THE ABA IS RAISING THE WRONG BAR

Posted on November 30, 2016 by thebellyofthebeast

“[W]hen we look at these low performing schools, you guys are doing absolutely nothing.”

So said a member of the Department of Education’s National Advisory Committee on Institutional Quality and Integrity last June. I wrote about the painful session in August. The question on the table was whether the American Bar Association should lose its power to accredit law schools. The ABA leaders on the receiving end of that stinging rebuke had expected routine approval. What they got instead was a three-hour thrashing.

Disaster Avoided

The ABA beat back the committee’s recommendation of a 12-month suspension of its accreditation power. Even worse, it learned nothing from the episode. That became apparent in October, when the ABA’s Section of Legal Education and Admissions to the Bar recommended a rule change that it thought was monumental. It’s actually far too little coming far too late.

The new rule would require at least a 75 percent of a law school’s graduates to pass a state bar exam within two years of receiving their degrees. The current standard requires a 75 percent pass rate within five years. Since 2000, only four law schools have faced difficulty under the current standard, and all were restored to full accreditation.

Looming Disaster Remains

The Department of Education’s heat directed at schools taking advantage of their students could cool significantly under President Trump, who recently paid $25 million to settle former students’ fraud claims against Trump University. The troubling law school backstory is a less dramatic variation on the same theme.

Plummeting national bar passage rates coupled with growing student debt for degrees of dubious value are the culmination of a dysfunctional market in legal education. That dysfunction is taking a cruel toll on a generation vulnerable to exploitation by elders who know better. Sooner or later, we’ll all pay the price.

The ABA’s latest misfire toward a remedy misses the key point: even passing the bar doesn’t mean getting a law job. Within 10 months of graduation, fewer than 60 percent of 2015 graduates obtained full-time long-term employment requiring bar passage. Compared to the class of 2014, the number of such positions declined by 10 percent (from 26,248 to 23,687). The total number of 2015 graduates: 40,000.

Students attending marginal schools bear the greatest burden. Their schools use a business model that relies on federal student loan dollars to fill classrooms. Because schools have no accountability for their graduates’ poor employment outcomes, they are free to dip ever deeper into the well of unqualified applicants. Prospective employers have noticed.

Disaster For Many Students

The ABA’s persistent refusal to confront the employment rate problem brought the Department of Education into the picture. At the June hearing, committee members posed tough questions that ABA Managing Director Barry Currier had a tougher time answering. As some marginal schools received huge federal dollars, the committee noted, the vast majority of their graduates couldn’t get law jobs.

Now the ABA proposes tinkering at the edges. Even at that, based on the outrage generated from some inside the professorial ranks, you’d think it was trying to do something truly revolutionary. Some educators complained that shortening the 75 percent bar passage rate period from five years to two would discourage schools from admitting minority candidates, thereby leading to a less diverse profession.

That’s a non sequitur. If an additional three years after graduation is needed for some graduates to pass the bar, whatever they’re learning during that post-graduate period can’t be coming from their former classrooms. And, of course, nothing in the ABA proposal solves the employment problem.

Disaster Rewards a Few

As educators rely on student debt to keep their law schools operating, they’re getting paid, regardless of how their graduates fare in the job market. That frames the issue with which the ABA should be grappling but continues to dismiss: Marginal law schools are unable place most of their graduates in full-time long-term bar passage-required jobs.

Solving that problem requires schools to have financial skin in the game. Here’s one suggestion: tie the availability of a student’s federal loan dollars to a law school’s employment outcomes. That would create accountability that no dean or administrator currently possesses. And they sure don’t want it.

The ABA is institutionally incapable of embracing the change required to create a functional market in legal education. Vested interests are too embedded. The clout of the marginal schools is too great.

For example, the head of the ABA’s last “task force” on the challenges of financing legal education was also serving as the chairman of the national policy board of the Infilaw consortium of for-profit law schools, including the Charlotte School of Law. In fact, Dennis W. Archer still chairs the Infilaw national policy board. On November 15, Charlotte was the subject of a rare event: the ABA placed the school on probation because of its admissions practices. The ABA also ordered public disclosure of its bar passage rates.

But the ABA didn’t address the bigger problem with Charlotte that afflicts students at similar schools: dismal full-time long-term bar-passage required employment rates. Charlotte’s rate for the class of 2015 was 26 percent — down from 38 percent in 2012. Here’s the real kicker: from 2011 to 2015, the number of graduates at Charlotte increased from 97 to 456.

Growing supply in response to shrinking demand. That’s what happens when the people running law schools view students as revenue streams for which the schools will never have any financial accountability. The federal government backs the loans; educational debt survives personal bankruptcy; many in a generation of young would-be attorneys begin adulthood in a deep, six-figure financial hole.

Perhaps President-elect Trump will identify with the plight of the student-victims of this continuing disaster. Where would he be today if he had not been able to discharge his business loans through a string of bankruptcy filings? Not in the White House, that’s for sure.

INDIANA TECH: ANOTHER COSTLY LESSON IGNORED

Posted on November 10, 2016 by thebellyofthebeast

I’ll have more to say about the election, but not today. Instead, let’s take a closer look at a story that got lost in the shuffle of presidential politics. It deserves more attention than it received.

Back in 2013, when Indiana Tech opened the state’s fifth law school, I wrote that the decision was the latest example of pervasive legal market dysfunction. As the number of applicants declined, marginal schools increasingly were admitting students who wouldn’t be able to pass the bar, much less get decent jobs requiring a JD. Schools such as Indiana Tech were continuing to inflate the growing lawyer bubble, which was also the title of my 2013 book. (Proving that some things never change, it came out in paperback earlier this year.)

The central contributor to that bubble remains in place. Specifically, the federal student loan program absolves marginal law schools of accountability for their graduates’ poor employment outcomes, while encouraging administrators to fill classrooms with tuition-paying bodies. The results are predictable: lower admission standards, lower bar passage rates, and burgeoning law student debt for degrees of dubious value from marginal schools.

Victims of a Doomed Experiment

Indiana Tech’s inaugural class of first-year students began their studies in August 2013. Two years later, the school failed in its first attempt to get ABA accreditation. Further proving the ABA’s failure to address the continuing crisis in legal education, it granted Indiana Tech provisional accreditation earlier this year. The school graduated its first twelve students in 2016; only one passed the bar exam. Another passed on appeal, and a third passed the bar in another state.

On October 31, 2016, the school’s 71 students received an unwelcome Halloween surprise. The board of trustees announced its unanimous vote to close forever on June 30, 2017.

Indiana Tech President Arthur Snyder’s statement said, “[F]or the foreseeable future, the law school will not be able to attract students in sufficient numbers for the school to remain viable.”

Here’s the thing. President Snyder’s observation was equally true in 2011 — when the school completed its feasibility study and announced the decision to move forward. But rather than confront obvious facts about the demand for legal education that were apparent to everyone else, President Snyder insisted in 2013:

“We have given this decision careful research and consideration, and we believe we can develop a school that will attract and retain talented individuals who will contribute to our region’s economic development.”

Thanks to President Snyder and Indiana Tech’s board of trustees, those individuals — students and faculty — now face a tough and uncertain road.

Seeking Answers

What could have motivated such an obviously bad decision to open a new law school in the teeth of a lawyer glut? The answer is pretty simple. Snyder is a business guy. He has an MBA in strategic management from Wilmington University and a doctorate in education (innovation and leadership) from Wilmington University. Before joining the academic world, he spent more than 20 years in the telecommunications industry, rising to the position of vice president for the Data Systems Division of AT&T.

For someone focused on a bottom line approach to running higher education, adding a law school probably seemed like a no-brainer. In a 2011 interview for the National Law Journal, Snyder explained his strategy. Noting that about half of Indiana residents who attended ABA-approved law schools were doing so out of state, he said, “There are potential students who desire a law school education who cannot get that education in this area….”

Capturing that segment of the market was a strange premise upon which to build the case for a new law school. Which Indiana students admitted to established out-of-state schools did he expect to jump to an unaccredited newcomer?

The Real Play For Dollars

Like most law schools that should have closed their doors long ago, Indiana Tech’s business strategy sought to exploit market dysfunction. If the school could attract a sufficient number of aspiring attorneys to Fort Wayne, student loan dollars for tuition would take care of everything else, including a spiffy new building:

“The Indiana Tech Law School contains eight state-of-the-art classrooms, a courtroom, several learning and relaxation spaces for students including lounges and an outdoors patio, a three-story library, and everything else our students need to make their time here a successful and rewarding experience.”

Would graduates obtain decent full-time long-term jobs requiring the Indiana Tech JD degrees costing them close to $100,000? That would never become President Snyder’s problem.

The Opposite of Leadership

After the ABA denied Indiana Tech provisional accreditation in 2015, the handwriting was on the wall. But Snyder doubled down on a bad bet. The school tried to bolster admissions with a loss leader: a one-year tuition scholarship to students who enrolled in the fall of 2015. Anyone who took that deal is now twisting in the wind.

Indiana Tech reportedly lost $20 million. But its failed business strategy, followed by gimmicks that could never save it, produced dozens of real-life human victims whose damage is immeasurable. Those people don’t count in calculating Indiana Tech’s profit-and-loss statement. Except as conduits for federal student loan dollars, it’s fair to ask if they ever counted at all.

In his 2011 interview about the then-planned new law school, President Snyder suggested that Indiana Tech law school could be the first to offer a joint JD and master in science degree in leadership. He thought it would be an especially good fit because the university already has several programs in leadership.

Sometimes the most important learning in life comes from careful observation of negative role models. Speaking of negative role models, as I said at the beginning, I’ll have more to say about the election results in the days and weeks to come.

THE ABA’S TERRIBLE, HORRIBLE, NO GOOD, VERY BAD DAY

Posted on August 10, 2016 by thebellyofthebeast

It’s a mere formality. Every five years, the Department of Education renews the ABA’s power to accredit law schools. The June 2016 session before a DOE advisory committee (NACIQI) was supposed to be just another step in the rubber-stamping process. The NACIQI staff had recommended approval. The committee’s three-day session contemplated action on a dozen other accrediting bodies, ranging from the American Psychological Association to the American Theological Schools. Sandwiched between acupuncture and health education, the agenda contemplated an hour for the ABA.

What could go wrong?

For starters, committee members grilled the ABA’s representatives for an entire afternoon.

Questions About Law Student Debt?

First up for the ABA was the chair of the Section of Legal Education and Admissions to the Bar, Arizona Supreme Court Justice Rebecca White Berch. A committee member asked how the ABA assessed schools based on the interrelationship between student debt, bar passage rate, and graduate placement rates. Justice Berch said the ABA was looking “for a bar passing rate of 75 percent…. [W]as that part of your question?”

Actually, that was just a proposal set for an ABA Section hearing on August 6, but it wasn’t what the NACIQI had in mind.

NACIQI Member: “Sorry, no. I think my question also went to concern related to debt that students incurred while in law school and relationship of that to placement.”

ABA Managing Director Barry Currier tried to field that one:

“With respect to debt, we have been following a disclosure model for a number of years now and a lot of information is disclosed… [W]e collect information about student borrowing, but it is currently not part of the consumer information that schools are required to post with us… [T]here is no standard about how much debt is too much debt at this point in time.”

Let the squirming begin.

“So it may be,” Currier continued, “that as evidence mounts that students don’t shop very effectively and that as uncapped student loans are available, that we need to be more paternalistic, if you will, or more — we may need to make more information required and adopt standards around how much debt is too much debt.”

Placement Rates?

NACIQI: “What would be an appropriate placement rate for a law school?”

Currier: “Well our standards do not require any specific employment…[W]e don’t have a specific standard that a school must achieve in terms of placement.”

…

NACIQI: “But you are the ones who identified that legal education is very expensive… And if they can’t find a job it wrecks their lives.”

…

NACIQI: “[Y]ou can tell a lot from some of these low performing schools. And a school that sticks out to me is Whittier Law School in California… [T]he enrollment has dropped 51 percent since 2010, yet tuition has increased 31 percent since 2008.”

He wasn’t finished.

“Over 105 million dollars of Title IV funding has gone into this school. All the while, one in four graduates of this law school has obtained a full-time attorney job within nine months… Appalachian School of Law, University of LaVerne, Golden Gate, all have abysmal placement rates… [S]o I guess my question is specifically related to these low performing institutions: what are you guys doing?”

Then he answered his own question:

“[W]hen we look at these low performing schools, you guys are doing absolutely nothing.”

Can We Talk About Something Else?

Justice Berch’s attempt to change the subject was unavailing.

NACIQI: “We are talking about student debt, right, so — I guess you are not answering my question, and so I would like for us to stay on that… I just want to make sure we are talking about what is your responsibility and your response to these lower performing schools. I mean, have they been put on probation? That’s my first question.”

Justice Berch: You make a valid point. The answer is — has anyone yet been put on probation? No…”

…

NACIQI: “How many institutions have you denied accreditation to for low pass rates?

Justice Berch: For low pass rates alone, none.”

…

NACIQI: “Over the past five years how many institutions have you withdrawn your accreditation from?”

Currier: “Zero, zero.”

You Think The ABA Can’t Do The Job?

During the NACIQI’s discussion on the motion to recommend renewal of the ABA’s accreditation power, one member put the problem bluntly:

“I am troubled that the ABA just simply isn’t independent enough for this responsibility… I find it very difficult to think that they are going to be objective enough to continue to carry out this responsibility. And I reluctantly conclude that the ABA is not the appropriate accreditor for our law schools…[T]he crushing debt load on thousands and thousands of students is too serious for us… And I think the debt load is not going to get better if we say yes to this motion.”

Another member added: “I think that objectivity is important as you go through this process, so I would think an independent body that does not have the conflict of interest that the ABA has.”

It’s Worse Than They Thought

The NACIQI didn’t consider a recent illustration of the ABA’s independence problems. Former ABA President Dennis Archer is chairman of the national policy board of Infilaw — a consortium of three for-profit law schools. At those schools — Arizona Summit, Florida Coastal, and the Charlotte School of Law — students graduate with six-figure debt and dismal prospects for a meaningful job requiring bar passage. (Full-time long-term JD-required job placement rate ten months after 2015 graduation: Arizona Summit — 40 percent; Florida Coastal — 39 percent; Charlotte — 26 percent.)

On November 18, 2013, Archer and Infilaw’s chief executive officer co-signed a seven-page tour de force warning the DOE about the perils of applying the “Gainful Employment Rule” to “proprietary law schools and first professional degree schools in general.” The letter (on Infilaw stationery) argued, among other things, that the proposed rule was unnecessary because the ABA — as an accrediting body — ensures that InfiLaw “must offer an education that will help students achieve their goals.”

Six months later, Archer became chairman of the ABA’s Task Force on the Financing Legal Education. A year later — June 2015 — the Task Force acknowledged that 25 percent of law schools obtain at least 88 percent of their revenues from tuition. But it refused to recommend an obvious remedy: financial penalties for schools where students incur massive law school debt in exchange for dismal long-term JD-required job prospects.

The Task Force’s recommendations were embarrassingly inadequate, but the ABA House of Delegates accepted them.

One More Chance?

The ABA’s culture of self-interest and insularity has now created a bigger mess. Some NACIQI members favored the “nuclear” option: recommending denial of the ABA’s accrediting authority altogether. The committee opted to send a “clear message” through less draconian means.

The final recommendation was to give the ABA a 12-month period during which it would have no power to accredit new law schools. Thereafter, the ABA would report its progress in addressing the committee’s concerns, including the massive debt that students are incurring at law schools with poor JD-required placement rates.

As one member put it, “It is great to collect data, but they don’t have any standard on placement. What’s the point of collecting data if you can’t…use the data to help the students and protect the students…”

Another member summarized the committee’s view of the ABA: “This feels like an Agency that is out of step with a crisis in its profession, out of step with the changes in higher ed, and out of step with the plight of the students that are going through the law schools.”

The day of reckoning may not be at hand, but it’s getting closer.

LAW SCHOOLS AND THE NEW YORK TIMES

Posted on June 23, 2016 by thebellyofthebeast

On June 17, Noam Scheiber’s article, “An Expensive Law Degree and No Place to Use It,” appeared in The New York Times. He focused on individual human tragedies resulting from the legal education bubble.

Four days later, Professor Steven Davidoff Solomon countered with his Times column, “Law School Still a Solid Investment, Despite Pay Discrepancies.” Notwithstanding the title, he’s moving in Scheiber’s direction.

Learning from Mistakes

Professor Solomon’s prior ventures into legal education haven’t gone particularly well. In November 2014, he wrote “[T]he decline in enrollment could lead to a shortage of lawyers five years from now.” Highlighting Thomas Jefferson School of Law as one of the marginal schools fighting to remain alive, Solomon suggested, “It may be tempting to shut them in these difficult times, but it can cost tens of millions to open a new one. Better to invest and cut back on expenses for a while and see what happens.”

Consistent with his area of expertise — financial and securities regulation — Professor Solomon was relying on the market to work. But in legal education, it never gets a chance. Bankruptcy laws and the federal student loan program insulate law schools from accountability for their graduates’ poor employment outcomes.

Waiting to “see what happens” became a triumph of hope over reality. For the Thomas Jefferson class of 2013, the full-time long-term JD-required employment rate nine months after graduation was 29 percent. For the class of 2014, it was 30 percent. Even with an additional month for the class of 2015 to find jobs, the ten-month FTLT-JD-required employment rate was 24 percent. But the school did win that nagging fraud case brought by a recent graduate.

In April 2015, Solomon’s column on legal education and the profession was so riddled with errors that I climbed out of a hospital bed to write a responsive post culminating in this question, “Whatever happened to The New York Times fact-checker?”

Almost There

With all of that carnage in the rearview mirror, Professor Solomon’s June 21 article assumes a more moderate tone. Most importantly, he acknowledges the different legal education markets that exist for new graduates: “[I]t is clear that it is harder out there for the lower-tier law schools and their graduates.”

Noting that some big firms announced starting salary increases to $180,000 for the class of 2016, he cautions, “Only the lucky 17 percent of graduates earn salaries this high. To be in this group, you needed to go to a top 10 school or graduate in the higher ranks of the top quartile of law schools. Things are harder for every other law graduate.”

Solomon also accepts the bimodal distribution of starting salaries that results from the different markets for law graduates: “[W]hile 17 percent of graduates earned median salary of $160,000 in 2014, about half had a median starting salary of $40,000 to $65,000.”

The article could and should have ended with this: “Either way, it is clear that it is harder out there for lower-tier law schools and their graduates.”

In Defense of Fellow Professors?

Four days before Solomon’s article, Noam Scheiber’s Times piece profiled once-hopeful students at Valparaiso University School of Law. They’d incurred massive debt for a JD degree, but couldn’t find jobs requiring one. Scheiber also quoted a professor who recently headed the school’s admissions committee: “If we could go back, I think we should have erred a little more on the side of turning people down.”

Immediately after the publication of Scheiber’s article, social media took over when a law professor complained in an open letter to Scheiber: “Have you seen this line of peer-reviewed research, which estimates the boost to earning from a law degree including the substantial proportion of law graduates who do not practice law?”

The cited “line of peer-reviewed research” consisted of one study, co-authored by that professor in 2013. When Scheiber invited the professor to identify any factual errors in his article, the professor provided six alleged mistakes. For anyone interested in diving into those weeds, Scheiber posted the six items and his response on his Facebook page, including this:

“It’s not worth reviewing the controversy about your work on law graduate earnings here, since the criticisms are well-established. But suffice it to say, I think it’s strange to respond to a claim that the economic prospects of people graduating after the recession have fundamentally changed relative to those who graduated before the recession with a study that only includes people who graduated prior to 2009.”

(UPDATE: On Friday, June 24, the professor responded to Scheiber’s response.)

Among the many other criticisms to which Scheiber refers is the 2013 study’s failure to consider differences among law schools in their graduates’ incomes. In other words, it ignored the actual law school markets.

Nearing the Finish Line

Professor Solomon’s latest article centers on the importance of recognizing those different markets. But he still cites the 2013 study for the proposition that “most law students earned a premium of hundreds of thousands of dollars over what they would have earned had they not gone to law school, even taking into account the debt they accrue.”

Even so, Solomon’s slow walk away from the 2013 study improves on his April 2015 column. There, he relied on it to suggest that an “acceleration in compensation results in a premium of $1 million for lawyers over their lifetime compared with those who did not go to law school.” Now he’s down to “hundreds of thousands of dollars” for “most law students.”

Professor Solomon teaches at a top school, UC-Berkeley. He knows that plenty of students at other schools have a tough road ahead. Solomon no longer refers to an overly broad $1 million lifetime premium. He has also added a qualifier (“most law students” — meaning a mere 51 percent) — to whatever he thinks the study proves about the economic benefit of a JD. In other words, he has rendered the 2013 study meaningless to anyone considering law school today.

So why does Professor Solomon continue to cite the study at all? Better not to ask. Accept progress wherever you find it.

ABOUT THAT LAWYER SHORTAGE…

Posted on May 4, 2016 by thebellyofthebeast

Facts are stubborn things — almost as stubborn as persistent academic predictions that boom times for attorneys are just around the corner.

Back in 2013, Professor Ted Seto at Loyola Law School-Los Angeles observed, “Unless something truly extraordinary has happened to non-cyclical demand, a degrees-awarded-per-capita analysis suggests that beginning in fall 2015 and intensifying into 2016 employers are likely to experience an undersupply of law grads, provided that the economic recovery continues.”

In November 2014 after the Bureau of Labor Statistics proposed a new and deeply flawed methodology for measuring attorney employment, Professor Seto weighed in again: “If the new BLS projections are accurate, we should see demand and supply in relative equilibrium in 2015 and a significant excess of demand over supply beginning in 2016.” His school’s full-time long-term bar passage employment rate for the class of 2015 was 62 percent — slightly better than the overall mean and median for all law schools, which are just under 60 percent.

Likewise in 2014, Professor Rene Reich-Graefe at Western New England University School of Law used what he described as “hard data” to argue, “[C]urrent and future law students are standing at the threshold of the most robust legal market that ever existed in this country.” The Georgetown Journal of Legal Ethics published his dubious analysis leading to that prediction. Within ten months of graduation, only 43 percent of 2015 graduates from Professor Reich-Graefe’s school found full-time long-term jobs requiring bar passage.

Fact-sayers v. Self-interested Soothsayers

To his credit, Professor Jerry Organ at the University of St. Thomas School of Law has been fearless in challenging the relentless optimism of his academic colleagues. And he does it with the most persuasive of lawyerly approaches: using facts and evidence.

Analyzing the ABA’s recently released law school employment reports for all fully-accredited law schools, Professor Organ notes that the number of graduates dropped in 2015. But for the second straight year, so did the number of full-time long-term jobs requiring bar passage.

Professor Organ offers a number of explanations for this result: declining bar passage rates; regional factors that reduced hiring in Texas and elsewhere; the impact of technology. But whatever the reasons, he suggests, “[T]his employment outcomes data provides a cautionary tale.”

Proceeding Without Caution

“The fact that the employment market for law school graduates appears to have stagnated and even declined to some extent over the last two years,” Professor Organ continues, “may mean that risk averse potential law school applicants who focus on post-graduate employment opportunities when assessing whether to invest in a legal education may remain skittish about applying, such that this year’s good news on the applicant front may be somewhat short-lived.”

The “good news on the applicant front” to which Professor Organ refers is his projection that applications for the fall 2016 entering class are on track to increase for the first time since 2010. But he offers a cautionary note there as well. Law schools at the upper end “will see more enrollment growth and profile stability in comparison with law schools further down the rankings continuum.”

Perilous Predictions

Some prognostications are safer than others. Here’s mine: Faculty and administration at weak law schools will continue using the overall decline in the number of all applicants to persist in their misleading sales pitches that now is a “Great Time to Go to Any Law School.” They will discourage inquiry into more relevant facts.

But here they are: At the 90th percentile of all 204 ABA-accredited law schools, the full-time long-term bar passage-required employment rate for 2015 graduates was just under 80 percent. At the 75th percentile, it was 67 percent. But at the 25th percentile, it was 49 percent. And at the 10th percentile, it was only 39 percent.

It will always be a great time to go to some law schools. It will never be a great time to go to others.

WARM BODIES

Posted on April 27, 2016 by thebellyofthebeast

Colleges have entered a game that law schools have been playing for years. According to a recent New York Times front page headline, “Colleges Seek Warm Bodies From Overseas.” The title of the online version was equally pointed: “Recruiting Students Overseas to Fill Seats, Not to Meet Standards.”

For years, law schools have been dropping standards to fill classrooms. Marginal schools have been the worst offenders, and the profession is now paying the price in declining bar passage rates. But even among top schools, a more subtle and profitable technique has pervaded law school business plans for years: expanding LLM programs.

The Numbers

From 2006 to 2013, the number of law students enrolled in non-JD programs increased by almost 50 percent — to more than 11,000. Leading the way are LLM programs that now exist at more than 150 law schools. And students from foreign countries are flocking to them.

What began decades ago as a noble effort to encourage international cultural diversity has become a cynical method of revenue generation. The Times article focuses on colleges that use foreign recruiters. But its money quotes apply to law schools:

“[T]he underlying motivation for the university…is to get warm bodies in the door.”

“It is ethically wrong to bring students to the university and let them believe they can be successful when we have nothing in place to make sure they’re successful.”

“[C]olleges began to look at foreign students, who pay full tuition, as their financial salvation.”

Need Money?

Warm bodies. Graduate outcomes that aren’t the schools’ problem. Students who pay full tuition. If you’re running a law school as a business, the solution to declining revenues from a JD program becomes three letters: LLM.

Professor George Edwards at the Indiana University Robert H. McKinney School of Law explains:

“I would like to think that U.S. law schools are creating LLM programs or expanding existing programs primarily for altruistic reasons…The reality is that law schools are businesses, and to stay afloat they must generate revenue to pay law school expenses, such as faculty salaries. Law school revenues primarily come from tuition revenues, and revenues are down due to fewer U.S. students enrolling in the degree programs for the basic U.S. law degree, the JD.”

“U.S. law schools have been seeking ways to make up for lost revenue,” Professor Edwards continues. “One way is to create or expand enrollment for international LLM students who may not have the same worries that are driving JD enrollment downwards.”

And so, he concludes,

“The desire to increase law school revenue has triggered a proliferation of new LLM programs and triggered the expansion of existing LLM programs.”

So What’s the Problem?

What exactly should a law school’s mission be? Some deans are unwilling to ask the question because they fear honest answers: revenue generation, short-term profits, and maximizing U.S. News rankings. Moving away from those safe harbors risks reorienting the profession toward what it was when they decided to become lawyers.

An institution’s mission statement should be the starting point for every decision its leaders make. Law schools are no exception. From the faculty hired to students admitted to programs offered, clear goals produce coherent behavior. But at law schools throughout the country, discussions about objectives — what they are and what they should be — aren’t happening.

Restating platitudes is easy. Developing a statement of principles to govern conduct is a challenge. Requiring consistent action in accordance with those principles creates accountability.

For centuries, the legal profession has occupied a transcendent role in the preservation of civilization. Law schools have been the custodians of that tradition. To retain that stature, the people who run them should view their responsibilities as something more than managing just another business. If they don’t, their schools will become exactly that.

LSAT v. GRE – RHETORIC v. REALITY

Posted on February 24, 2016 by thebellyofthebeast

[NOTE: The trade paperback edition of my book, The Lawyer Bubble – A Profession in Crisis (Basic Books, 2016) — complete with an extensive new AFTERWORD — is now available at Amazon.]

The Wall Street Journal reports that the University of Arizona College of Law has begun accepting GRE scores in lieu of LSATs. Two other schools — the University of Hawaii and Wake Forest — are performing validation studies to determine whether they, too, should make the move to GREs.

At Arizona, Dean Marc Miller said, “This isn’t an effort to declare war on anybody. This is an effort to fundamentally change legal education and the legal profession.”

To “fundamentally change legal education and the legal profession,” accepting GRE scores instead of LSATs seems like a misfire. Beyond the rhetoric is a reality that might reveal what else could be going on.

The GRE Is Easier

According to the executive director of prelaw programs at Kaplan Test Prep, Jeff Thomas, “The GRE is regarded as the easier test. The entirety of the LSAT was meant to mimic the law-school experience, while the GRE was not created for that particular purpose.”

But the fact that the GRE is easier doesn’t explain why some law schools want to use it. Self-interest and U.S. News rankings might.

LSATs Are Telling a Sad Story

As LSAT scores of entering classes have dropped at many schools, so have bar passage rates. According to the University of Arizona School of Law’s ABA Reports, its median LSAT for matriculants in 2012 was 161. For 2015, it was 160. That’s not much of a decline, but at the 25th percentile, the LSAT score went from 159 to 155.

According to the school’s website, in July 2013, 92 percent of first-time test takers passed the Arizona bar exam. In July 2015, the passage rate was 84 percent.

The GRE Isn’t the LSAT

Such trends suggest another possible reason for allowing students to substitute the GRE for the LSAT: It buys law schools time and complicates prelaw student decision-making. At many schools, year-over-year LSAT score comparisons have documented the willingness of many deans to accept marginal students. The easiest way to stop such time series analyses is to make that test optional.

The GRE will be a new data point. Until schools report those scores for two or three years, it won’t reveal trends in admitted student qualifications. That will deflect attention away from the “declining quality of admitted students” narrative that has become pervasive. Never mind that the narrative is pervasive because, based on LSATs and undergraduate GPAs for matriculants at many schools, it’s true. (Between 2012 and 2015, the University of Arizona School of Law’s undergraduate GPA for matriculants dropped at all three measuring points — the 25th, 50th, and 75th percentiles, according to its ABA reports for those years.)

The Heavy Hand of U.S. News rankings

In addition to confusing the story on the declining quality of applicants, law schools have another reason to accept the GRE. Applicants will take both exams and pick the better result for law school consumption. It’s analogous to the current ABA rule allowing schools to use only a student’s highest LSAT score.

Prelaw students who do badly on the LSAT will submit the GRE score instead. The ongoing self-selection of poor LSAT scores away from the applicant pool will increase the 25th, 50th and 75th percentile LSAT values for the scores that remain. Until all schools adopt the GRE option, it will help the U.S. News rankings of the schools that do it.

There’s precedent for such behavior. Most high school students take the SAT and the ACT. Where a college allows either score, students submit the higher one.

Look Beyond the Rhetoric

Trends at the two other schools mentioned in the WSJ article might be relevant to all of this. At the University of Hawaii, compare the 2012 and 2015 ABA forms reporting LSATs for matriculants:

75th percentile: 2012 – 160; 2015 – 158

50th percentile: 2012 – 158; 2015 – 154

25th percentile: 2012 – 154; 2015 – 151

Likewise, at Wake Forest the results are:

75th percentile: 2012 – 165; 2015 – 162

50th percentile: 2012 – 163; 2015 – 161

25th percentile: 2012 – 159; 2015 – 157

At this point, the appropriate legal phrase is res ipsa loquitur — the thing speaks for itself.

The ABA is planning to determine independently whether the GRE meets its accreditation requirement allowing schools to use the LSAT or another “valid and reliable” test when making admissions decisions. The profession’s leading organization is likely to approve the switch. That’s because doing so will perpetuate what has become the ABA’s central mission in legal education: protecting many law schools from scrutiny and meaningful accountability.

That’s about as far as you can get from trying “to fundamentally change legal education and the legal profession.”

THE CRISIS IN LEGAL EDUCATION IS OVER!

Posted on January 13, 2016 by thebellyofthebeast

[NOTE: The trade paperback edition of my book, The Lawyer Bubble – A Profession in Crisis (Basic Books) — complete with an extensive new AFTERWORD — will be released on March 8, 2016. That’s just in time to put in proper perspective the latest annual rankings from U.S. News & World Report (law schools in mid-March) and Am Law (big firms on May 1). The paperback is now available for pre-order at Amazon and Barnes & Noble. Now on to today’s post…]

Wishful thinking is never a sound strategy for success.

“I don’t see legal education as being in crisis at all,” said Kellye Testy, the new president of the Association of American Law Schools and dean of the University of Washington Law School. She made the observation on January 5, 2016 — the eve of the nation’s largest gathering of law professors.

Perhaps her declaration made attendees more comfortable. Unfortunately, it’s not true.

The Trend! The Trend!

Law deans and professors cite the dramatic declines in applicants since 2010 as proof of law school market self-correction. Dean Testy echoed that approach: “I think there is a steadying out now after quite a crash in the number of students our schools are admitting….”

Two points about that comment. First, the decline in the number of applicants since 2010 is real, but that year may not be the best baseline from which to measure the significance of the drop in subsequent years. From 2005 to 2008, the number of applicants was already declining — from 99,000 to 83,000. But the Great Recession reversed that downward trend — moving the number back up to 88,000 by 2010 as many undergraduates viewed law school as a place to wait for three years while the economy improved.

Viewed over the entire decade that began in 2005, the “drop” since 2010 was from a temporarily inflated level. If the roughly four percent annual reduction that occurred from 2005 to 2008 had continued without interruption to 2014, the result would have been about 65,000 applicants for the fall of 2014, compared to the actual number of 56,000. That difference of 9,000 applicants doesn’t look like a “crash.”

A More Troubling Trend

Second and more importantly, many law schools solved their reduced applicant pool problem by increasing admission rates. Overall, law schools admitted almost 80 percent of applicants for the fall of 2014. Compare that to 2005 when the admission rate was only 59 percent.

During the same period, the number of applicants dropped by 40,000, but the number of admissions declined by only 12,000. Countering the impact of fewer applicants to keep tuition revenues flowing meant lowering admission standards. The ripple effects are now showing up in declining bar passage rates for first-time takers.

Student Enlightenment Interrupted

Transparency has given students access to data that should produce wiser decisions. Until the current application cycle, better information was contributing to the recent decline in the number of law school applicants. But the relentless promotional efforts of law school faculty and administrators may be interrupting that trend. Compared to last year, the number of applicants is up.

But law schools aren’t solely to blame. Responsibility for persistently dubious decisions also rests on those making them. A December 22 article in The Wall Street Journal, “U.S. Helps Shaky Colleges Cope with Bad Student Loans,“ includes this unfortunate example:

“Anthony C. Johns, 32 years old, regrets accumulating $40,000 in debt while attending Texas College, a private college in Tyler. He says he graduated in 2007 with an English degree but couldn’t land a full-time job.

“‘I think I applied for everything on CareerBuilder from teaching to banking,’ says Mr. Johns, who has defaulted on his Texas College loans. ‘Default was very embarrassing.’ Since then, he has enrolled in law school and borrowed $30,000 to pay for his first year.'”

The emphasis is mine.

The Biggest Problems Remain

According to LinkedIn, someone named Anthony C. Johns graduated from Texas College in 2007 and is currently a student at the Charlotte School of Law. That’s one of the Infilaw consortium of three for-profit law schools — Charlotte, Arizona Summit, and Florida Coastal. Owned by private equity interests, the Infilaw schools — like many others — survive only because unrestricted federal student loans come with no mechanism that holds schools accountable for graduates’ poor employment outcomes.

Ten months after graduation, Charlotte School of Law’s full-time long-term bar passage-required placement rate for 2014 graduates was 34 percent. The average law school loan debt of its 2014 graduates was $140,000. If Anthony Johns regretted accumulating $40,000 in college debt, wait until he’s taken a retrospective look at law school.

You Be The Judge

Perhaps Dean Testy is right and there is no crisis in legal education. Or perhaps it depends on the definition of crisis and how to measure it. When a problem gets personal, it feels different.

Since 2011 when the ABA first required law schools to report the types of employment their graduates obtained, over 40 percent of all graduates have been unable to find full-time long-term employment requiring bar passage within ten months of receiving their degrees.

Now let’s make those numbers a bit more personal. Saddled with six-figure law school debt, many recent law graduates might consider crisis exactly the right word to describe their situation. Where you stand depends on where you sit.

MIZZOU FOOTBALL LESSONS

Posted on November 11, 2015 by thebellyofthebeast

The legal profession could learn something from the events culminating in Tim Wolfe’s resignation as president of the University of Missouri system. So could all of higher education. But those lessons have little to do with race.

Who is Tim Wolfe?

He’s a businessman.

Wolfe’s family moved to the Columbia, Missouri area when he was in fourth grade. For 30 years, his father was a communications professor at the University of Missouri. Wolfe quarterbacked his high school football team to a state championship. He earned an undergraduate degree from MU in personnel management.

After college, Wolfe became a sales rep for IBM where he worked his way up to vice president and general manager of its global distribution center. After 20 years at IBM, he became executive vice president of a consulting services company. From there, he moved to software maker Novell Americas, where he was president when another company acquired Novell and left him unemployed.

In December 2011, the University of Missouri’s board of curators announced Wolfe’s selection as its 23rd president. His base salary was $459,000.

What Happened? For a While, Not Much

As recently as August 2014, the board of curators thought that Wolfe’s performance had earned him a contract extension from February 2015 through June 2018. A year later, his troubles began.

On September 12, the president of the Missouri Student Association posted a Facebook item about vile racist slurs he’d received. By October 10, a group calling itself Concerned Student 1950 (the year Mizzou first admitted black students) staged a homecoming parade protest. On October 20, the group issued eight demands, including the ouster of Wolfe.

Exactly what he did to make such a shortlist is far from clear. The New York Times and the Wall Street Journal put some blame on his proposal to close the university’s respected press as a cost saving measure. But he withdrew that proposal after hearing from objectors.

The Times and the Journal also implied that Wolfe was responsible for canceling health insurance for graduate students. But that situation is more complicated. As the graduate studies office announced in August, new Affordable Care Act requirements prevented the university from paying those premiums. Instead, the university would provide a one-time stipend to all qualified graduate students. Under the ACA, the university said, it was unable to link the stipend to health insurance or to ask whether recipients needed or planned to purchase a policy. Failure to implement the new IRS regulations would have resulted in fines of $100 per student.

Was It Race?

After a swastika with feces appeared in a campus bathroom on October 24, Concerned Student 1950 met with Wolfe personally. Three days later, one of the protest organizers announced a hunger strike. On November 6, a student posted a video in which protesters asked Wolfe to define systematic oppression.

“I’ll give you an answer, and I’m sure it will be a wrong answer,” he said. “Systematic oppression is because you don’t believe that you have the equal opportunity for success.”

“Did you just blame us for systematic oppression, Tim Wolfe?” shouted a protester. “Did you just blame black students?”

Wolfe’s insensitive comments were unfortunate. But they’re not the sort of thing that costs a university president his job. And they didn’t cost Wolfe his — until the football team weighed in.

And Then…

On Saturday, November 7, the entire Mizzou football team — 84 scholarship players and their coaches — proclaimed unanimous solidarity with the protest movement. Within 36 hours, Wolfe resigned.

Like many universities, the University of Missouri created the monster that can devour it. College football is big business, especially in the Southeastern Conference. The average SEC head football coach makes almost $4 million a year. President Wolfe’s base salary was about one-tenth of what the school pays coach Gary Pinkel. Throughout the country, college football generates enormous revenues that pay for coaches, athletic scholarships, and stunning athletic facilities.

Whether and to what extent this circle of riches makes its way back to support a school’s principal mission — educating young people — isn’t clear. Earlier this year during its dispute over whether college players could unionize, Northwestern University claimed that, considered as a whole with other sports that football subsidized, the athletic programs were money-losers for the school. On November 7, Northwestern broke ground on a new $260 million athletic facility.

Pocketbook Threat

The tipping point for Wolfe came when the football team — with a mediocre record of four wins and five losses — said it would boycott its November 14 game against BYU. That game alone would have cost the university $1 million. But the potential impact could be far greater if the team fails to win the two more games needed to qualify for a postseason bowl appearance.

Now we come to the lesson for big law firms. The internal gap between the highest and lowest paid equity partners at most firms is enormous and growing. Likewise, the frenzy to recruit lateral rainmakers continues unabated. Those trends have produced a “don’t-get-me-angry” group that is analogous to what many college football teams have become. A handful of individuals exerts disproportionate influence over an entire institution, but the resulting culture affects everyone.

Football Cognitive Dissonance

Society is conflicted about football. Every weekend, millions of people watch college games. I’m among them. Our behavior creates market demand that gives college football an outsized influence over higher education.

At the same time, we’ve become uncomfortable with some of the adverse individual consequences that the market doesn’t consider, such as lifelong brain damage from concussions. Economists call these externalities. It’s one reason that half of Americans don’t want their sons playing tackle football. When things get personal, they’re somehow different.

Big Law Cognitive Dissonance

Likewise, most law firm managing partners admit that recruiting high-powered rainmakers doesn’t usually improve their firms’ financial performance. Independent studies confirm that lateral hiring is dubious strategy. Yet the lateral frenzy continues as newly hired partners parachute into the top ranks of many firms.

Unfortunately, short-run disappointment with the financial impact of a lateral hire is the least of the problems associated with aggressive inorganic growth. The strategy can destroy a firm’s cohesion, impair its sense of professional mission, and increase its vulnerability to financial shocks. In the resulting environment, everyone in the institution suffers.

Living through the financial and cultural consequences of lateral hiring failures could have prompted law firm leaders to rethink their strategic plans. But that hasn’t happened. After all, such a reversal would require leaders to overcome their confirmation bias, transcend hubris, and admit mistakes. That’s less likely than a major university relegating football to its proper place in the institution’s broader educational mission.

By the way, Mizzou may also offer a lesson to some law school deans: make friends with your university’s football coach.

LEGAL EDUCATION’S STRANGE BEDFELLOWS

Posted on November 4, 2015 by thebellyofthebeast

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 standards; dismal first-time bar passage rates; average 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, D eVito 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.

GAME-CHANGER?

Posted on October 28, 2015 by thebellyofthebeast

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.

LEARNING FOUR LESSONS FROM FAILURE

Posted on October 7, 2015 by thebellyofthebeast

On October 2, 2015, Northwestern University ended a six-year experiment — the two-year accelerated JD. Dean Daniel B. Rodriguez deserves credit for pulling the plug. Now comes the important part: learning the right lessons from failure.

Lesson #1: Beware of Public Relations Hype

With much fanfare in June 2008, Dean Rodriguez’s predecessor, David Van Zandt, released a document outlining his new long-range strategic vision: “Plan 2008: Preparing Great Leaders for a Changing World.” The centerpiece was an accelerated JD program whereby the school jammed three academic years of ABA-required curriculum into two calendar years.

Van Zandt worked tirelessly to sell the program. From local talk show appearances to speeches at law schools, he never let up. But one of his stated goals should have generated concern. Even as the market for lawyers plummeted, his keynote address at a February 2009 Southwestern Law Review symposium explained that he hoped to “tap a different population of students to expand our pool of potential applicants.” In particular, he wanted to “reach those who were planning on going to MBA programs.”

In other words, he offered a prescription for what the profession needed least: more law students who had been on their way to business school until the prospect of a Northwestern accelerated JD appeared.

Lesson #2: Dig Deeper

A program that “accelerated” a student through law school in two years instead of three sounded like an unambiguously good idea. But beyond the superficial appeal were troubling realities.

Students in the program started with a Web-based course even before they arrived on campus. In May, they began full-time study. In the fall, they joined first-year students in the traditional three-year program while also adding an extra course. For anyone on the two-year accelerated path, an already precious commodity — time during the first year to integrate experiences while contemplating one’s place in a diverse, challenging and changing profession — disappeared.

Even worse, Northwestern missed an opportunity. Total tuition for the two-year program was the same as that for the three-year degree. Accelerated students just paid more in tuition each semester. According to Van Zandt, students still benefitted financially because they could enter the job market sooner. Never mind how dismal that market remained.

Lesson #3: Ignore the Spin

Many deans claim to be remaking their schools in ways that respond to the current crisis in legal education. For the sake of the profession, let’s hope that’s true. (But see Lesson #1 above.)

Even so, cramming three years of legal education into two was never particularly creative or innovative. For example, Southwestern Law School started its accelerated JD program in 1974. (Southwestern also has dismal full-time long-term JD-required employment rates for recent graduates.)

After leaving the deanship to become president of the New School in 2010, Van Zandt continued his defense of the Northwestern AJD in an online July 25, 2011 New York Times op-ed. In the process, he earned one of my “Unfortunate Comment Awards.” That was four years ago.

Lesson #4: Beware of Motivated Reasoning

Van Zandt spoke often about the importance of markets and market-based decisions. But it took six years (and a new dean) before Northwestern responded to what the markets were telling it about the AJD. As Dean Rodriguez announced on October 2, the program failed to achieve its aspirational target of 40 AJD students per year (Van Zandt had hoped eventually to enroll 65 AJD students annually):

“[D]ealing with this smaller program,” he said, “has impacted our ability to serve the objectives and needs of all our law students.”

As schools pursue various efforts to reduce the cost and improve the content of legal education, perhaps they’ll learn one more lesson: Don’t wait years to admit a mistake.

MORE ON MY NY TIMES OP-ED

Posted on September 18, 2015 by thebellyofthebeast

Professor Milan Markovic (Texas A&M) and Dean Jeremy Paul (Northeastern) responded to my recent post analyzing their letters to the New York Times about my Times op-ed.

On September 17, The American Lawyer published Dean Paul’s response (and my reply) here: http://www.americanlawyer.com/home/id=1202737553089/Is-Legal-Education-in-Crisis-A-Dean-Responds?mcode=1202617075486&curindex=0

On September 10, the Tax Prof Blog summary of my earlier post prompted Professor Markovic’s response (and my reply), here: http://taxprof.typepad.com/taxprof_blog/2015/09/more-on-the-ny-times-op-ed-too-many-law-students-too-few-legal-jobs.html

The Tax Prof Blog entry also included a comment from someone identifying himself as Gary Lucas. A person with that name also teaches at Texas A&M. I replied to that one, too.

At this point, I’m content to invoke the legal principle of res ipsa loquitur (“the thing speaks for itself”) and let readers decide this one.

NY TIMES OP-ED FOLLOW UP

Posted on September 9, 2015 by thebellyofthebeast

My August 25 Op-Ed in The New York Times went viral. It became number one on the Times’ “most-emailed” list. It rose to the top-five in “most viewed,” “most shared on Facebook,” and “most tweeted.” Within hours of publication, it generated more than 600 comments.

It also produced letters to the editor, three of which the Times chose to publish on September 2. Two are from law professors whose responses reveal why the current crisis in legal education is so intractable.

Letter #1

Milan Markovic is an associate professor of law at Texas A&M. He argues that current law students will soon have better job prospects because there are fewer of them:

“Not all of these students will graduate and pass the bar, but those who do will face much less competition for legal jobs even if the economy fails to improve.”

Professor Markovic perpetuates the sloppy analysis infecting virtually all academic discussion about law student debt and the crisis in legal education. In particular, his macroeconomic prediction about the fate of future graduates ignores a crucial fact: job opportunities vary dramatically according to school.

A 2018 graduate from Professor Markovic’s school — Texas A&M — will not have employment prospects comparable to students at top schools that regularly place more than 90 percent of their new graduates in full-time long-term bar passage-required positions. In that key category, Texas A&M’s employment rate for 2014 graduates was 52 percent.

Likewise, only three Texas A&M graduates in the class of 2014 began their careers at firms where attorney compensation is highest (that is, firms with more than 100 lawyers). Like the JD-required employment rate, big firm placement is another indicia of a school’s relevant market. That’s not a value judgment; it’s just true.

In fact, Professor Markovic is a living example of the distinct legal education submarkets. In 2006, he graduated from the Georgetown Law Center, which placed 281 of its class of 2014 graduates — more than Texas A&M’s entire 232-member class — in firms of more than 100 lawyers. Before Professor Markovic began teaching in 2010, he spent four years as an associate in two big law firms — Sidley Austin and Baker & Hostetler.

Let’s Run the Experiment

Professor Markovic objects to introducing law school accountability for employment outcomes. He argues that any reduction in federal funding “will not lead to less demand for law school or other graduate programs. Rather, students will turn to the private loan market, and private lenders will be only too happy to lend because graduate school loans — and particularly those allocated to law students and medical students — have historically been very profitable.”

Let’s run that experiment. But first, let’s create something resembling a functional market for legal education. Start by adopting my proposed sliding scale of federal loan guarantees based on each individual law school’s employment outcomes. In such a system, a school’s poor job prospects would mean a reduced loan guarantee amount for its students. Then implement one more change to the present regime: make law school debt dischargeable in bankruptcy.

Will private lenders be “only too happy” to make six-figure loans to students at any marginal law school, including places where fewer than half of graduates are finding jobs requiring a JD? Let a real market decide.

Letter #2

Professor Jeremy Paul is dean at Northeastern University School of Law. His letter to the Times editor notes correctly that many Americans cannot afford legal services and analogizes the situation to doctors.

“No one would say we had an oversupply of medical students if millions of Americans resorted to self-medication and treatment because they could not pay for a doctor,” he writes.

One commenter to Tax Prof Blog countered Professor Paul’s analogy with this one: “How can anyone say there are too many restaurants when there are still so many starving and malnourished people in the world? That’s how 12-year-olds think, not lawyers, which I’ve heard is law school’s reason for being.”

For the indigent needing legal services, there are not enough lawyers. But that’s because our society isn’t willing to pay for them. Based on the funding trends for the Legal Services Corporation and the federal government’s current obsession with austerity, the future in that respect is bleak. Compared to 1985, Congressional appropriations to the LSC are down 50 percent (in constant 2013 dollars).

Other than complain about the government’s failure to make the universal right to counsel in civil cases a priority, I can’t do anything about that problem. Neither can Professor Paul. But politicians’ reluctance to fund legal aid positions does not justify burdening today’s graduates with enormous educational debt for a JD that won’t lead to a paid position requiring that degree.

Experiments with Other People’s Student Loan Money

Professor Paul also observes that some law schools and bar associations are launching “incubator programs aimed at helping law graduates to serve clients of modest means.” That’s true. I was on the committee that developed such a program with the Chicago Bar Foundation. Will they result in more solo practitioners who, over the long-term, can squeeze out a living and a satisfying legal career? No one knows. But the participants in those programs are a drop in the bucket compared to the vast numbers of law graduates annually who can’t find JD-required jobs.

Like Professor Markovic, Dean Paul knows there’s no unitary legal education market. He graduated from Harvard Law School in 1981. For Northeastern Law School — where he has been dean since 2012 — the full-time long-term bar passage-required employment rate for the class of 2014 was 53 percent.

Completing the Circle

Professor Paul’s final observation is that “studies show that a law degree remains a sound investment…”

Which takes us back to the pervasive and persistent academic canard that aggregate data matter to individual decisions about attending particular schools. What study tracks outcomes by individual law school to “show that a law degree remains a sound investment” for graduates of every school?

No such study exists. But for those determined to resist necessary change in the broken system for funding legal education, magical thinking combines with confirmation bias to trump reality every time. Federal student loan subsidies unrelated to student outcomes encourage otherwise thoughtful legal academics to become unabashed salespeople.

Think of it as your tax dollar at work.

Would Professor Markovic and Dean Paul — among many others who similarly ignore the crisis in legal education — counsel their own children to attend a marginal law school that, upon graduation, assured them of six-figure debt but offered only dismal JD-required employment prospects? It probably depends on how they feel about their kids.

WHEN SUPPORTING A CAUSE UNDERMINES IT

Posted on June 10, 2015 by thebellyofthebeast

Lee Siegel and The New York Times probably thought they were aiding a vital cause when the Times published Siegel’s June 6 op-ed, “Why I Defaulted on My Student Loans.” The underlying issue is important. Many of today’s young people bear the burden of huge educational debt in an economy that has not afforded the kinds of opportunities available to their baby-boomer parents, including Siegel.

Here’s the problem: Siegel did more harm than good. He made himself a poster child for the kind of moral hazard that first led policymakers to render student loans non-dischargeable in bankruptcy more than 40 years ago. It was a mistake then, and it’s a mistake now. But Siegel is exactly the wrong spokesperson for the issue.

Lee Siegel’s Pitch

According to his op-ed, Siegel financed his education with student loans, the first of which he obtained 40 years ago. But when his family’s financial hardship left him unable to pay the full cost of tuition at “a private liberal arts college,” he “transferred to a state college in New Jersey, closer to home.” Eventually, he defaulted on his student loans.

“Years later,” he writes, “I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society.”

He urges others to follow his example: default.

Who is Lee Siegel?

Here’s what Siegel and the Times didn’t reveal.

Notwithstanding his transfer to a New Jersey state college, he obtained three degrees from Columbia University — a B.A., an M.A., and a master’s of philosophy. According to the HarperCollins Speakers Bureau website, he’s “an acclaimed social and cultural critic.” The mere fact that he appears on that site means that you should expect to pay big bucks for the privilege of hearing him speak. He has written four books and his essays have appeared in The Atlantic Monthly, The New Yorker, Time, Newsweek, The New York Times, and The Wall Street Journal.

In other words, he has an elite education that led to a lucrative career. He is exactly the wrong person to be the face of the student loan crisis — which is very real.

The Problem with Siegel’s Support

Siegel has now made himself a powerful anecdote for those on the wrong side of the fight for reform in financing higher education. Forty years ago, similar ammunition — anecdotes about individuals exploiting moral hazard — led to bad policy when student debt first became non-dischargeable in bankruptcy.

In the early years of the student loan program, the Department of Health, Education & Welfare brought a supposed “loophole” to the attention of the 1973 Congressional Commission on Bankruptcy Laws. Concerned about tarnishing the image of the new program, the Department didn’t want new college graduates embarking on lucrative careers to default on loans that had made their education possible

But there was no hard, numerical evidence suggesting a serious problem. Rather, media hype over a few news reports of “deadbeat” student debtors took on a life of their own. In 1976, Congress yielded to public hysteria and made student loans non-dischargeable in bankruptcy unless a borrower had been in default for at least five years or could prove “undue hardship.”

In 1990, it extended the default period to seven years. In 1997, the Bankruptcy Reform Commission still had found no evidence supporting claims of systemic abuse, but Congress decided nevertheless that only “undue hardship” would make educational debt dischargeable. That placed it in the same category as child support, alimony, court restitution orders, criminal fines, and certain taxes. In 2005, it extended non-dischargeability to private loans as well.

The Enduring Power of a Big Lie

Unfortunately, the anecdotes and unsubstantiated lore about supposed abuses that led to the current rule persist to this day. In a lead editorial on July 25, 2012, The Wall Street Journal perpetuated the falsehood that “[a]fter a surge in former students declaring bankruptcy to avoid repaying their loans, Congress acted to protect lenders beginning in 1977.”

There was no such surge. It was “more myth and media hype” than reality. Now, Siegel has provided fuel for a new round of obfuscation to displace facts.

“Thirty years after getting my last [student loan],” Siegel writes, “the Department of Education is still pursuing the unpaid balance.” I hope they catch him.

NOTE: The special ebook sale of my first book, Crossing Hoffa – A Teamster’s Story continues: http://discussions.mnhs.org/10000books/true-crime-e-book-sale/. It’s the true crime saga of my father’s two-year tangle with Jimmy Hoffa from 1959 to 1961.

The Chicago Tribune honored it as one of the “Best Books of the Year.” You can get it at Amazon, bn.com, Google, iTunes, and Kobo.

LAW SCHOOL MORAL HAZARD

Posted on April 29, 2015 by thebellyofthebeast

My article in the Winter 2015 issue of the American Bankruptcy Institute Law Review, “Bankruptcy and Bad Behavior — The Real Moral Hazard: Law Schools Exploiting Market Dysfunction,” is now available on the Social Science Research Network. (Free download)

Here’s a teaser.

Loose talk about “the market for law school graduates” and related optimism about future employment prospects for entering students lack analytical rigor. That’s because the job market for new law school graduates is not a single market at all. Rather, graduate employment opportunities vary tremendously across distinct law school submarkets. But tuition and resulting law student debt often bear little relationship to graduates’ employment outcomes.

Current federal policies, including unlimited educational loans that are not dischargeable in bankruptcy, ignore these differences in law school submarkets and confound the operation of a true market. Those policies allow many law schools to exploit the resulting moral hazard, namely, the absence of accountability for their graduates’ poor employment outcomes.

I propose a solution that will make many law school deans, admissions officers, and faculty squirm — as they should.

A NEW YORK TIMES COLUMN MISFIRES

Posted on April 1, 2015 by thebellyofthebeast

My unwelcome diagnosis and resulting detour into our dysfunctional medical system diverted my attention from scrutinizing commentators who make dubious assertions about the current state of the legal profession.

Well, I’m back for this one. At first, I thought that Professor Steven Davidoff Solomon’s article in the April 1 edition of the New York Times, “Despite Forecasts of Doom, Signs of Life in the Legal Industry,” was an April Fool’s joke. But the expected punch line at the end of his essay never appeared.

To keep this post a manageable length, here’s a list of points that Solomon got wrong in his enthusiastic account of why the legal industry is on the rise. As a professor of law at Berkeley, he should know better.

“The top global law firms ranked in the annual AmLaw 100 survey experienced a 4.3 percent increase in revenue in 2013 and a 5.4 percent increase in profit.”

That’s true. But it doesn’t support his argument that new law graduates will face a rosy job market. Increased revenue and profits do not translate into increased hiring of new associates. In most big firms, profit increases are the result of headcount reductions at the equity partner level – which have been accelerating for years.

“Bigger firms are hiring.”

Sure, but nowhere near the numbers prior to Great Recession levels. More importantly, big firms comprise only about 15 percent of the profession and hire almost exclusively from the very top law schools. Meanwhile, overall employment in the legal services sector is still tens of thousands of jobs below its 2007 high. Even as recently December 2014, the number of legal services jobs had fallen from the end of 2013.

“Above the Law, a website for lawyers, recently reported a rising trend for lateral moves for lawyers in New York.”

Apples and oranges. The lateral partner hiring market — another big law firm phenomenon that has nothing to do with most lawyers — is completely irrelevant to job prospects for new entry-level law school graduates. Even during the depths of the Great Recession, the former was hot. The latter continues to languish.

“Last year, 93.2 percent of the 645 students of the Georgetown Law class of 2013 were employed.”

That number includes: 83 law school-funded positions, 12 part-time and/or short-term jobs, and 51 jobs not requiring a JD. Georgetown’s full-time, long-term, non-law school-funded JD-required employment rate for 2013 graduates was 72.4 percent – and Georgetown is a top law school. The overall average for all law schools was 56 percent.

“[Michael Simkovic and Frank McIntyre found that a JD degree] results in a premium of $1 million for lawyers over their lifetime compared with those who did not go to law school.”

Simkovic acknowledges that their calculated median after-tax, after-tuition lifetime JD premium is $330,000. More fundamentally, the flaws in this study are well known to anyone who has followed that debate over the past two years. See, e.g., Matt Leichter’s two-part post beginning at https://lawschooltuitionbubble.wordpress.com/2013/09/09/economic-value-paper-a-mistrial-at-best/, or the summary of my reservations about the study here: https://thelawyerbubble.com/2013/09/03/once-more-on-the-million-dollar-jd-degree/. Most significantly, it ignores the fact that the market for law school graduates is really two markets — not unitary. Graduates from top schools have far better prospects than others. But the study admittedly takes no account of such differences.

“[The American Bar Foundation’s After the JD] study found that as of 2012, lawyers had high levels of job satisfaction and employment as well as high salaries.”

It also found that by 2012, 24 percent of the 3,000 graduates still responding to the study questionnaire are no longer practicing law. The study’s single class of 2013 originally included more than 5,000 — so no one knows what the non-respondents are doing.

“These are the golden age graduates,” said American Bar Foundation faculty fellow Ronit Dinovitzer [one of the study’s authors], “and even among the golden age graduates, 24 percent are not practicing law.”

7. “Law schools have tremendous survival tendencies. I have a bet with Jordan Weissmann at Slate that not a single law school will close.”

Yes. Those “survival tendencies” are called unlimited federal student loans for which law schools have no accountability with respect to their students employment outcomes. If Solomon wins that bet, it will be because a dysfunctional market keeps alive schools that should have closed long ago.

Whatever happened to the News York Times fact-checker?

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — CONCLUSION

Posted on January 21, 2015 by thebellyofthebeast

My prior two installments in this series predicted that in 2015 many deans and law professors would declare the crisis in legal education over. In particular, two changes that have nothing to do with the actual demand for lawyers — one from the ABA and one from the Bureau of Labor Statistics — could fuel false optimism about the job environment for new law graduates.

Realistic projections about the future should start with a clear-eyed vision of the present. To assist in that endeavor, the Georgetown Law Center for the Study of the Legal Profession and Thomson Reuters Peer Monitor recently released their always useful annual “Report on the State of the Legal Market.”

The Importance of the Report

The Report does not reach every segment of the profession. For example, government lawyers, legal aid societies, in-house legal staffs, and sole practitioners are among several groups that the Georgetown/Peer Monitor survey does not include. But it samples a sufficiently broad range of firms to capture important overall trends. In particular, it compiles results from 149 law firms, including 51 from the Am Law 100, 46 from the Am Law 2nd 100, and 52 others. It includes Big Law, but it also includes a slice of not-so-big law.

The principal audience for the Georgetown/Peer Monitor Report is law firm leaders. The Report’s advice is sound and, to my regular readers, familiar. Rethink business models away from reliance on internally destructive short-term metrics (billable hours, fee growth, leverage). Focus on the client’s return on investment rather than the law firm’s. Don’t expect a reprise of equity partner profit increases that occurred from 2004 through 2007 (cumulative rate of 25.6 percent). Beware of disrupters threatening the market power that many firms have enjoyed over some legal services.

For years, law firm leaders have heard these and similar cautions. For years, most leaders have been ignoring them. For example, last year at this time, the Georgetown/Peer Monitor Report urged law firm leaders to shun a “growth for growth’s sake” strategy. Given the frenzy of big firm merger and lateral partner acquisition activity that dominated 2014, that message fell on deaf ears.

The Demand for Lawyers

The 2015 Report’s analysis of business demand for law firm services is relevant to any new law graduate seeking to enter that job market. Some law schools might prefer the magical thought that aggregate population studies (or dubious changes in BLS methodology projecting future lawyer employment) should assure all graduates from all law schools of a rewarding JD-required career. But that’s a big mistake for the schools and their students.

For legal jobs that are still the most difficult to obtain — employment in law firms — the news is sobering. While demand growth for the year ending in November 2014 was “a clear improvement over last year (when demand growth was negative), it does not represent a significant improvement in the overall pattern for the past five years.”

In other words, the economy has recovered, but the law firm job market remains challenging. “Indeed,” the Report continues, “since the collapse in demand in 2009 (when growth hit a negative 5.1 percent level), demand growth in the market has remained essentially flat to slightly negative.”

Past As Prologue?

The Report notes that business spending on legal services from 2004 to 2014 grew from about $159.4 billion to $168.7 billion — “a modest improvement over a ten-year period. But if expressed in inflation-adjusted dollars, the same spending fell from $159.4 to $118.3 billion, a precipitous drop of 25.8 percent.”

What does that mean for future law graduates? The Report resists taking sides in the ongoing debate over whether the demand for law firm services generally will rebound to anything approaching pre-recession levels. It doesn’t have to because, the Report concludes, “it is increasingly clear that the buying habits of business clients have shifted in a couple of significant ways that have adversely impacted the demand for law firm services.”

One of the two shifts that the Report identifies doesn’t necessarily mean less employment for lawyers generally. Specifically, companies are moving work from outside counsel to in-house legal staffs. That should not produce a net reduction in lawyer jobs, unless in-house lawyers become more productive than their outside law firm counterparts.

The second trend is bad news for law graduates: “[T]here has also been a clear — though still somewhat modest — shift of work by business clients to non-law firm vendors.” In 2012, non-law firm vendors accounted for 3.9 percent of legal department budgets; it grew to 7.1 percent in 2014.

Beware of Optimistic Projections

The Georgetown/Peer Monitor Report is a reminder that the recent past can provide important clues about what lies ahead. For lawyers seeking to work in firms serving corporate clients, it sure doesn’t look like a lawyer shortage is imminent.

So what will be the real-life source of added demand sufficient to create market equilibrium, much less a true lawyer shortage? Anyone predicting such a surge has an obligation to answer that question. As the Report suggests, general claims about population growth or the “ebb and flow” of the business cycle won’t cut it. Along with the rest of the economy, the profession has suffered through the 2008-2009 “ebb.” The economy has returned to “flow” — but the overall demand for lawyers hasn’t.

Here are two more suggestions for those predicting a big upswing from recent trends in the demand for attorneys. Limit yourselves to the segment of the population that can actually afford to hire a lawyer and is likely to do so. Then take a close look at individual law school employment results to identify the graduates whom clients actually want to hire.

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART II

Posted on January 14, 2015 by thebellyofthebeast

Part I of this series addressed the ABA rule change that will allow 2014 law graduates until March 15 — an extra month from prior years — to find jobs before their schools have to report those graduates’ employment results to the ABA (and U.S. News). That change will almost certainly produce higher overall employment rates. But relying on any alleged trend that results solely from an underlying change in the rules of the game — such as extending the reporting period from nine months to ten — would be a mistake.

This post considers a second rule change. It comes from the U.S. Department of Labor, and it’s a whopper.

The Government Makes Things Worse

The Bureau of Labor Statistics recently adopted a new statistical methodology for projecting the nation’s legal employment needs. Just about everyone agrees that, by any measure and for many years, the economy has been producing far more new lawyers than JD-required jobs. But the new BLS methodology declares that any oversupply of attorneys has evaporated. In fact, applying the new methodology retroactively to previous years would lead to the conclusion that the obvious glut of new lawyers never existed at all!

Using its earlier methodology, the Bureau has been revising downward its predictions of new lawyer jobs. In 2008, it projected a net additional 98,500 legal jobs through 2018. In 2012, it dropped that number to 73,600 through 2022. Taking into account retirements, deaths, and other attrition, the BLS separately projected that the profession could absorb about 20,000 new graduates annually for the next ten years. Most knowledgeable observers of the changing market for new lawyers have concurred with that ballpark assessment. Unfortunately, schools have been producing about twice that number (40,000).

Remarkably, the BLS’s new approach more than doubles the number of anticipated new legal jobs over the next 10 years. Rather than annual absorption of about 20,000 new lawyers through 2022, the Bureau now projects room for more than 41,000 a year. Overnight, demand caught up with what had been a chronic oversupply of attorneys.

In Defiance Of Sound Statistical Analysis And Common Sense

There are numerous technical and analytical flaws in the BLS’s new methodology. (See, e.g., Matt Leichter’s recent post, “2016 Grads Shouldn’t Take Comfort in New Jobs Projection Approach.”) Beyond those are common sense tests that the new methodology fails. For example, since 2011 the ABA-required data have revealed a persistent FTLT JD-required employment rate of 55 percent for new graduates. That’s not far from the projections that the BLS’s old methodology produced for a long time.

The BLS’s new approach amounts to saying that, somehow, all of those unemployed graduates must have been finding law jobs after all. As the old joke goes, endless digging in a roomful of manure was worth the effort; there was indeed a pony to be found – with the help of a little regression analysis.

Another common sense test considers actual employment numbers. For example, legal sector employment (including non-lawyers) through December 2014 was 1.133 million — about the same as a year ago and down more than 40,000 from 2006. Although the economy generally has recovered from the Great Recession, total employment in the legal sector is still far below pre-recession levels. If the BLS’s proposed approach were valid, it would suggest a remarkable attrition rate, raise serious questions about the state of the profession, and cause many prelaw students to wonder whether law school was the right choice.

The Bad Beat Goes On

Meanwhile, weak law schools that will benefit most from the ABA and BLS changes remain unaccountable for their graduates’ poor employment outcomes as they lower admission standards to fill classrooms. Median law school debt at graduation currently exceeds $120,000, and some of the schools with the worst employment outcomes burden students with the highest levels of debt. But there’s no financial risk to those schools because the federal government backs the loans and they’re not dischargeable in bankruptcy.

The escape hatch is small. If income-based repayment programs survive austerity demands of the Republican-controlled Congress – a big if – then students who persevere through 20 years of IBR will get a large tax bill because forgiven debt will count as income to them in the year it’s forgiven. The shortfall between the amount IBR students actually pay and the amount they owe will come from the federal purse.

Voila! The Crisis Is Over

Sometime in 2015, the synergy between the new ABA-rules allowing law schools to report 10-month employment data (discussed in Part I of this series) and the new BLS methodology projecting 41,000 new lawyer jobs annually will produce a law school chorus declaring that the crisis in legal education is over, at least in a macroeconomic sense. Indeed, the hype has already begun. Discussing the new BLS approach, Loyola University – Los Angeles School of Law professor Ted Seto observed: “If the new BLS projections are accurate, we should see demand and supply in relative equilibrium in 2015 and a significant excess of demand over supply beginning in 2016.”

The operative word is “if.” As noted in Part I, Seto’s similarly conditional prediction in 2013 didn’t come to pass. Meanwhile, only about half of his school’s 2013 graduating class secured full-time long-term JD-required employment within nine months of receiving their degrees. Average law school debt for the 82 percent of Loyola-LA law graduates who incurred debt was $141,765 — placing it 22nd (of 183) among schools whose students graduate with the most law school debt.

Here’s the real kicker. The vast disparity in individual law school employment outcomes makes broad macroeconomic declarations about opportunities for law graduates disingenuous anyway. It’s no surprise that the loudest voices come from schools where many graduates have great difficulty find any JD-required job.

But even at the macro level, anyone concerned about the fate of marginal law students, exploding student debt, or the future of a noble profession should look beyond any distracting noise about the supposed end of the legal education crisis. At least for now, the real question should be whether anything has really changed — other than the rules of the game.

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART I

Posted on January 7, 2015 by thebellyofthebeast

Remember that you read it here first: In 2015, many law school deans and professors will declare that the law school crisis is over. After five years of handwringing, relatively minor curriculum changes at most schools, and no improvement whatsoever in the mechanism for funding legal education, the storm has passed. All is well. What a relief.

The building blocks for this house of cards start with first-year law school enrollment that is now below 38,000 – a level not seen since the mid-1970s when there were 53 fewer law schools. The recent drop in the absolute number of future attorneys seems impressive, but without the context of the demand for lawyers, it’s meaningless in assessing proximity to market equilibrium, which remains far away.

The Search for Demand

To boost the projected demand side of the equation, the rhetoric of illusory equilibrium often turns to the “degrees-awarded-per-capita” argument that Professor Ted Seto of Loyola Law School – Los Angeles floated in June 2013. His premise: “Demand for legal services…probably increases as population increases.”

“Unless something truly extraordinary has happened to non-cyclical demand,” Seto continued, “a degrees-awarded-per-capita analysis suggests that beginning in fall 2015 and intensifying into 2016 employers are likely to experience an undersupply of law grads, provided that the economic recovery continues.”

If only wishing could make it so. The economic recovery did, indeed, continue, but the hoped for increase in attorney demand was nowhere to be found. When Seto posted his analysis, total legal services employment (including non-lawyers) at the end of May 2013 was 1,133,800. At the end of November 2014, it was 1,133,700.

Follow That Dream

Professor Rene Reich-Graefe of Western New England University School of Law relied on a similar per capita approach (among other dubious arguments) to assert that today’s students are about to enter “the most robust legal market that ever existed in this country.” His students sure hope he’s right. Only 49 out of 133 members of the Western New England Law class of 2013 — 37 percent — obtained full-time long-term JD-required jobs within nine months of graduation.

It’s easy to hypothesize that population growth should increase the demand for everything, including attorneys. But it’s more precise to say that population growth is relevant to the demand for attorneys only insofar as such growth occurs among those who can actually afford a lawyer. (The degrees-per-capita argument also ignores the profound ways that technological change has reduced the demand for lawyers across many segments of the profession.)

The ABA and the U. S. Department of Labor’s Bureau Labor Statistics have added two new factors that will feed false optimism in 2015. This post considers the ABA’s unfortunate action. Part II will cover the BLS’s contribution to continuing confusion.

The ABA Misfires Again

Since it began requiring law schools to report detailed employment outcomes for their most recent graduates, the overall full-time long-term JD-required employment rate has hovered around 55 percent (excluding law school-funded jobs). For a long time, the cutoff date for schools to report their most recent graduates’ employment status to the ABA (and U.S. News) has been February 15 following the year of graduation.

Starting with the class of 2014, law schools will get an additional month during which their graduates can try to find jobs before schools have to report class-wide employment results. When the employment status cutoff date moves from February 15 to March 15, the reported FTLT JD-required employment rate will go up. Comparisons with prior year outcomes (nine months after graduation) will be disingenuous, but law deans and professors touting an upswing in the legal job market will make them. Market equilibrium, they will proclaim, has made its way to legal education.

The stated reason for the ABA change was that the February 15 cutoff had an unfair impact on schools whose graduates took the bar exam in states reporting results late in the fall, especially New York and California. Schools in those states, the argument went, suffered lower employment rates solely because their graduates couldn’t secure jobs until they had passed the bar. Another month would help their job numbers.

In July 2013, Professor Deborah Merritt offered powerful objections to the ABA’s proposed change: The evidence does not support the principal reason for the change; moving the cutoff date would impair the ability to make yearly comparisons at a time when the profession is undergoing dramatic transformation; prospective students would not have the most recent employment information as they decide where to send their tuition deposits in April; the change would further diminish public trust in law schools and the ABA. The new March 15 cutoff passed by a 10-to-9 vote.

Watch For Obfuscation

In a few months when the new 10-month employment figures for the class of 2014 show “improvement” over the prior year’s nine-month results, think apples-to-oranges as you contemplate whose interests the ABA is really serving. Consider, too, whether any macroeconomic projections of attorney demand are even probative when there is a huge variation in employment opportunities across law schools.

At 33 law schools (including Western New England School of Law), fewer than 40 percent of 2013 graduates found full-time long-term employment requiring a JD. At most of those schools, the vast majority of students incurred staggering six-figure debt for their degrees. (At Western New England, it was $120,677 for the class of 2013.)

In the some corners of the profession, federal student loan dollars are subsidizing an ugly business.

BULLET DODGED? OR REDIRECTED TOWARD YOU?

Posted on November 5, 2014 by thebellyofthebeast

For the past six months, Thomas Jefferson School of Law in San Diego seemed poised to become the first ABA-accredited law school to fail since the Great Recession began. For anyone paying attention to employment trends in the legal sector, the passage of six years without a law school closing somewhere is itself remarkable. It also says much about market dysfunction in legal education.

In his November 5 column in the New York Times, University of California-Berkeley law professor Steven Davidoff Solomon has a different view. Solomon argues that recent enrollment declines prove that a functioning market has corrected itself: “[T]he bottom is almost here for law schools. This is how economics works: Markets tend to overshoot on the way up, and down.”

Solomon urges that the proper course is to keep marginal law schools such as Thomas Jefferson alive for a while “and see what happens.” I disagree.

Take Thomas Jefferson, Please

As I’ve discussed previously, in 2008 the school issued bonds for a new building. When the specter of default loomed large in early 2014, the question was whether some accommodation with bondholders would keep the school alive. Solomon suggests that creditors made the only deal possible and the school is the ultimate winner. He gives little attention to the real losers in this latest example of a legal education market that is not working: Thomas Jefferson’s students, the legal profession, and taxpayers.

In retrospect, the restructuring agreement between the school and its bondholders reveals that a deal was always likely. That’s because both sides could use other people’s money to make it, as they have since 2008.

According to published reports, interest on the taxable portion of the 2008 bond issuance was 11 percent. Tax-exempt bondholders earned more than 7 percent interest. Thanks to federally-backed student tuition loans, taxpayers then subsidized the school’s revenue streams that provided quarterly interest and principal payments to those bondholders.

Outcomes? Irrelevant In This Market

Last year, Thomas Jefferson accepted 80 percent of applicants. According to its latest required ABA disclosures, first-year attrition was over 30 percent. The school’s California bar passage rate for first-time takers in February and July 2012 was 54 percent, compared to the state average of 71 percent.

Solomon cites the school’s other dismal statistics, but ignores their implications. For example, Thomas Jefferson’s low bar passage rate made no difference to most of its graduates because the full-time long-term bar passage-employment rate for the class of 2013 was 29 percent, as it was for the class of 2012.

Meanwhile, its perennially high tuition (currently $44,900 a year) put Thomas Jefferson #1 on the U.S. News list of schools whose students incurred the greatest law school indebtedness: $180,665 for the class of 2013. According to National Jurist, the school generates 95 percent of its income from tuition.

It’s Alive

This invites an obvious question: How did the school survive so long and what is prolonging its life?

First, owing to unemployed recent graduates with massive student loans, bondholders received handsome quarterly payments for more than five years — much of it tax-exempt interest. The disconnect between student outcomes and the easy availability for federal loans blocked a true market response to a deteriorating situation. Bondholders should also give an appreciative nod to federal taxpayers who are guaranteeing those loans and will foot the bill for graduates entering income-based loan forgiveness programs.

Second, headlines touted Thomas Jefferson’s new deal as “slashing debt” by $87 million, but bondholders now own the law school building and will reportedly receive a market rate rent from the school — $5 million a year. Future student loans unrelated to student outcomes will provide those funds.

Third, the school issued $40 million in new bonds that will pay the current bondholders two percent interest. Student loan debt will make those payments possible.

Net-net, win-win, lose-lose

The bottom line benefit for Thomas Jefferson is immediate relief from its current cash crunch. Instead of $12 million in principal and interest payments annually, the school will pay $6 million in rent and bond interest — funded by students who borrow to obtain a Thomas Jefferson law degree of dubious value.

“I think the whole deal is a reflection of the fact that the bondholders were very desirous for us to succeed,” [Thomas Jefferson Dean Thomas] Guernsey said.

Actually, it reflects the bondholders’ ability to tap into the proceeds of future federal student loans as they cut a deal with a wounded adversary. Instead of cash flow corresponding to bond interest rates of 7 and 11 percent, bondholders will receive about half that amount, along with an office building and the tax advantages that come with ownership (e.g., depreciation deductions). Think of it as refinancing your home mortgage, except the bank gets to keep your house.

Erroneous Assumptions Produce Dubious Strategies

“This restructuring is a major step toward achieving our goals,” said Thomas Guernsey, dean of Thomas Jefferson. “It puts the school on a solid financial footing.”

Throwing furniture into the fireplace to keep the house warm is not a viable long-run survival strategy. Consider future students and their willingness to borrow as the “furniture” and you have a picture of the Thomas Jefferson School of Law’s business plan.

Meanwhile, Solomon echoes the hopes of law school faculty and administrators everywhere when he says, “[T]he decline in enrollment could lead to a shortage of lawyers five years from now.”

In assuming a unitary market demand for lawyers, he conflates the separate and distinct submarkets for law school graduates. His resulting leap of faith is that a rising tide — even if it arrives — will lift Thomas Jefferson’s boat and the debt-ridden graduates adrift in it. It won’t.

STUDENT LOANS, MORAL HAZARD, AND A LAW SCHOOL MESS

Posted on September 10, 2014 by thebellyofthebeast

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

Posted on June 4, 2014 by thebellyofthebeast

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 35 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.

MORE JOBS, EXCEPT FOR LAWYERS

Posted on May 14, 2014 by thebellyofthebeast

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.

WHO REALLY PAYS FOR LAW STUDENT DEBT?

Posted on April 23, 2014 by thebellyofthebeast

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.”

FALSE ADVERTISING POSING AS LEGAL SCHOLARSHIP

Posted on March 26, 2014 by thebellyofthebeast

Sometimes everything you need to know about a piece of purported scholarly legal research appears in its opening lines. Take, for example, the first two sentences of “Keep Calm and Carry On” in current issue of The Georgetown Journal of Legal Ethics:

“Supposedly, there is a crisis in legal education. It appears to be touted mostly by those who are in the business of realizing monetary (or, at least, reputational) gain from providing cost-efficient coverage about matters of (rather) little importance.”

At this point, Professor Rene’ Reich-Graefe’s 15-page article offers the second of its 80 footnotes: “For example, in 2011, The New York Times Company reported annual revenues of $2,323,401,000. Of those, approximately 52.57% (or $1,221,497,000) were raised in advertising revenue…”

So it turns out that the New York Times, The Wall Street Journal, and every other media outlet reporting on the troubled world of American legal education have manufactured a crisis to sell advertising space. Never mind too many law school graduates for too few JD-required jobs, more than a decade of soaring law school tuition, and crippling student debt. Everyone just needs to calm down.

The argument

Professor Reich-Graefe offers what he calls “a brief exercise in some eclectic apologetics of the present state of legal education for those of us who refuse to become card-carrying members of the contemporary ‘Hysterias-R-Us’ legal lemming movement.” Starting with a Bureau of Labor Statistics report that “lawyer employment jobs in 2010 were at 728,200,” he observes that the United States has an additional 500,000 licensed attorneys and concludes:

“One may safely assume that, at present, a good number (though certainly not all) of those licensed lawyers are gainfully employed, too — mainly within the legal profession.”

Then Reich-Graefe posits trends that he says will favor the legal profession: “Over half of currently practicing lawyers in this country will retire over the next 15 to 20 years”; “U.S. population will increase by over 100 million people, i.e., by one third, until 2060, thus, increasing total demand for legal services”; “the two largest intergenerational wealth transfers in the history of mankind…will occur in the United States over the course of the next 30 to 40 years, thus, increasing total demand for legal services even further”; and “everything in the law, by definition, will continue to change…there will be more work for more lawyers.”

His analysis culminates in a breathless conclusion: “[R]ecent law school graduates and current and future law students are standing at the threshold of the most robust legal market that ever existed in this country — a legal market which will grow, exist for, and coincide with their entire professional career [sic].”

The critique

Others have already dissected Reich-Graefe’s statistical arguments in great detail. Suffice it to say that when law professors wander into the world of numbers, someone should subject their work to peer review before publishing it. But Professor Bill Henderson makes an equally important point: Even if Reich-Graefe’s analysis and assumptions are valid, his advice — “Keep Calm and Carry On” — is dangerous.

I would add this nuance: Reich-Graefe’s advice is more dangerous for some law schools than for others. The distinction matters because law schools don’t comprise a single market. That’s not a value judgment; it’s just true. At Professor Reich-Graefe’s school, Western New England University School of Law, only 37 percent of the graduating class of 2013 obtained full-time, long-term jobs requiring a JD. Compare that to graduate employment rates (and salaries) at top schools and then try to convince yourself that all schools serve the same market for new lawyers.

The dual market should have profound implications for any particular school’s mission, but so far it hasn’t. Tuition at some schools with dismal employment outcomes isn’t significantly less than some top schools where graduation practically assures JD-required employment at a six-figure salary.

Likewise, virtually all schools have ridden the wave of dramatic tuition increases. In 2005, full-time tuition and fees at Western New England was $27,000. This year, it’s $40,000.

Shame on us

Reich-Graefe makes many of us accomplices to his claimed conspiracy against facts and reason. Shame on me for writing The Lawyer Bubble. Shame on Richard Susskind for writing Tomorrow’s Lawyers. Shame on Bill Henderson for his favorable review of our books in the April 2014 issue of the Michigan Law Review. Shame on Brian Tamanaha, Paul Campos, Matt Leichter, and every other voice of concern for the future of the profession and those entering it.

Deeply vested interests would prefer to embrace a different message that has a noble heritage: “Keep Calm and Carry On” — as the British government urged its citizenry during World War II. But in this context, what does “carry on” mean?

“Carry on” how, exactly?

Recently on the Legal Whiteboard, Professor Jerry Organ at St. Thomas University School of Law answered that question: filling classrooms by abandoning law school admission standards. Ten years ago, the overall admission rate for applicants was 50 percent; today it’s almost 80 percent. That trend line accompanies a pernicious business model.

It’s still tough to get into top a law school; that segment of the market isn’t sacrificing student quality to fill seats. But most members of the other law school market are. They could proceed differently. They could view the current crisis as an opportunity for dramatic innovation. They could rethink their missions. They could offer prospective students new ways to assess realistically their potential roles as attorneys while providing a practical, financially viable path for graduates to get there.

Alternatively, they can keep calm and carry on. Then they can hope that on the current field of battle they’re not carried off — on their shields.

THE END OF THE LAWYER GLUT?

Posted on March 5, 2014 by thebellyofthebeast

Could a years-long oversupply of new attorneys finally be on the wane? Based on the trend of recent headlines, it would be easy to reach that conclusion. For example, a December 2013 Wall Street Journal headline read: “First-Year Law School Enrollment at 1977 Levels.” The first sentence of the article described the “plunge” in entering law student enrollments.

Likewise, in January 2014, National Jurist reported on steep enrollment declines at particular schools from 2010 to 2013. The big losers in that compilation were “the University of LaVerne (down 66.2 percent) and Thomas M. Cooley Law School (down 40.6 percent).”

Most recently, the National Law Journal took a closer look at the 13 law schools that saw “1L enrollment drop by 30 percent or more in the span of 12 months, while an additional 27 reported declines of 20 to 30 percent in all.”

Taken together, these reports create an impression that the severe lawyer glut is ending.

How about a job?

For prospective law students, the size of any drop in overall enrollment isn’t relevant; employment prospects upon graduation from a particular school are. According to the ABA, just under 40,000 students began law school in the fall of 2013 — down eight percent from the entering class of 2012. That’s significant, but not all that dramatic.

Meanwhile, for the entire decade ending in 2022, the latest estimate (December 2013) from the Bureau of Labor Statistics puts the total number available positions for “Lawyers, judges, and related workers” at around 200,000. That net number takes into account deaths, retirements, and other departures from the profession. More sobering, it’s yet another downward revision from earlier BLS projections.

As the profession makes room for 20,000 new attorneys a year, why all the media attention about 1L enrollments “plunging” to a level that is still almost twice that number?

I think the answer is that some law professors are running around screaming that their hair is on fire because, for many of them, it is. The media are covering that blaze, but the larger conflagration surrounding the crisis in legal education somehow gets lost.

U.S. News to the rescue?

Professor Jerry Organ at the University of St. Thomas School of Law has an interesting analysis of the situation. Schools in trouble are “picking their poison.” One option is to maintain admission standards that preserve LSAT and GPA profiles of their entering classes. Alternatively, they can sacrifice those standards in an effort to fill their classrooms and maximization tuition revenues.

U.S. News & World Report rankings now have an ironic role in this mess. For decades, rankings have contributed to perverse behavioral incentives that have not served law schools, students, or the profession. For example, in search of students with higher LSATs that would improve a ranking, many schools diverted need-based financial aid to so-called “merit scholarships” for those with better test scores.

Likewise, revenue generation also became important in the U.S. News calculus. As the ABA Task Force Report on the Future of Legal Education notes, the ranking formulas don’t measure “programmatic quality or value” and, to that extent, “may provide misleading information to students and consumers.” They also reward “increasing a school’s expenditures for the purpose of affecting ranking, without reference to impact on value delivered or educational outcomes.”

Now the rankings methodology has presented many schools with a Hobson’s choice: If they preserve LSAT/GPA profiles of their entering classes, they will suffer a reduction in current tuition dollars as class size shrinks; if they admit less qualified applicants, they’ll preserve tuition revenues for a while, but they’ll suffer a rankings decline that will hasten their downward slide by deterring applicants for the subsequent year.

As some schools become increasingly desperate, they will be tempted to recruit those who are most vulnerable to cynical rhetoric about illusory prospects on graduation. The incentive for such mischief is obvious: However unqualified such students might be for the profession, the six-figure loans they need to finance a legal education are available with the stroke of a pen. Revenue problem solved.

Some law professors argue that the trend of recent declines in enrollment is sufficient to create a shortfall in law school graduates by 2015. Maybe they’re right. Time will tell — and not much time at that.

I think it’s more likely that over the next decade, a lot of law professors will find themselves looking for work outside academia. Meanwhile, their best hope could be to run out the student loan program clock long enough for them to retire. Then it all becomes someone else’s problem.

ONCE MORE ON THE MILLION DOLLAR JD DEGREE

Posted on September 3, 2013 by thebellyofthebeast

In late July, my article “The Dangerous, Million-Dollar Distraction” appeared here before its republication at Am Law Daily and Business Insider. In it, I discussed a study purporting to calculate the lifetime premium of a law degree compared to BA holders. The authors of the study, Professors Michael Simkovic and Frank McIntyre, weren’t pleased and Am Law Daily has now published their rejoinder. Were it not for their now pervasive claims relating to my alleged confusion, errors, and mistakes, I’d let it pass because the study has already received more attention than it deserves.

The real point

There were no errors in my analysis. My view – expressed in the article – is that the decision to attend law school should not turn on the hope of future financial rewards. In that respect, Simkovic and McIntyre take a strong position that looks like career advice based on predictions about the future: “[M]any college graduates who follow the critics’ advice and skip law school will forego a lucrative career and face higher long-term risks of financial hardship.” (p. 12)

The law is a great profession that I love, but it’s not for everyone. Through the years and for many undergraduates, law school has been a default position for liberal arts majors who can’t decide what to do next. For far too many, life after law school becomes a process whereby great expectations clash with harsh reality in a way that creates career dissatisfaction and worse.

As a consequence, for me, the most important problem with the Simkovic/McIntyre study is that it uses aggregate data in inviting students individually to choose a legal career in the pursuit of financial security or a safe return on their educational investment. That is the wrong reason for anyone to become a lawyer.

Multiple markets

No one talks much about the two markets for law schools. The Simkovic/McIntyre study ignores the differences among schools and, in a response to Professor Deborah Merritt’s critique, Simkovic asserted on Brian Leiter’s Law School Reports blog that he “doesn’t think the evidence for a bimodal distribution of lifetime earnings is very compelling.” One wonders what profession he’s looking at.

For some – especially but not exclusively graduates from top law schools who land (and keep) jobs in big firms – practicing law can be lucrative. But those outcomes are on the far end of a severely skewed distribution of attorney incomes. As NALP data confirm, that skewing begins from the moment of graduation. Big law firm first-year associates earn an average of more than $130,000 yearly and average partner profits for the Am Law 100 exceed $1 million.

But big law attorneys account for only about 10 percent of all practitioners. Far more people – mostly but not exclusively graduates from law schools outside the top group – wind up at the much lower end of the distribution. According to the Bureau of Labor Statistics, the median income for all lawyers in the United States in 2010 was $112,760.

Red herrings or real issues?

Professor Simkovic — initially via Professor Leiter’s blog — called my observations about income distribution a “red herring.” But the real red herring is using the average of a skewed distribution to tout a “Million Dollar Degree” – first in his study’s original title and then persisting in the final sentence of the article’s synopsis. Of course, it attracts more attention than even his dramatically lower median (midpoint) value. (In his Leiter blog post, Simkovic endorsed $330,000 as the lifetime (40-year career) net JD-degree premium for the median (midpoint) of his sample.)

At some point below the 25th percentile, even Simkovic’s study proves that the so-called JD-degree premium turns negative. That includes a lot of lawyers, although the study doesn’t disclose the number.

Contrived controversies

My other observations to which Simkovic took exception — initially in his Leiter blog post and now in his Am Law Daily response — relate to points that his own study acknowledges: the presence of a statistical correlation doesn’t prove causation (p. 25) or predict the future (p. 38); the conclusions of any regression analysis depend on its assumptions (pp. 39-41); none of the attorneys in his 1,382-person sample graduated after 2008 (p. 13 and n. 31; companion slide 13).

(One of the more perplexing criticisms in Simkovic’s Leiter blog post was that I was wrong about half of all JD-degree holders finding themselves below the median for all JD-degree holders. My statement simply embodied the definition of a median – half above and half below that midpoint. His related comment about median incomes relative to bachelor’s degree holders is irrelevant to anything I wrote.)

Others will decide the fate of the Simkovic/McIntyre study as an enduring scholarly work. My views will not move Professor Simkovic or anyone else to a different position on the underlying issue of whether law schools today should rethink their business models in light of the profession’s ongoing transformation.

Reality therapy

But the academic debate has little bearing on my mission. Rather, as I wrote, my concern is for young people who “rely on an incomplete understanding of the study’s limitations to reinforce their own confirmation bias in favor of pursuing a legal career primarily for financial reasons.”

Several years ago, I added an undergraduate course to my workload in the hope of providing students with information that might help them in deciding whether to pursue a legal career. The vast majority of those students go on to law school, but with an increased awareness of the road ahead. They understand that even in tough economic times, many JD-degree holders will do well, while others won’t.

The reality of those less fortunate creates challenges for the entire profession because: 1) most prelaw students have a difficult time imagining that they’ll ever find themselves in the lower 25th percentile of anything; and 2) even among the so-called “winners” who wind up a lot higher in the overall income distribution, attorney career dissatisfaction remains widespread.

In short, prelaw students should tread carefully along the path toward law school. The law can lead to a great career, but it’s not for everyone.

Even if the high-end market for new attorneys were booming – which it isn’t – pursuing a JD for financial reasons is a mistake. As a wise person said long ago, ”Not everything that can be counted counts; not everything that counts can be counted.”

HOW THE LAWYER BUBBLE GROWS

Posted on July 17, 2013 by thebellyofthebeast

In June, the legal services sector lost more than 3,000 jobs. According to the latest Bureau of Labor Statistics data, the sector has gained only 1,000 net jobs since June 2012. In the last two months, 6,000 positions disappeared.

No market solutions here

In a properly functioning market, reduced demand would prompt suppliers to cut output in search of equilibrium. But the legal profession consists of several distinct and dysfunctional markets.

For example, there’s plenty of unmet demand for lawyers from people who can’t afford them. Reduced federal funding for the Legal Services Corporation has exacerbated that problem. So has the rising cost of law school tuition and resulting student debt. Over the past 25 years, tuition increases for law school have far outpaced the rest of higher education.

In another segment of the legal market, demand for corporate legal work has been flat for years. But law schools business models generally have focused on filling classrooms, regardless of whether students will ever be able to repay their six-figure educational loans. Because most tuition revenue comes from federally guaranteed loans that survive bankruptcy, schools have no financial incentive to restrict enrollments — that is, until they run out of applicants.

When might that happen? Not soon enough, although recent headlines imply otherwise.

High-profile reductions in class size

Some schools have reduced the size of their entering classes. For example, the University of the Pacific McGeorge School of Law announced that it is reducing enrollment from the current 1,000 to about 600 — an impressive 40 percent drop.

But as Dan Filler observed at the Faculty Lounge, the reality may be less impressive. Although McGeorge graduated 300 new lawyers annually from 2010 through 2012, its first-year enrollment hasn’t kept pace with those numbers. In 2012, the school had 248 (day and evening) first-year students. In 2011, it had 215. A normalized class enrollment of 200 would be a 20 percent reduction from recent levels. That’s positive, but as explained below, not nearly enough.

About those declining applications

A recent Wall Street Journal article about the “plunge” in law school enrollments noted that “applications for the entering class of 2013 were down 36 percent compared with the same point in 2010…” But a more relevant statistic should be more jarring: “Law school first-year enrollments fell 8.5 percent nationwide.”

Here’s another way to look at it: For the fall of 2004 entering class, law schools admitted 55,900 of 98,700 applicants — or about 57 percent. For the fall of 2012 class, law schools admitted 50,600 of 68,000 applicants — almost 75 percent.

About those jobs

The increase in the percentage of admitted applicants is one reason that the lawyer bubble is still growing. Another is the stagnant job market. In 2008, the Bureau of Labor Statistics projected 98,500 net additional attorney positions for the entire decade ending in 2018. In 2010, it revised that estimate downward to project 73,600 net additional positions by the end of 2020.

Even allowing for attrition by retirement, death and otherwise, the BLS now estimates that there will be 235,000 openings for lawyers, judges, and related workers through 2020 — 23,500 a year. Last year alone, law schools graduated 46,000 new attorneys.

If law schools as a group reduced enrollments by 20 percent from last year’s graduating class, they would still produce almost 37,000 new lawyers annually — 370,000 for a decade requiring only 235,000 — not to mention the current backlog that began accumulating even before the Great Recession began.

One more thing

Which takes us back to the University of the Pacific McGeorge School of Law. According to its ABA submission, only 42 percent of its class of 2012 graduates found full-time long-term jobs requiring a JD. Even if the school caps entering classes at 200, its resulting placement rate would rise to only 64 percent.

U.S. News rankings considerations loom large in all of this. Law schools fear that reducing LSAT/GPA admission standards would hurt their rankings. In that respect, McGeorge’s class size announcement overshadowed a more unpleasant disclosure that new ABA rules now require: scholarship retention rates.

Many law schools try to enhance their U.S. News rankings by offering entering students with high LSATs so-called merit scholarships. But those scholarships sometimes disappear for years two and three. According to Prof. Jerry Organ’s analysis, only 42 percent of students entering McGeorge in the fall of 2011 kept their first-year scholarships. Eleven schools (out of 140 that offered conditional scholarships) did worse.

The overall picture is ugly. Some schools are laying off faculty and staff to counter the financial impact of reduced enrollments. But they’re also keeping tuition high and spending money on LSAT-enhancing scholarships that disappear after the first year, presumably to be replaced with non-dischargeable loans. Meanwhile, almost all of today’s students are incurring staggering educational debt, but many of them won’t find jobs sufficient to repay it.

That’s not a march toward market equilibrium. It’s a growing bubble.

THE LAWYER BUBBLE — Early Reviews and Upcoming Events

Posted on March 29, 2013 by thebellyofthebeast

The New York Times published my op-ed, “The Tyranny of the Billable Hour,” tackling the larger implications of the recent DLA Piper hourly billing controversy.

And there’s this from Bloomberg Business Week: “Big Law Firms Are in ‘Crisis.’ Retired Lawyer Says.”

In related news, with the release of my new book, The Lawyer Bubble – A Profession in Crisis, my weekly posts will give way (temporarily) to a growing calendar of events, including:

TUESDAY, APRIL 2, 2013, 10:00 am to 11:00 am (CDT)
Illinois Public Media
“Focus” with Jim Meadows
WILL-AM – 580 (listen online at http://will.illinois.edu/focus)

TUESDAY, APRIL 2, 2013, 1:00 pm to 2:00 pm (CDT)
“Think” with Krys Boyd
KERA – Public Media for North Texas – 90.1 FM (online at http://www.kera.org/think/)

THURSDAY, APRIL 4, 2013, 11:00 am to Noon (EDT)
Washington, DC
“The Diane Rehm Show”
WAMU (88.5 FM in DC area) and NPR

FRIDAY, APRIL 5, 2013, 10:45 am to 11:00 am (EDT)
New York City
“The Brian Lehrer Show”
WNYC/NPR (93.9 FM/820 AM in NYC area)
(http://www.wnyc.org/shows/bl/)

SATURDAY, APRIL 6, 2013, Noon (EDT)
New Hampshire Public Radio
“Word of Mouth” with Virginia Prescott
WEVO – 89.1 FM in Concord; available online at http://nhpr.org/post/lawyer-bubble)

WEDNESDAY, APRIL 10, 2013, 8:00 am to 9:00 am (CDT)
“The Joy Cardin Show”
Wisconsin Public Radio (available online at http://www.wpr.org/cardin/)

FRIDAY, APRIL 12, 2013
“The Shrinking Pyramid: Implications for Law Practice and the Legal Profession” — Panel discussion
Georgetown University Law Center
Center for the Study of the Legal Profession
600 New Jersey Avenue NW
Location: Gewirz – 12th floor
Washington, D.C.

TUESDAY, APRIL 23, 2013, 7:00 pm (CDT) (C-SPAN 2 is tentatively planning to cover this event)
The Book Stall at Chestnut Court
811 Elm Street
Winnetka, IL

Here are some early reviews:

“The Lawyer Bubble is an important book, carefully researched, cogently argued and compellingly written. It demonstrates how two honorable callings – legal education and the practice of law – have become, far too often, unscrupulous rackets.”
—Scott Turow, author of Presumed Innocent and other novel

“Harper is a seasoned insider unafraid to say what many other lawyers in his position might…written with keen insight and scathing accusations…. Harper brings his analytical and persuasive abilities to bear in a highly entertaining and riveting narrative…. The Lawyer Bubbleis recommended reading for anyone working in a law related field. And for law school students—especially prospective ones—it really should be required reading.”
—New York Journal of Books

“Anyone looking into a career in law would be well advised to read this thoroughly eye-opening warning.”
—Booklist, starred review

“[Harper] is perfectly positioned to reflect on alarming developments that have brought the legal profession to a most unfortunate place…. Essential reading for anyone contemplating a legal career.”
—Kirkus Reviews

“[Harper] burns his bridges in this scathing indictment of law schools and big law firms…. his insights and admonitions are consistently on point.”
—Publishers Weekly

“Imagine that the elite lawyers of BigLaw and the legal academy were put on trial for their alleged negligence and failed stewardship. Imagine further that the State had at its disposal one of the nation’s most tenacious trial lawyers to doggedly build a complete factual record and then argue the case. The result would be The Lawyer Bubble. If I were counsel to the elite lawyers of BigLaw and the legal academy, I would advise my clients to settle the case.”
—William D. Henderson, Director of the Center on the Global Legal Profession and Professor at the Indiana University Maurer School of Law

“With wit and insight,The Lawyer Bubble offers a compelling portrait of the growing crisis in legal education and the practice of law. This book is essential reading for anyone concerned about the profession or contemplating a legal career.”
—Deborah L. Rhode, Professor of Law and Director of the Center on the Legal Profession, Stanford University

“This is a fine and important book, thoughtful and beautifully written. It makes the case – in a responsible and sober tone – that we are producing far too many lawyers for far too small a segment of American society. It is a must-read for leaders of law firms, law schools, and the bar, as the legal profession continues its wrenching transition from a profession into just another business.”
—Daniel S. Bowling III, Senior Lecturing Fellow, Duke Law School

“In this superb book, Steven Harper documents, ties together and suggests remedies for the deceit that motivates expanding law school enrollment in the face of a shrinking job market, the gaming of law school rankings and the pernicious effect of greed on the leadership of many of our nation’s leading law firms. The lessons he draws are symptomatic, and go well beyond the documented particulars.”
—Robert Helman, Partner and former Chairman (1984-98), Mayer Brown LLP; Lecturer, University of Chicago Law School

“Every sentient lawyer realizes that the legal profession is in crisis, but nobody explains the extent of the problem as well as Steven Harper. Fortunately, he also proposes some solutions – so there is still room for hope. This is an essential book.”
—Steven Lubet, author of Fugitive Justice and Lawyers’ Poker

“Steven Harper’s The Lawyer Bubble is an expression of tough love for the law, law firms and the people who work in them. The clear message is take control of your destiny and your firm to avoid the serious jeopardy that confronts far too many firms today. Whether you are a partner, associate, or law student, you should read this compassionate and forceful work.”
—Edwin B. Reeser, Former managing partner, author, and consultant on law practice management

“Harper chronicles the disruption of his once-genteel profession with considerable sadness, and places the blame squarely at the wing-tipped feet of two breeds of scoundrel: law school deans, and executive committees that have run big law firms …” –“Bar Examined” – Book Review in The Washington Monthly (March/April 2013)

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The Belly of the Beast

Steven J. Harper, Esq.

Tag Archives: law schools

THE ABA IS RAISING THE WRONG BAR

INDIANA TECH: ANOTHER COSTLY LESSON IGNORED

THE ABA’S TERRIBLE, HORRIBLE, NO GOOD, VERY BAD DAY

LAW SCHOOLS AND THE NEW YORK TIMES

ABOUT THAT LAWYER SHORTAGE…

WARM BODIES

LSAT v. GRE – RHETORIC v. REALITY

THE CRISIS IN LEGAL EDUCATION IS OVER!

MIZZOU FOOTBALL LESSONS

LEGAL EDUCATION’S STRANGE BEDFELLOWS

GAME-CHANGER?

LEARNING FOUR LESSONS FROM FAILURE

MORE ON MY NY TIMES OP-ED

NY TIMES OP-ED FOLLOW UP

WHEN SUPPORTING A CAUSE UNDERMINES IT

LAW SCHOOL MORAL HAZARD

A NEW YORK TIMES COLUMN MISFIRES

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — CONCLUSION

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART II

2015: THE YEAR THAT THE LAW SCHOOL CRISIS ENDED (OR NOT) — PART I

BULLET DODGED? OR REDIRECTED TOWARD YOU?

STUDENT LOANS, MORAL HAZARD, AND A LAW SCHOOL MESS

THE BATTLE FOR CHARLESTON

MORE JOBS, EXCEPT FOR LAWYERS

WHO REALLY PAYS FOR LAW STUDENT DEBT?

FALSE ADVERTISING POSING AS LEGAL SCHOLARSHIP

THE END OF THE LAWYER GLUT?

ONCE MORE ON THE MILLION DOLLAR JD DEGREE

HOW THE LAWYER BUBBLE GROWS

THE LAWYER BUBBLE — Early Reviews and Upcoming Events

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