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.

A TROUBLESOME TASK FORCE

For any lawyer, credibility is everything. A key reason that the ABA Task Force on the Future of Legal Education produced such a worthwhile report and recommendations was the stature and credibility of its participants, especially its chairman, retired Indiana Supreme Court Chief Justice Randall T. Shepard. Although imperfect, the effort and outcome have received widespread and well-deserved praise.

On a vitally important issue, the Task Force punted. With respect to the cost and financing of legal education, a new ABA task force has now stepped into that breach. Unlike its predecessor, the ABA Task Force on the Financing of Legal Education has a credibility problem at the outset.

The Best Intentions

The chairman of the new task force, Dennis W. Archer, is undoubtedly a decent man trying to the right thing. In fact, he has an impressive history of public service. But as a former associate justice of the Michigan Supreme Court, Archer understands that appearances matter. In fact, the mere appearance of impropriety in a case is enough for a judge to step aside. It’s not a question of personal ethics. Rather, it’s a matter of public perceptions about the integrity of a decision-making process and its outcomes.

Since 2010, Archer has been a member of the National Policy Board of InfiLaw, which owns three private ABA-accredited for-profit law schools: Arizona Summit Law School (formerly the Phoenix Law School), Charlotte School of Law, and the Florida Coastal School of Law. The board on which he sits “provides counsel upon the strategic direction and long-term plans for the InfiLaw system of independent law schools….”

The Business Model

Annual tuition and fees at all three InfiLaw schools exceed $40,000. According to their ABA disclosures, the schools have been big beneficiaries of the current dysfunctional system of financing a legal degree. 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.

At all three law schools, students’ “institutional financial plan debt” was zero. The InfiLaw schools have plenty of federal student loan dollars skin in the game, but none of their own.

A Disturbing Trend

Even as the market for lawyers has languished, InfiLaw schools increased enrollment. According to the ABA, the three schools graduated a combined class of 679 students in 2011. Nine months later, only 256 had long-term, full-time jobs requiring a JD. That’s 38 percent.

Last year’s combined graduating class for the three school had soared to 1,191 students. Only 428 found full-time long-term JD-required employment. That’s 36 percent.

All of the schools’ websites follow the format of Arizona Summit’s rosier description of employment outcomes:

“Arizona Summit Law School was able to confirm the employment status of 99% (278 out of 279) of its program completers [sic] who graduated September 1, 2012, through August 31, 2013. The job placement rate for these graduates was 90%. This figure was calculated using the NALP formula for calculating job placement rate. Therefore, the 90% job placement rate was calculated by adding together all the employed graduates (250) and then dividing by the number of graduates whose employment status we were able to confirm (278). In accordance with NALP guidelines, the number of employed graduates includes all employment positions, including legal and non-legal positions, permanent and temporary positions, full-time and part-time positions, and any positions funded by Arizona Summit Law School.”

Clicking to another document on the site reveals that 25 of those jobs were “Law School Funded Positions” — 22 of which were short-term.

The Challenge of Leadership

Perhaps it takes an insider, such as former Justice Archer, to accomplish the kind of monumental change that his InfiLaw constituents may well resist. Perhaps this will be a “Nixon goes to China” moment for him and the profession. Maybe it will be the equivalent of President Lyndon Johnson muscling civil rights legislation through the Senate — a Texan overcoming a resistant South in the 1960s.

On the other hand, if the latest ABA task force produces anything less than revolutionary recommendations that finally make law schools financially accountable for the fate of their graduates, everyone will laugh it off — as they should. Unfortunately, there’s nothing particularly funny about the situation.

WHO REALLY PAYS FOR LAW STUDENT DEBT?

More public interest lawyers for our nation’s underserved citizens would be a good thing. More public debt to subsidize law schools that shouldn’t exist at all would be a bad thing.

In recent years, law schools have promoted debt forgiveness programs as a solution to rising student loan obligations. In some important ways, they are. Income-based repayment (IBR) can be a lifeline in a drowning pool of educational debt. It can also open up less remunerative options, including public interest law, for those willing to forego big bucks to avoid big law firms. But now everyone seems surprised to realize that, when all that debt is forgiven years hence, someone will have to pick up the tab.

Well, not quite everyone is surprised. More than two years ago, Professor WIlliam Henderson, one of the profession’s leading observers, saw this train wreck coming. “Unless the government’s actuarial assumptions on student loan repayments turn out to be correct,” Henderson wrote, “federal funding of higher education is on a collision course with the federal deficit.”

Tuition increases without regard to value added

Recently, the Wall Street Journal made that collision a front page story. In “Plans That Forgive Student Debt Skyrocket,” law students took center stage — and for good reason. For a decade, new lawyers have outpaced everyone, even medical students, in the rate at which they have accumulated educational debt.

Am Law columnist Matt Leichter has reported that from 1998 to 2008, private law school tuition grew at an annual rate of almost 3.5 percent, compared to 1.89 percent for medical schools and 2.85 percent for undergraduate colleges. Public law school tuition increased at an even faster pace: 6.71 percent. From 2008 to 2012, median law school debt for new graduates increased by 54 percent — from $83,000 to $128,000. (That compares to a 22 percent increase in medical student debt.)

Market disconnects

What accounts for the law school tuition explosion? For starters, the U.S. News rankings methodology incentivizes deans and administrators to spend money without regard to the beneficial impact on a student’s education. More expenditures per student mean a higher ranking, period.

Who provides that money? Students — most of whom obtain federally backed loans. To that end, the prevailing law school business model requires filling classrooms. As transparency about dismal law graduate employment outcomes has produced fewer applications at most schools, deans generally have responded by increasing acceptance rates. The overall rate for all law schools rose from 56 percent in 2004 to almost 80 percent in 2013.

Sell, sell, sell

As National Law Journal reporter Karen Sloan observed recently, “It’s a tale of two legal education worlds.” Top law schools place 90 percent of their graduates; but “more than three-quarters of ABA accredited law schools — 163 — had underemployment rates of 20 percent or more.”

Those numbers begin to explain what has now become an annual springtime ritual. As I’ve discussed in recent posts, many law school professors and deans at schools producing those underemployed graduates are proclaiming that the lawyer glut is over. Now, they say, is the best time ever to attend law school.

Outside the ivory tower, practicing lawyers know that such hopeful rhetoric isn’t transforming the market or slowing the profession’s structural changes. Last June, NALP Executive Director James Leipold wrote, “There are no indications that the employment situation will return to anything like it was before the recession.”

The most recent ABA employment statistics for the class of 2013 prove Leipold’s point: Nine months after graduation, only 57 percent had obtained long-term-full-time jobs requiring a JD. Median incomes for new graduates aren’t improving much, either. For the class of 2008, it was $72,000; for the class of 2012, it was $61,245.

IBR to the rescue

The vast majority of students borrow six-figure sums to fund their legal education. The federal government backs the loans, which survive bankruptcy. The end result is law schools with no financial skin in a game for which they reap tremendous economic rewards.

IBR is a godsend to many new lawyers who can’t get jobs that pay enough to cover their loans. It permits monthly installments totaling 10 percent of discretionary income (defined as annual income above 150 percent of the poverty level). Outstanding balances are forgiven after 10 years; for private sector workers, it’s 20 years.

Less obvious consequences

IBR has a dark side, too. If a person leaves the program early, total debt will include all accrued interest and principal, often creating a balance larger than the original loans. For those remaining in the program for the requisite 10 or 20 years, forgiven debt becomes taxable income in the year forgiven.

More insidiously for the profession, IBR allows marginal schools to exploit an already dysfunctional market. Such schools are free to ignore the realistic job prospects for their graduates (including JD-required public service positions) as they recruit new students who obtain six-figure loans to pay tuition. When graduates can’t get decent jobs, it’s not the school’s problem. Meanwhile, IBR becomes the underemployed young lawyer’s escape hatch.

The Wall Street Journal reports that graduates are using that hatch in dramatically increasing numbers: “[E]nrollment in the [IBR] plans has surged nearly 40% in just six months, to include at least 1.3 million Americans owing around $72 billion.” Those figures aren’t limited to lawyers, but they undoubtedly include many young graduates from law schools that should have closed long ago.

Bill Henderson probably finds some measure of vindication as a wider audience now frets over a problem that he foresaw years ago. But I know him well enough to believe that for him, like me, four of the least satisfying words in the English language are: “I told you so.”

ANOTHER UNFORTUNATE OP-ED

The current debate over the future of legal education is critical. Even more important is the need to base that debate on a common understanding of indisputable facts. Perhaps UC-Irvine Dean Erwin Chemerinsky and Professor Carrie Menkel-Meadow just made an honest mistake in misreading employment statistics upon which they rely in their April 14, 2014 New York Times op-ed, “Don’t Skimp on Legal Training.” If so, it was a bad one. (The Times designated my comment that includes some of the data cited in this post as a “NYT pick.”)

The offending paragraph comes early in the effort to dismiss those who use the word “crisis” — their op-ed puts it in quotation marks — to describe the challenges facing the profession. Since that word appears prominently in the subtitle of my latest book, I’ll take the bait.

Wrong From The Start

The authors support their “no crisis” argument with this:

“[A]s recently as 2007, close to 92 percent of law-school graduates reported being employed in a paid-full-time position nine months after law school. True, the employment figures had dropped by 2012, the most recent year for which data is [sic] available, but only to 84.7 percent.”

But the data on which they rely include part-time, short-term, and law school funded jobs — and only those graduates “for whom employment status was known.”

“Facts Are Stubborn Things”

Not until 2010 did the ABA require law schools to identify the types of jobs that their graduates actually obtained. The results have been startling, as data from the class of 2013 demonstrate:

– Nine months after graduation, only 57% of graduates had long-term full-time (LT-FT) jobs requiring bar passage. Another 5% held part-time or short-term positions.

– LT-FT “JD Advantage” jobs went to another 10.1%. This category includes positions — such as accountant, risk manager, human resources employee, and more — for which many graduates are now asking themselves whether law school was worth it.

– Another 4% got law school funded jobs.

– Unemployed law graduates seeking jobs increased to 11.2%.

– Average law school debt for current graduates exceeds $100,000. The rate of tuition increase in law schools between 1998 and 2008 exceeded the rate for colleges and medical schools. One reason is that U.S. News ranking criteria reward expenditures without regard to whether they add value to a student’s education.

– For 33 out of 202 ABA-accredited law schools, the LT-FT JD-required employment rate was under 40%; for 13 schools, it was under 33%.

Federally-backed student loans that survive bankruptcy fuel a dysfunctional system that has removed law schools from accountability for graduates’ employment outcomes. The current regime blocks the very “market mechanisms to weed out the weakest competitors” that the authors cite as providing the ultimate cure. As law school applications have plummeted, most schools have responded with soaring acceptance rates.

If all of that doesn’t add up to a crisis, what will it take?

The Importance of Credibility

The problem with the authors’ unfortunate attempt to minimize the situation is its power to undermine their other points that are, in fact, worth considering.

For example, they note that job prospects “obviously depend on where a person went to school and how he or she performed.” True, but many law professors now touting the happy days ahead for anyone currently contemplating law school ignore that reality.

“The cost of higher education, and the amount of debt that students graduate with, should be of concern to all.” True, but what’s their proposed solution?

“Law schools specifically should do more to provide need-based financial aid to students — rather than what most law schools have been doing in recent years, which is to shift toward financial aid based primarily on merit in order to influence their rankings. This has amounted to ‘buying’ students who have higher grades and test scores.” True, but how many schools are changing their ways? Between 2005 and 2010, law schools increased need-based financial aid from $120 million to $143 million while non-need based aid skyrocketed from $290 million to $520 million.

Like almost every law school dean in America, Dean Chemerinsky has a choice. He can acknowledge the crisis for what it is and be part of the solution, or he can live in denial and remain part of the problem. Earlier this year, National Jurist named Chemerinsky its “Most Influential Person in Legal Education.” Now is the time for him to rise to the challenge of that role.