own post on “The Faculty Lounge,” Freedman defends his resulting calculations on the unsupported grounds that “the vast majority of them retired or changed careers” — an assumption, he acknowledges, that contradicts the real world observations and data of Jim Leipold, executive director of NALP.)

Even worse, Freedman offers a general recommendation to every prospective student — “Enroll today!” was the title of his first installment at “The Faculty Lounge.” But he fails to mention that employment outcomes vary enormously across law schools. His post’s subtitle — “Why 2017-2018 Will Be a Fantastic Time to Graduate from Law School” — is fraught with the danger that accompanies the absence of a nuanced and individualized message.

Ironically, in the real world of clients, judges, and juries, attorneys who ignore the key facts in a case usually lose. Eventually, they have trouble making a living. Someday, perhaps the law school deniers will have that experience, first-hand.