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How to reduce the increasingly indefensible cost of law school

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I was invited by 17 Stanford Law School student groups to give a talk on the law school scam, in the wake of increasing concerns that even at elite law schools the cost of attendance is approaching or has reached levels that make the decision to attend highly questionable. Prof. Deborah Rhode (author of the excellent new book The Beauty Bias) participated as well. The discussion is now available on Youtube. It’s in five segments, the first of which is linked here.

I’d like to thank Dave Jackson of Stanford’s Computer Science department for taking the time to record the event and put it up on the Internet. I also want to thank him for reminding me that, when Harvard College announced its new financial aid model in December 2007, other elite universities fell in line with it almost immediately. This fact has obvious significance for any law school willing to consider gaining the considerable first mover advantages that would accrue to it if it were to cut tuition significantly.

In the course of Monday’s discussion, I suggested that SLS should immediately reduce tuition for its JD students by 30%, i.e., to around $33,000 per year. (This would reduce tuition to where it was, in nominal terms, in 2004. In real dollar terms the reduction would be somewhat larger). The cost of doing so would be about seven million dollars, assuming that the school continued to spend what it’s spending now on scholarships and grants.

Now it’s true seven million dollars is not a small sum of money, even in Palo Alto. But consider that Stanford University’s endowment is currently about $17 billion dollars. The law school’s endowment isn’t a public number, but given that it was supposedly around $270 million 12 years ago, and that over that same time the university’s general endowment has nearly tripled, a conservative estimate would put it in the $600-$700 million range (HLS’s endowment is said to be $1.7 billion, although it’s a much larger school).

In other words, SLS’s endowment throws off several tens of millions of dollars in income every year. Of course much of this income is dedicated to specific purposes, so it’s not a simple matter to dip into it for the purpose of cutting tuition. Nevertheless, it’s not hard to imagine how some combination of redirection of endowment monies and a fundraising appeal premised on the attractive proposition that SLS is going to take the lead in moving American legal education toward crucial structural reforms (and become the top-ranked law school in the country in the process) could shake seven million dollars per year out of the seat cushions.

What would happen then? My guess is that HLS dean Martha Minow and YLS dean Robert Post, and their respective university presidents, would have a bad day or two. Then they would announce they were doing the same thing. (As a law professor points out law school deans and faculties will in many cases have to fight battles with central administrations to make these sorts of changes. This is another reason why transparency is crucial: the myth that it’s either fair or efficient to charge law students a cross-subsidized university tax because of the great jobs they’ll be getting needs to be killed sooner rather than later). After all, who other than the Winklevoss twins will choose to go to HLS or YLS at $50K per year, if you can go to SLS for two-thirds as much?

The consequences of this would also be fairly predictable. Can Columbia, Chicago, and NYU charge 30% more than SYH? Obviously not. What about Michigan, Penn, Duke, and Virginia? Nope. Etc. Now at some point as one slides down the hierarchy schools will find that they have to engage in truly major long-term (as opposed to moderately uncomfortable short term) restructuring in order to return their tuition to what it was, in real terms, a dozen years ago. And somewhat further down the line, some schools may find it not merely difficult but actually impossible to do this. In other words, some schools will find it impossible to charge a price of attendance that even comes within rough hailing distance of something that would produce a reasonable expected return on investment for a reasonable proportion of their students. Those schools would go out of business — which, it should be unnecessary to point out, is exactly what should happen.

The idea that there’s something inherent about the nature of legal education that requires it to cost at least twice as much as it did in real terms 20 years ago, and third more than it did a decade ago, is so absurd that it could only be believed by people who have an enormous ideological-economic stake in that belief. Stanford was a pretty good law school a dozen years ago, and there’s no reason it can’t return its financial structure to what it looked like then. The same goes for many, many other law schools (not, as noted above, all). And there’s no reason why the process needs to stop there: longer-term structural reforms could reduce the cost of law school to what it was 20 years ago — i.e., half of what is now — with little or no loss of real educational quality.

The first law school dean who is bold enough to assert that fact through concrete actions will be remembered for a long time.

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  • CJColucci

    I’m not sure this works. So one of the fifteen or so top ten schools, say, Stanford, cuts tuition. The 300-odd people that my alma mater took for the Class of 1982 were a nice bunch, but you could have blown us all up the first day and nobody would have noticed the difference if we’d been replaced by the next 300 on the list. Stanford can’t take everybody, so let’s say each of the other 14 top ten schools loses to Stanford a dozen or twenty people that would otherwise have have taken. So what? The next dozen or twenty who replace them are basically the same. Why should the other schools leave money on the table?

    • Paul Campos

      Why should the other schools leave money on the table?

      This is the kind of argument that got us into this mess in the first place. SLS is already leaving a lot of “money on the table,” in that they could charge $100K a year and still fill their class (there are a lot of rich people in America). They don’t for a complex set of reasons, but one of the most compelling is that other schools that could get away with charging this (Harvard and Yale certainly, and probably a half dozen others to lesser degrees) don’t.

      Of course if the purpose of education is indistinguishable from the purposes of a for-profit business, i.e., profit maximization, then Stanford is in fact already charging far less than it “should.” OTOH if education is among other things a government-subsidized public good, things get more complicated.

  • Alan Tomlinson

    I once suffered through a lecture from William Muir at Berkeley where he pointed out, with some pride, that UCB had a law school and not a medical school and that this was immensely profitable as medical schools require rather fewer instructors per student than do law schools. Other than, “it’s fun to steal from those who have less”, why are law schools now so expensive?

    Cheers,

    Alan Tomlinson

    • rea

      medical schools require rather fewer instructors per student than do law schools.

      Surely it’s the other way around?

      • Alan Tomlinson

        Obviously I turned that around. Mea culpa

        Alan Tomlinson

      • KLG

        It is exactly the other way around, especially when you take into account what happens in years 3 and 4 of medical school, when students do their clinical rotations. At many medical schools the faculty:student ratio is greater than 1.

        • KLG

          Never mind.

    • Fighting Words

      Alan,

      I graduated from Cal in the late 1990’s and took Prof. Muir’s Con Law and Law and Public Policy classes as an undergrad. I remember him saying that exact same thing in one of the classes. Although, as rea points out, law schools require far fewer instructors per student than do medical schools.

      As to your question, why are law schools so expensive? As a law school grad, I have a couple answers.

      First, and least helpful, because they can.

      Second, there is the demand factor. There are a small group of lawyers who make A LOT of money right out of law school. That is if you go to the right law school, if you are ranked high in your class, if you are on law review, and if you can get into the right firm. Law schools know this, so they portray the costs as sort of an investment in the future of the student. The implication is that students pay a lot now, but they can make a lot more money in the future.

      I hate to admit this, but it seems like a lot of students make the same mistake that I made. I thought that because I got great grades as an undergrad and had an above average score on my LSAT, that Law School would be easy – well, not easy but doable. I even worked at a large law firm so I knew what I was getting into. I knew that law students worked hard, but I was a really hard worker – I could do that. It turned out that I worked my ass off, and I was just an average law student. I think this happens to a lot of law students. Everyone had good grades as an undergrad, everyone had a good LSAT score, everyone works hard, everyone thinks that they are going to be the one who gets the job at the big law firm. But not everyone can be in the top 10% of their class.

      • Alan Tomlinson

        Muir is, from my perspective, a self-serving tool who believes that it’s good to be rich, but no matter; his point was valid.

        Essentially it seems to me, that you are arguing, the “it’s fun to steal from those who have less” point of view with respect to law school costs. My question, which I obviously didn’t make clear enough remains, aside from sheer profit-taking, why have law school costs increased so much?

        Cheers,

        Alan Tomlinson

        • Alan Tomlinson

          i.e. It’s good to be rich, and fuck everyone else.

          • firefall

            Ah, I did wonder .. cos if its not good to be rich, you’re probably doing it wrong.

    • fledermaus

      “that UCB had a law school and not a medical school”

      I’m still chuckling at the idea of Upright Citizens Brigade running a law school

      . . . oh wait, you ment Cal Berkley

  • JohnR

    I’ve been following this discussion with some interest as you’ve unfolded it; I think that, although there is much to be debated about the pros and cons of the position that there are too many law schools, one of the strongest arguments in that line is this – that Anne Althouse is a tenured faculty member. Surely that is an argument that there are simply so many law school graduates that law schools must be created and expanded to employ the excess.

  • Tom M

    Want me to drop a note off at Ken Gormley’s house? I’m sure he’d appreciate your sentiments.
    Would there be demand for more 1Ls at some higher level of GDP or is the market so benighted it will take a generation to clear?

    • L2P

      GDP isn’t the big issue. It’s inequality. There’s a ton of demand for lawyers to handle normal, middle-class problems, but those people just can’t quite afford it. It’s 10-20k for a normal case to get bare-bones treatment. If people were a little (not a lot) richer, they could afford it. It’d suck, but they could afford it and they could take care of their every-day, normal legal hassles.

  • I have the opposite reaction to CJColucci: I can’t understand why some top-tier law school hasn’t done this already. After all, law schools (and the universities they are part of) are not profit-making entities, but they are engaged in intense competition for prestige. So it seems silly, even from a self-interested standpoint, to claim all your scarcity rents in the form of cash, especially since money is not the main scarce resource in this world. Why not instead take some of your rents in the form of status, by substantially lowering tuition and then getting your first pick of the very “best” (from the point of view of the prestige game — no other merit implied) students in the country?

    The only explanation I can see is that the most sought-after students are not very price-sensitive. To the extent that tuition is a signal of quality, the demand curve might even slope backward. But that’s just speculation.

    Paul, do you really think a cut of the scale you’re talking about would induce *most* students who would otherwise have gone to Harvard or Yale, to choose SLS instead?

    • Katya

      Quite possibly. I was able to choose between several similarly (and highly) ranked schools, and one of the major factors was price. Even $10,000 a year less in tuition adds up when you’re talking about student loans that will be paid off over a couple of decades.

      What many schools do now is offer scholarships to desirable students, so that the most sought-after students are not going to pay full price, anyway. But you could make it more affordable for everyone and make scholarships less necessary.

      • I think this is the answer. Scholarships dominate across-the-board tuition cuts. To the extent that there are really rich people going to law school, there’s no reason the university shouldn’t milk them. It’s hard for me to se why a rational university administrator would choose to reduce tuition for the WInklevoss twins, when the same money could offer a much bigger bang for the buck when offered to poorer but better qualified student. To be honest, it’s not even clear to me why we should want them to.

        If I recall some previous posts here correctly, Paul C. believes that there is a moral right to pay the same tuition as other students at the same school. I’ve never understood the logic behind this. After all, we don’t recognize a right for everyone to be a lawyer, to attend law school in general, or to attend the school of their choice. So what is the egalitarian principle that comes into play only after admission decisions are made?

      • Anderson

        What many schools do now is offer scholarships to desirable students, so that the most sought-after students are not going to pay full price, anyway.

        Good point. Lots of pricing works like this. Anyone who pays list price is a sucker.

    • L2P

      We already have a natural experiment in cost-cutting, and it didn’t cause a race to lower tuitions. The UCs, Texas, Michigan, and a few others provided top-25/top-50 schools for bargain prices, but there wasn’t a huge influx of 1Ls to go there.

      There are always excuses given for why this “isn’t the same,” but UCLA’s tuition was literally 10% of Harvard’s when I went there. A lot of California residents didn’t even apply because it wasn’t HYS.

      My guess is that if Stanford did this, they would get a ton of applications, and overall their student body would look no different from Harvard and Yale. Harvard and Yale would see no reason to change anything because they, just just Stanford, would be filled with students that maxed their LSATs and GPAs. And that’s it.

    • CJColucci

      I was admitted, and went to, to a top-tier law school many years ago. Although my 300 classmates looked like an impressive bunch and I was certainly full of myself, I saw no reason to think that the next 300 students on the waiting list would be any less “desirable” that we were. The highly-selective schools could throw darts at their huge applicant pool of what are conventionally regarded as stellar applicants I’m no longer as sure of that conventional evaluation as I once was, but this is not the place to squabble over it) and turn out as “desirable” a class as their admissions offices do now. (I’ve recommended something like this, only slightly tongue-in-cheek, as a partial solution to the affirmative action wars.)
      There are no legal A-Rods out there whose presence would add great luster to the organization — or, at least, we can’t spot them well enough to make grabbing any particular highly-qualified applicant out of the pool an incentive to do anything unusual, like giving up money.
      To forestall any misunderstanding, I intend everything I have said as descriptive, not normative.

  • Eric Messinger

    Stanford’s budget plan isn’t publicly touted but it is certainly accessible with a quick search –

    http://www.stanford.edu/dept/pres-provost/budget/plans/BudgetBookFY12.pdf – see page 34 for detailed information on the law school.

    Would be curious to see how whether your analysis changes with access to the concrete numbers.

    • Paul Campos

      Thanks much for this.

  • oldmunni

    If the key is ‘being entitled to practice law’ then anyone considering law school in the US should go to law school elsewhere. NZ/Australian universities will make you a lawyer for not that much money. If, on the other hand, you want ‘a JD from Harvard/Stanford/whatever’ then it is a matter of how much of your money you are willing to waste.

    • Fighting Words

      There are a lot of problems with this:

      First, if you went to school in Australia/NZ, you would pay foreign tuition. I don’t know the costs of foreign tuition for commonwealth countries relative to costs of US law schools, and it may be cheaper to go to school in a Commonwealth country. But it is probably not that much cheaper – and it might come out to be more expensive if you have to get an LL.M. However, you are certainly not paying what a citizen of NZ/OZ or similar countries do.

      Second, in order to take the bar exam in most states, they require a JD degree, or a law degree from an “accredited” institution. I think that New York might be the only state that allows a candidate to sit for the bar with a foreign law degree (I’m not sure on this, so correct me if I am wrong). I think that in many jurisdictions, if you want to practice law with a foreign degree, you will have to take a LL.M. degree at a U.S. law school – which involves another year of school and costs as much as a year of law school at a U.S. school (Again, you will have to check the state bar requirements to see the amount of education you need).

      Third, you might be able to get around the education requirement if you have experience as a foreign attorney. But, you might have visa problems if you are a US citizen who wants to practice law in a foreign country. Additionally, NZ/Australia have barristers and soliciters as separate vocations.

      Finally, there is just the issue of plain old snobbery. When it comes to legal education, the legal profession is one of the most elitist professions out there. Firms look at where you went to law school. And U.S. law firms just do not think highly of foreign law schools.

      • oldmunni

        Fees shouldn’t be a big issue, unless you decide to take the ‘Melbourne JD’ which wants to charge you 100k. Auckland, in NZ, has 2200-3300$/subject fees for international students. Much cheaper. Note also that you could do an LLM simply by adding a year at one of these schools, and that the LLB is an undergraduate qualification.

        I gather that Cali and NY are easy to satisfy bar requirements for. I must admit I wasn’t interested in living in the US, so didn’t look into it in any depth. But, note the ease of getting at least an LLM internationally. Also, is the US really that parochial about qualifications (and is it just lawyers, or do they get uppity about foreign doctors and professors as well?)

        As for visa issues. Well, Australia is mean about them, but a college educated USian who wants to practice law in NZ? No problem at all to get PR. I’ve known a few people do it, and it doesn’t sound like anyone has issues (note though that Australia is much less pleasant about immigration restrictions).

        Snobbery…. well, yeah. This would be a point. But why would you want to work for these people? (And if the answer is money, well then, maybe you deserve to spend x on law school, where x is an unconscionably big number).

        • Fighting Words

          I’m more familiar with Australia than NZ, so I was basing my answer on that.

          As for the LL.M. degree requirement if you have a foreign law degree (LL.B.), I don’t know about other states, but in California I am pretty sure that you would need to get an LL.M. from an accredited U.S. law school. I have friends who had to do this.

          Now, and I am not sure of this, if you practice law in NZ for a while, you might just be able to take certain states’ bar exams because you have experience, without having to get an LL.M.

      • oldmunni

        Followup: Given reciprocity, wouldn’t NY be enough to set up most people?

        • Tcaalaw

          Aren’t there minimum practice times for reciprocity even if you are admitted in New York? I thought you had to practice for like 5 or 7 years to be able to invoke reciprocity, which is a long time to hang around New York state if you aren’t interested in living there. (Especially given that the New York legal market is pretty saturated as I understand it.)

      • Katya

        Not to mention, foreign law schools teach foreign law, not the US system. If you want to practice in the United States, you probably need an American law degree. You can mock the extent to which law schools prepare students to practice law, but the fact is that students learn the fundamentals of civil procedure, Constitutional law, torts, contracts, property, etc., which you wouldn’t learn at a foreign law school. Unlike medicine, where human anatomy is human anatomy, law is pretty context-dependent.

        • Fighting Words

          I know that it seems counterintuitive, but this really is not that much of an issue. I know more than a few foreign educated lawyers who practice in the U.S. (well, California). I know there are people who can articulate this better than I, but here are a few reasons why I disagree.

          First, law school in the U.S. isn’t so much to teach you the law (which is changing all the time), but to teach you “how to think like a lawyer.” And, as long as you have that “lawyer thinking,” it wouldn’t be that hard to practice law in the US.

          Second, there are different types of legal systems in this world. The two most common are “civil law” based on the Napoleonic Code and “common law” which is based on the British legal system. Most countries have civil law systems, but most countries that are former British colonies have common law systems. The United States (with the exception of Louisiana) is a common law country.

          This is just a long winded way of saying that the law systems in common law countries (England [but not Scotland], Canada, Australia, NZ, etc.) are roughly similar to the United States legal system. They are not completely similar – for example, obviously Constitutional Law is different, and regarding property law, Australia has a Torrens Title system, and the US doesn’t. But if you were to have a law degree from a common law country, it wouldn’t be that difficult to practice in the U.S. (once you’ve passed the bar exam).

          I mention this because the above post was specifically about NZ/Australia.

          Third, piggybacking off of the above, most of the law is similar in several different jurisdictions. Your Torts, Criminal Law, Contracts are usually the same. Civil and Criminal Procedure are different, as is Con Law. And my law school did not even require students to take Con Law.

          Fourth, in terms of preparation for the bar exam, going to a foreign law school is not that much of an issue. Even in the US, your going to take Barbri (or whatever equivalent) where you are going to learn the law required to pass the exam.

  • Xenos

    In the mid-80s Mount Holyoke tried this strategy, cutting or keeping tuition low to the point that it was at least 25% less than the competition. Applications dropped rather dramatically. When they raised tuition and funneled money into student luxuries like new gyms, better furnished dorms, a town center full of cute shops and restaurants the applications picked right up again.

    Who is the market for these degrees? Upper middle class people who want some coddling and status markers for their time invested. When you cut the fluff you cut a critical part of your marketing. And if you do not price your luxury good at luxury prices then you confuse your potential customers.

    So keep the price point high. Funnel that seven million dollars into loan forgiveness, and you can market that too. You can not compete on price, however, and you can not create the price competition you propose here. The market does not work that way.

    For further research you will need to check the back issues of New England Magazine… this is not online. Look through 1987-1989, and you should find it – it was a cover article.

    • guy who read the article

      never knew Mount Holyoke had a LAW SCHOOL….

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