LEGAL EDUCATION’S STRANGE BEDFELLOWS

The recent New York Times editorial on the law student debt crisis didn’t attack all law schools as “scams.” Rather, along with Law School Transparency’s recent report, it exposed a soft underbelly. But in defending the bad behavior of others, many law professors and deans are doing themselves, their schools, and the profession a great disservice.

It’s a puzzling situation.

In my 30-year career as a litigator at Kirkland & Ellis, I encountered plenty of bad lawyers. I regarded them as embarrassments to the profession. But I didn’t defend their misconduct. Good doctors don’t tolerate bad ones. Gifted teachers have no patience for incompetent colleagues.

The Opposite of Leadership 

Yet the top officers of the Association of American Law Schools sent a letter to the Times editor that began:

“The New York Times fails to make its case on law school debt.”

AALS president Blake Morant (dean of George Washington University Law School), president-elect Kellye Testy (dean of the University of Washington School of Law), and executive director Judith Areen (professor and former dean at Georgetown Law and former AALS president) then explained why all is well.

If those AALS leaders speak for the organization, a lot of law deans should consider leaving it. Rather than serving the best interests of most law schools, publicly defending the bottom-feeders — while saying “no” to every proposal without offering alternatives — undermines credibility and marginalizes otherwise important voices in the reform process.

Using a Poster Child to Make a Point

The Times editorial looked at Florida Coastal, about which certain facts are incontrovertible: low admission standardsdismal first-time bar passage ratesaverage debt approaching $163,000 for the 93 percent of its 2014 graduates with law school loans; poor JD-employment prospects (ten months after graduation, only 35 percent of the school’s 2014 class had full-time long-term jobs requiring bar passage).

Florida Coastal isn’t alone among those exploiting law school moral hazard. Without any accountability for the fate of their graduates, many schools feed on non-dischargeable federal loans and the dysfunctional market that has allowed them to survive.

Predictable Outrage from a Inside the Bubble

In June, Scott DeVito became Florida Coastal’s new dean. In an interview about his strategic plans, he said, ““We’re going to have to build more on the parking garage because people will want to go here.”

Predictably, DeVito pushed back hard against the Times’s op-ed. (The newspaper published only a portion of his two-page letter.) He boasts that his school’s first-time bar passage rate was 75 percent in February 2015 — third best of the state’s 11 law schools. That’s true.

But the February session typically includes only 50 to 60 Florida Coastal first-time test-takers annually. DeVito doesn’t mention more recent results from the July 2015 administration, which usually includes 200 to 300 Florida Coastal grads each year: 59.3 percent first-time bar passage rate — eighth out of eleven Florida law schools.

From 2010 to 2014, the school’s July results were:

2010: 78.8% (7th out of 11)

2011: 74.6% (8th)

2012: 75.2% (9th)

2013: 67.4% (10th)

2014: 58.0% (10th)

Who among America’s law school deans is willing to defend that performance record? Their professional organization, the AALS, seems to be.

Facts Get in the Way

DeVito acknowledges that his students’ law school debt is high, but says that’s because, as a for-profit school, “taxpayers are not paying for our students’ education.” That’s a remarkable statement. Florida Coastal and every other law school receives the current system’s inherent government subsidies: non-dischargeable federal student loans, income-based repayment (IBR), and loan forgiveness programs.

Likewise, DeVito asserts that Florida Coastal students “repay their loans,” citing the school’s low default rate. The AALS letter makes the same point: “[M]ost law students…are able to repay and do. The graduate student default rate is 7 percent versus 22 percent for undergrads.”

That argument is disingenuous. The absence of a default doesn’t mean a graduate is repaying the loan or that the day of reckoning for deferred or IBR-forgiven debt will never arrive for students and taxpayers. In fact, it’s inconsistent to assert that law students “repay their loans” while also touting the benefits of IBR and loan forgiveness because students in those programs will never have to repay their loans in full. (And they still won’t be in default!)

Not Defaulting Is Not the Same as Repaying

A recent Department of Education report on colleges highlights the extent to which the absence of default is not equivalent to repayment. There’s no similar compilation for law schools, but an April 2015 Federal Reserve Bank of New York Report on Student Loan Borrowing and Repayment trends generally notes that while only 11% of all educational loan borrowers are in default, “46% of borrowers are current in their loans but are not in repayment. Only 37% of borrowers are current on their loan and actively paying down.” (Emphasis supplied)

As the New York Fed reports, the worsening repayment rate is exacerbating the long-term debt problem for students and taxpayers: “The lower overall repayment rate [compared to earlier years] helps explain the steady growth in aggregate student debt, now at nearly 1.2 trillion dollars.”

Righting Wrongs?

Finally, DeVito takes a noble turn, claiming that it “takes a for-profit entity to right a wrong — in this case the lack of diversity in law schools.”

In “Diversity as a Law School Survival Strategy,” St. Louis University School of Law Professor Aaron N. Taylor explains that marginal schools with the worst graduate employment outcomes have become diversity leaders: “[T]he trend of stratification may only serve to intensify racial and ethnic differences in career paths and trajectories.”

Rather than righting a wrong, it looks more like two wrongs not making a right.

A Few Profiles in Courage

To their credit, Professors William Henderson (Indiana University Maurer School of Law) and David Barnhizer (Cleveland-Marshall College of Law), among others, have embraced the Times’s message that Brian Tamanaha (Washington University School of Law) offered years ago: The current system is broken. Recognize it; accept it; help to lead the quest for meaningful reform.

Likewise, Loyola School of Law (Chicago) Dean David Yellen worries about schools that are “enrolling large numbers of students whose academic credentials suggest that they are likely to struggle gaining admission to the bar… [T]he basic point is an important one that legal education must address.”

The Real Enemy

DeVito’s effort to spin away Florida Coastal’s problems is understandable. Properly implemented, school-specific financial accountability for employment outcomes would put maximum pressure on the weakest law schools. Frankly, the demise of even a single marginal law school would come as a welcome relief. Since the Great Recession we’ve added law schools, not eliminated them.

That’s why most law schools and their mouthpiece, the AALS, should side with Dean Yellen and Professors Henderson, Barnhizer, Tamanaha, and others urging meaningful reform. To test that hypothesis, try this:

The next time someone says that introducing financial accountability for individual schools would be a bad idea, ask why.

The next time someone says that respectable law schools serving their students and the profession should not distance themselves from marginal players that could never survive in a functioning market for legal education, ask why not.

The next time someone says that a united front against change is imperative, ask who the real enemy is.

Then offer a mirror.

COMMENDABLE CONDUCT AWARD

Regular readers know that I’m often critical of many law school deans. But when one of them gets it right, let’s give credit where it’s due. As the glut of new attorneys persists, the University of Kansas School of Law Dean Stephen Mazza became the latest dean to announce significant reductions in incoming class size. With that action, he has earned a “Commendable Conduct Award.”

Not the first

The University of Kansas isn’t the first to implement such cuts. Last year, Frank Wu, chancellor and dean of the University of California Hastings School of Law announced a 20 percent reduction in class size for the fall of 2012.

“The critics of legal education are right,” Wu said. “There are far too many law schools and there are too many law students and we need to do something about that.”

George Washington University, Albany Law School, Creighton University School of Law, and Loyola University Chicago School of Law have reduced entering class size, too. In March, Northwestern Law School Dean Daniel Rodriguez said his school would reduce the fall 2013 class by 10 percent. “We can’t ignore the destabilizing forces that the legal industry is facing today,” he said.

KU deserves special praise

All of these efforts to reduce the size of entering classes are commendable. But there are several unique aspects to the University of Kansas announcement that make it especially noteworthy.

First, the reduction as a percentage of enrollment in prior years is large: from 175 students graduating this year to a target of 120 students for the 2013 entering class and for the foreseeable future.

Equally significant, it appears that KU didn’t have to take its laudable step. The dean said that applications were down only about 10 percent — far less than many other schools. Moreover, an impressive 82 percent of 2012 graduates secured long-term jobs where a JD was required or preferred — far above the national average.

As an added bonus, a KU legal education is a relative bargain compared to many other schools: $18,600 tuition for full-time students who are state residents; $31,500 for out-of-state.

Motivations matter; outcomes matter more

Everyone expects that the decline in the number of law school applicants will produce lower average LSATs and GPAs for the entering 1L class. That, in turn, would hit the selectivity component of a school’s overall U.S. News ranking. It’s possible that some deans have reduced entering class size as part of a strategy to protect their rankings. But if the overall net outcome is that law schools as a group produce fewer lawyers three years from now, then the rankings may have helped to mitigate damage that they have caused since their first appearance in 1987.

Ay, there’s the rub. Will there be fewer total law graduates, or will other schools (and new ones in the pipeline) enroll the students that KU and others don’t accept? Indeed, will some schools expand enrollments solely to increase their tuition revenues? Asking those institutions to consider the long-term well being of the marginal students they recruit, or the sad state of the profession itself, would be asking too much, I guess.

One way to counteract the agendas of deans who refuse to do the right thing is to recognize those who do. Even more important is the task of helping prospective law students make informed decisions before they apply to law school. Over time, perhaps more of them will take advantage of increased transparency to assess realistically their own suitability for a satisfying and successful legal career. But at any age, encounters with confirmation bias are never easy.

Meanwhile, kudos to Dean Stephen Mazza and the University of Kansas School of Law. He’s been dean only since April 2011, but he’s already making a profound difference in the way that matters most — one person at a time. (And thanks to one of my regular readers who brought Dean Mazza’s announcement to my attention.)

BACK TO SCHOOL SPECIAL: LAW SCHOOL TUITION!

A recent article in The Wall Street Journal highlights the efforts of some law schools to generate applicants (and enroll students) in the declining legal market. The print version of the paper included a large photograph of University of Illinois College of Law Dean Bruce P. Smith. It’s an odd time for that school to seek publicity. Not long ago, the ABA fined the school $250,000 for intentionally submitting false LSAT and GPA data.

The new initiatives include scholarships, although for many schools those aren’t really new. For years, some law schools have used non-need-based financial aid to lure students with high LSATs. Lurking behind the current initiatives — and the counterproductive behavior of far too many law school deans — are the ubiquitous U.S. News rankings. Obsession over those rankings created a climate that produced the University of Illinois College of Law’s sanctionable conduct.

There’s just one problem…

The difficulty for many “merit” scholarship recipients is two-fold. First, the money often disappears after year one. For years two and three, the law school business model reasserts its power and, for most students, loans for tuition keep school revenues and profits flowing. The New York Times wrote about that phenomenon last year.

I don’t know what the University of Illinois College of Law’s approach will be, but tuition there is $44,520 for non-residents and $37,100 for residents. Dean Smith said that grants went to every member of the class of 2014 (including those admitted from the wait list) at a total cost of $3.6 million. Maintaining that average of $18,000 per student (assuming enrollment of 200) for all three years would be a daunting task. After all, it’s a state school and Illinois is in terrible financial shape.

Make that two problems…

The more abiding challenge for many students surfaces a bit later: limited job opportunities. For example, the University of Illinois College of Law awarded 190 J.D. degrees in 2011. According to its July 2012 ABA employment report, nine months after graduation, only 96 had full-time long term jobs requiring bar passage.

Other schools mentioned in the WSJ article include:

USC (Gould School of Law): 207 graduates in 2011; nine months after graduation, 134 with full-time long term jobs requiring bar passage.

UCLA: 344 graduates in 2011; 211 with full-time long term jobs requiring bar passage.

George Washington University: 518 graduates in 2011; 421 with full-time long term jobs requiring bar passage.

Brooklyn Law School: 455 graduates in 2011; 215 with full-time long term jobs requiring bar passage.

The overall full-time long term employment rate for all 2011 law school graduates with jobs requiring bar passage was 55 percent.

An old trick

The premise of these scholarship programs is simple. Rather than reduce tuition for everyone, keep the list price high (hotel managers would call it a room’s “rack rate”) for those who can afford it and offer differential discounts to those who are price sensitive at the margin. The secrecy of individual grants creates a perfect environment for implementing what economists might call pricing along the demand curve. Extract as much as possible from each buyer while maximizing total sales (enrollments).

For anyone with a long-run perspective that extends beyond filling up next year’s law school classrooms, the approach might seem a bit perplexing. If there are twice as many law jobs as there are graduating students with J.D.s, might it make more sense to adopt a strategy that reduced total enrollment?

To their credit, some schools, including George Washington University, are doing that. But for the most part, each law school is striving to maintain enrollments and the credentials of entering classes. Insofar as they are now throwing scholarship money at prospective students who are uncertain about whether to attend law school at all, they’re making things even worse.

U.S. News strikes again

Professor William Henderson correctly closes the article with this observation: “It’s the fear of a U.S. News downward spiral. It’s hard to come up in the rankings when your applications are going down.”

Thank goodness the U.S. News rankings’ guru Robert Morse clarified his magazine’s position on all of this: “[T]he rankings should not be a management tool that law school administrators use as the basis for proving that their school is improving or declining.”

Unfortunately, they do.