GAME-CHANGER?

Almost overnight, a persistently sad situation finally has many legal educators squirming. And rightly so.

The problem has been years in the making, as has been the profession’s unwillingness to address it. Federal funding mechanisms have combined with lack of accountability and non-dischargeability in bankruptcy to block the effective operation of market forces in legal education. Well-intentioned policies have gone terribly awry; they actually encourage misbehavior among many law school deans.

As law student debt soared into six-figures, calls for change produced the equivalent of catcalls from the “voice of the profession” — the ABA. Its latest Task Force report on the subject should embarrass anyone associated with it, including the House of Delegates that approved it. As the profession’s echo chamber convinced itself that all was well, hope for meaningful change was leaving the building.

But as it did four years ago, The New York Times has now aimed its spotlight on one of the profession’s dirtiest secrets.

The Paper of Record Speaks

In January 2011, The New York Times’ David Segal wrote a series that exposed the cynical gamesmanship whereby law schools inflated their recent graduates’ employment statistics. Through the deepening Great Recession, the profession still generated 90-plus percent employment rates for recent graduates. How? By counting every short-term, part-time, and non-JD-related job as if it were a position that any law graduate would want. Part-time greeters at Wal-mart, temporary baristas at Starbucks, and associates at Cravath were all the same in the eyes of that metric: employed.

The ugly truth surprised many prospective law students, but not the ABA, which had approved the schools’ misleading reporting methods. It turned out that within nine months of graduation, only about half of all new J.D.-degree holders were obtaining full-time long-term (defined as lasting a year) jobs that required bar passage. Within two years of the Times’ expose’, the ABA succumbed to public embarrassment and required law schools to detail their employment outcomes.

And It Speaks Again…

The overall full-time long-term JD-required employment rate has barely budged since the new age of transparency began, but law school tuition and resulting student debt have outpaced inflation. As applications to law school plummeted, many deans responded by increasing acceptance rates to keep student loan revenues flowing.

So now the focus has shifted from full disclosure to flawed funding, and the Times has entered the field of battle:

— On August 25, it published my op-ed on the law school debt crisis and the ABA”s feeble response. It went viral.

— On October 24, the Times’ lead editorial was “The Law Student Debt Crisis.” It, too, went viral.

— On October 26, the first page of the Times’ business section completed the trifecta with “Study Cites Lower Standards in Law School Admissions.” The article discusses Law School Transparency’s report documenting that bottom-feeder schools are exploiting unqualified applicants.

And Still the Naysayers Resist…

Previous posts discussed two letters-to-the-editor responding to my August 25 Times piece — one from a law professor at Texas A&M; the other from Northeastern’s dean. There’s no need to review them here. The latest Times’ editorial is generating similarly defensive vitriol from some law professors and deans who are determined to defend the indefensible.

For example, Professor Frank Pasquale at the University of Maryland School of Law (where the full-time long-term JD-required employment rate for 2014 graduates was 57 percent) fears that the Times’ October 24 op-ed will accelerate privatization:

“Private lenders are sure to be pleased by the editorial,” Pasquale writes at Balkanization. “Law school loans are lucrative for them because of extremely low student loan default rates for law school borrowers… The stage is now set for a bootlegger/baptist coalition: as prohibitionists cut off the flow of federal loans, private lenders line up to take their place.”

But The Naysayers Are Wrong…

Pasquale offers a clever turn of phrase, but his premise is incorrect. The widespread use of deferral and income-based repayment programs means that the default rate is not the most meaningful measure of whether a loan will be repaid. Actual repayment rates are. Depending on the school, repayment rates can be pathetic.

Professor Bill Henderson at Indiana University Maurer School of Law doesn’t share Pasquale’s confidence that private lenders would step into any breach that the loss of federal funds created. Henderson also notes, correctly, that private loans don’t come with deferral and IBR options that have kept nominal default rates low as non-repayment rates have surged:

“[P]rivate lenders would need to be confident that loans would be repaid. That likelihood is going to vary by law school and by law student, raising the cost of lending.”

Precisely correct. As I’ve suggested previously, tying the availability of law school loans to school-specific employment outcomes could allow the market begin exercising its long-denied power to correct the situation. It could also mean big trouble for marginal schools.

How About Holistic?

Pasquale also chides the Times for its narrow-minded approach: “[T]he paper’s biased view of higher education in general is inflecting its take on law schools. We can only hope that policymakers take a more holistic approach.”

How about a holistic approach that permitted educational debtors to discharge their private loans in bankruptcy? In that case, Pasquale’s “stage” would no longer be “set for a bootlegger/baptist coalition” whereby “prohibitionists cut off the flow of federal loans [and] private lenders line up to take their place.” Private lenders wouldn’t rush to make fully dischargeable loans to students seeking to attend marginal schools that offered little prospect of employment generating sufficient income to repay them.

How About A Constructive Suggestion?

Policymakers could revise the federal loan program to tie student funding at a school to that school’s employment outcomes for recent graduates. In fact, it could do that while preserving deferral and IBR programs. Add dischargeability of educational debt in bankruptcy and you have the beginnings of a holistic recipe for hope.

In that respect, Professor Henderson notes: “I have faith that my legal colleagues would do a masterful job solving the problems of higher education.”

Based on the profession’s track record to date, I fear that my friend’s sentiment reflects a triumph of hope over reality. But his key message is right on target: If the profession does not put its own house in order soon, someone else will.

Marginal law schools exploiting market dysfunction may have triggered the current round of scrutiny, but outside interveners will not limit their systemic fixes to the bottom feeders. Deniers of the ongoing crisis can persist in their positions, or they can propose solutions, as I have.

The Times has pulled a loose thread on the entire legal education establishment’s sweater.

10 thoughts on “GAME-CHANGER?

  1. Two themes run through many critiques of law schools. First, critics call occupational licensure itself a sad relic of a more guilded age. In a better world, they argue, anyone could hang out a shingle to offer legal services.

    Second, critics lament that the number of graduates of law schools in JD-required jobs (within 9 months of graduation) has declined (about 10% to 15% over the last 15 years). So the JD requirement is both troubling, and essential to measuring schools’ success? Seems like a contradiction.

    And yes, Maryland’s rate, for the misleading JD-required number, is 57%–but Yale’s is 74%. Is Yale also part of a “scam”? 17% less scammy? Is there a number at which you would be satisfied?

    • I assume your final question about Yale being “less scammy” is facetious. Surely you don’t believe that employment opportunities for a Yale grad (average law student debt of $117,000) are similar to those for a Maryland grad (average law student debt of $102,000). In any event, I don’t regard Maryland or Yale as a “scam.” Maryland’s placement rate is close to the average of all law schools, which is the number at which I would be satisfied. My recent article for the American Bankruptcy Institute Law Review proposed a sliding scale of reduced federal student loan guarantees for students seeking to attend a school that failed to achieve the overall average of all schools (around 57 percent).

      What’s your constructive proposal?

      • So here’s a first step that I’ve heard proposed: The ABA refuses to accredit the bottom 10% or 20% or so of schools whose students are most at risk at failing. These schools then sue under antitrust law, claiming ABA is a cartel. What then?

    • I don’t know who claims that requiring licensure is the problem; if anything, it is a major factor mitigating the problem. The legal market is so glutted that there is little sense in hanging out a shingle at this point. The solution to the problem here is drastically reducing the number of JDs/lawyers minted each year, so that the market can eventually be corrected.

  2. Thank you for bringing this issue to the forefront. Back in September 2011, I offered a few modest proposals for addressing these concerns. David Segal’s series in the New York Times signaled a watershed moment regarding legal education and its ill effects on many recent graduates. When people such as Paul Campos and Mr. Harper highlight these outcomes, it carries much more weight.

    Frankly, this nation will not benefit from having hundreds of thousands of college or law grads who are each strapped down with ridiculous amounts of non-dischargeable debt. The only people who would argue to the contrary are law professors, administrators or those on their payroll.

  3. The only quibble I have with this post is the part where you used the phrase “well-intentioned.” I don’t agree. I don’t agree when it comes to the federal lending system – the intentions of this Congress or past Congresses – and I definitely don’t agree when it comes to the ABA (the other very, very guilty and captured accreditation agencies) or law schools.

    C.f. An excellent article in the NY Post from 5 years ago entitled “Subprime Goes to College” – borrowed from an Eisman speech. Also, an absolutely great article in the Huffington Post from equally as many years ago detailing the role of accreditation agencies in this business. Even, Matt Taibbi in Rolling Stone from nearly 3 years ago, “Ripping Off Young America: the College-Loan Scandal.” What conclusion could a fair-minded and informed person come to but that this entire situation is 100% intentional, generational theft?

    P.S. The ABA is only the official accreditation agency (meaning the accreditation secures Title IV funds) for stand-alone law schools. For non-stand-alone (the overwhelming majority of law schools) the official accreditation agency is one of the regional bodies – WASC, Middle States, etc. . Have you ever heard about their standards for bar pass rates? Of course not…because that’s a secret. P.S. Corinthian was still WASC senior accredited the day the DOE shut it down….

    Riddle me why any of this debacle exists given all the ‘good intentions.’

  4. The ABA is the only body that can exercise any control over law schools’ admissions policies and whether they comply with them. But the federal government could take a big step toward reducing the law school debt crisis if it would stop allowing for-profit law schools to benefit from federal student loans. That is just a travesty. The federally guaranteed money flows straight from the taxpayers, via the indebted student, into the investors’/owners’ pockets. And when the student can’t find work, his or her credit and finances are ruined but the investors keep the money.

    • “The ABA is the only body that can exercise any control over law schools’ admissions policies and whether they comply with them.”

      No, you’re wrong about that. When I say the ABA is not the official accreditation agency for non-stand-alone law schools, I mean they are not the accreditation agency for non-stand-alone law schools. They, not the ABA, set and enforce standards that allow the law degree granting programs within the university to be accredited – hence take Title IV monies.

      For instance, WASC has its own standards for programmatic accreditation of a law degree granting program; they are nominally tougher than the ABA standards, but apparently not enforced.

      You may check on this yourself by looking up a non-stand-alone law school you’re interested in here (read the notes): http://ope.ed.gov/accreditation/search.aspx

      • I think we’re comparing apples and oranges. Here’s what I am talking about:
        Accrediting Agency for Law:
        Since 1952, the Council of the Section of Legal Education and Admissions to the Bar (“the Council”) of the
        American Bar Association (“the ABA”) has been approved by the United States Department of Education
        as the recognized national agency for the accreditation of programs leading to the J.D.
        J.D. programs at law schools that are part of universities still have to be accredited by the ABA’s Council of the Section on Legal Education, even if the larger university together with all its programs is accredited by another agency.

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