DEAR ABA…

Dear ABA (especially members of the House of Delegates to the upcoming annual meeting in Chicago):

For years, America’s dysfunctional system of financing legal education has produced too many lawyers for too few jobs — and too many law graduates with too much educational debt. A year ago, the ABA created yet another Task Force to consider the problem. The June 17, 2015 Final Report on the Financing of Legal Education embodies the failure of that Task Force’s mission. It now goes to the House of Delegates for approval.

If the Delegates are interested in rehabilitating the ABA’s credibility and restoring public confidence in the profession on an issue of critical importance to the country, they could take this simple step: reject the Task Force Report. That’s right. Rather than giving the typical rubber stamp of approval amid flowery speeches thanking Task Force members for their time and effort in generating a hollow ABA statement summarizing the obvious, the House of Delegates could just say no.

Round One

Some observers had hoped that the ABA’s previous Task Force on the Future of Legal Education might tackle the daunting issues responsible for our dysfunctional legal education market. After all, the ABA’s leaders promised that the 2012 Task Force would make “recommendations to the American Bar Association on how law schools, the ABA, and other groups and organizations can take concrete steps to address issues concerning the economics of legal education and its delivery.”

To its credit, the 2012 Task Force put its toe in those waters, observing that the “system of lending distances law schools from market considerations and it supports pricing practices that do not well serve either the public or private value in legal education.”

Let’s state the problem more bluntly: Marginal law schools are relying on exploding student debt to produce revenue streams that keep them alive. They get away with it because federal student loans come without school-specific accountability for graduates’ dismal employment outcomes. Schools have no financial skin in the game.

But the 2012 Task Force didn’t go beyond identifying the problem because, it said, “The time and resources available to the Task Force have made it impractical to develop a structure of equitable and effective solutions.”

Round Two

So in May 2014, then-ABA president James R. Silkenat announced the creation of a new Task Force — one specifically devoted to the Financing of Legal Education. It was supposed to pick up where the 2012 Task Force had stalled. It was going to “conduct a comprehensive study of the complex economic and political issues involved and produce sound recommendations to inform policymakers throughout the legal community.”

The 2014-2015 Task Force Report recites that 25 percent of law schools obtain at least 88 percent of their total revenues from tuition and that the average for all law school is 69 percent. It also reports that higher tuition has produced more student debt, even as job prospects for graduates of marginal schools have languished.

Since 2006 alone, average student debt has increased by 25 percent (private schools) and 34 percent (public schools) in inflation-adjusted dollars. Average student debt at graduation from private law schools in 2013 was $127,000; for public schools it was $88,000. Meanwhile, only about half of new law graduates are obtaining full-time long-term jobs requiring a JD.

But the new Task Force didn’t pursue this obvious market dysfunction. Instead, its Final Report offers superficial fixes: better debt counseling for students, better disclosure forms from the Department of Education, more dissemination of how schools spend their money, and continued experimentation with law curriculum. They ignore the core financial accountability problem, rather than confronting and addressing it.

Insularity and Self-Interest

The chairman of the 2014-2015 Task Force was Dennis W. Archer, former mayor of Detroit, former Michigan Supreme Court justice, and past president of the ABA. Did the ABA think no one would notice that Archer also chairs of the national policy board of Infilaw — a private equity-owned consortium of three for-profit law schools — Arizona Summit, Charlotte, and Florida Coastal.

The Infilaw schools feed on the market dysfunction that the current system for funding legal education creates. The job market for law graduates from schools such as Infilaw’s remains dismal. But even in the face of their graduates’ poor full-time long-term JD-required employment results, Infilaw’s schools increased enrollment and have become leaders in creating debt for their students.

Archer wasn’t the only problematic appointment to the 2014-2015 Task Force. Another member, Christopher Chapman, is president and CEO of Access Group — the collective voice of 197 ABA-accredited law schools.

According to the Access Group’s website, “During the course of our 30+ year existence, we became a leading provider of affordable student loans for aspiring professionals in law, medicine, dentistry, health, business, and other disciplines. As such, we served as a national originator, holder and servicer of federally guaranteed and private, credit-based loans, funding more than $18 billion of education loans since 2001.”

Enough said.

Forfeiting The Right To Be Heard

The fact that, as one 2014-2015 Task Force witness said, legal education may be the “canary in the coal mine” on issues relating to student debt and financing higher education generally is no excuse for the profession to refrain from offering potential solutions.

For that reason, at its upcoming August 3-4 meeting in Chicago, the ABA House of Delegates could reject the Task Force Report. It could then reconstitute the Task Force membership with individuals willing to deliver the tough message that the profession needs. It could direct the newly constituted group to develop meaningful proposals that tie law student loan availability to individual law school outcomes. My recent article in the American Bankruptcy Institute Law Review, “Bankruptcy and Bad Behavior,” offers one idea that would force law schools to put some financial skin in the game; others have suggested plans warranting serious consideration.

The ABA describes its mission as “committed to doing what only a national association of attorneys can do: serving our members, improving the legal profession, eliminating bias and enhancing diversity, and advancing the rule of law throughout the United States and around the world.”

In a single vote rejecting the 2014-2015 Task Force Report on the Financing of Legal Education, the House of Delegates could match those lofty words with action.

On this vitally important issue, the ABA leadership has caused many attorneys and the general public to become cynical about the organization’s motives. The House of Delegates has a unique opportunity to prove that the ABA is not just the vehicle whereby an insular, self-interested group seeks to preserve the present at the expense of the future. The House of Delegates can be part of the solution, or it can remain part of the problem.

Which path will it choose? The whole legal world is watching.

4 thoughts on “DEAR ABA…

  1. With such a steep reliance on student loan dollars for paying the law school bills (i.e. professor salaries) – 88% of salaries coming directly from the students!!! – the damn professors should be in the classroom for 88% of their work week.

    If the want the title “professor” (which is odd, given their utter lack of qualifications to teach, research, and generally profess), they should do what the PhDs do: obtain their research funding from external sources. I’d be surprised, though, if any third party felt that any law school professor research was actually worth paying for.

    What a screwed up system we have. The funding needs to stop. End of story. And the ABA needs to stop pussyfooting around the issue with its utterly feeble, “The time and resources available to the Task Force have made it impractical to develop a structure of equitable and effective solutions.” Um, ABA, how about you spend an hour reading the so-called scamblogs. Your solutions are right there and have been for years.

    One strongly suspects that the task force had, as its hidden agenda (but actually not that hidden), the ultimate goal of preserving the status quo.

    How about a task force that is made up of lawyers and non-lawyers thoroughly unconnected to law schools? Again, probably asking too much.

  2. Hey Steve,

    enjoyed your article. Just note that footnote 48 is wrong- there is no tax bill waiting those that discharge on PSLF.

    “Any debt forgiven/cancelled through the Public Service Loan Forgiveness Programs is non-taxable. There is no 1099-C form and there is no requirement to report it to the IRS. The debt is non-taxable if, as a condition for the cancellation, “the individual worked for a certain period of time in certain professions for any of a broad class of employers.” 26 U.S.C. § 108(f)(1).”

    My other comment- why does the article not just point out the obvious- that the non functioning market is the result of federal involvement in the student loan business. We have seen countless ways with countless government programs in which it is possible to get around “stringent requirements” by playing with statistics or just otherwise rent-seeking. I can only see pulling the entire loan program for graduate schools would enable a rational market in law (even if it means many schools close). Private lenders will provide for students that can get into Duke, Vandy, etc. Not so much for Cooley.

    • You’re right about loans forgiven under Section 108; they do not result in taxable income. Most graduates are in other programs — Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR)– all of which will eventually produce big tax bills for the beneficiaries of forgiven debt at significant expense to the federal treasury (and, therefore, taxpayers). Still, as footnote 48 states, “For indebted graduates, IBR/PAYE/ICR are still better than nothing.”

      I don’t agree that the federal government should get out of the student loan business. But for federal loans, I would not have been able to attend college, much less law school. My family (and I) would have been unacceptably high credit risks for any private lender.

  3. I don’t think the government student loan program should be totally shut down , but graduate students should not be eligible to borrow $60,000 a year or more to go to fifth rate law schools. There should be a requirement that most graduates of the school find decent paying work, or Uncle Sam should cut off the money supply. I think that at least half of the law schools in the country should close down. But for the massive amounts of government student loan money, there is little question they would. It’s not doing anyone a favor to allow them to borrow $200,000 for a worthless degree.

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