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.

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