Ideas from various observers. Mine:
In real, inflation-adjusted terms, tuition at private American law schools has doubled over the past 20 years, tripled over the past 30, and quadrupled over the past 40. The rate of increase for resident tuition at public law schools has been even steeper.
The result of this trend is that students enrolling in law school this fall will graduate with an average of around $200,000 in educational debt. This debt will carry an interest rate of about 7.5%, which means that typical law graduates will start their legal careers, assuming they have such careers — nearly half of 2012 graduating class did not get jobs requiring law degrees — with an obligation to pay $15,000 per year in interest alone on their debt.
Law graduates are now incurring levels of educational debt that can be serviced only by the salaries paid by the kinds of large law firms featured in Noam Scheiber’s article. Yet only ten percent of current law graduates get such jobs, and, as Scheiber’s article suggests, such firms seem more likely to contract rather than expand in the foreseeable future.
Two aphorisms from economists sum up what’s going on in legal education today: Herb Stein’s observation that, if something cannot go on forever, it will stop, and Michael Hudson’s insight that debts that can’t be repaid, won’t be.
The current price structure of legal education represents a massive market failure. The primary source of that failure is the federal government’s policy of allowing anyone admitted to any law school to borrow the full cost of attendance, including living expenses, to that institution. Incredibly, law schools can charge any price they want, and law students can borrow that amount from taxpayers, subject to no actuarial controls whatsoever.
The cost of law school needs to be reduced to what it was a generation ago. This would happen practically overnight if the federal government put reasonable caps on educational loans. Such caps need to take into account that law graduates are entering a hyper-saturated market, which features approximately one job for every two new lawyers. Around one in every five of those jobs pays more than a mid-five figure salary. Allowing people to borrow $200,000 of taxpayer money to enter such a market is extraordinarily irresponsible.