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When is enough enough?

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Matt Leichter has crunched a bunch more numbers at Law School Tuition Bubble, and is projecting what private law school tuition will be four and nine years from now. Notes:

(1) These projections are in current dollars, so if these projections are correct, the nominal dollar figures will be even higher.

(2) MT is projecting that in 2017 (the year in which people applying now will be graduating), average private law school annual tuition will be just about $50,000. This means that somebody who borrows the full cost of tuition but nothing at all for living expenses will have around $180,000 in law school debt by the time the first payment comes due six months after graduation.

(3) Over the past decade, the percentage of law students paying full sticker tuition at any one time has declined a bit, from 55% to 48% (the percentage of students who pay full sticker at some point in their law school careers is higher, because many scholarships are conditional on grades).

To put $50,000 per year tuition prices in perspective,here’s Harvard’s tuition in 2013 dollars:

1971: $13,150

1981: $16,300

1991: $28,750

2001: $37,000

(Historically, Harvard’s annual tuition has tended to run about 20% higher than that of average private law school tuition).

(4) Nine years from now private law school tuition will be over $70,000 at several schools, and the average will be nearly $58,000.

The answer to the question of how this happened, and continues to happen, is complex, but probably the single most important direct cause of the increasingly preposterous tuition structure of legal education is a massive decline in student-faculty ratio, which has gone from about 30 to 1 in the late 1970s to around 14.5 to 1 today.

Those are averages, but the relative percentage decline tends to be quite consistent across the legal academic hierarchy, i.e., elite schools that had 20 to 1 ratios a couple of decades ago are at 9 to 1 today, etc.

Now within legal academia all of this is predictably enough defended on the grounds of quality. A first-rate legal education, we are told, is “inherently” expensive. This is of course classic cartel behavior: if car companies could operate like law schools they would sell nothing but luxury models, because luxury models have much higher profit margins than other cars.

This analogy also requires hypothesizing a federal government program that loans the full cost of purchasing a luxury car to anyone a car company deigns to anoint worthy of luxury car ownership, with the cost of the default on those loans falling on taxpayers. To make the analogy complete, we must also hypothesize that half the cars turn out not to have engines in them, that it is illegal to sell a luxury car on the secondary market, and that car loans can’t be discharged in bankruptcy.

In any case, a question I find particularly interesting is, when is enough enough? From one perspective, the “quality” rationale for constantly raising prices is a straight-up scam. On this view, legal education isn’t any better than it was a generation ago, and thus the tripling of the price of a law degree over that time is simply straightforward rent extraction on the part of law schools and their host universities.

If one takes that view, then all the talk of smaller classes and more clinics and fancier facilities, and more administrative services, and a more productive faculty (“productive” in this context means “more law review articles”) is just an ideological smokescreen for paying people employed by law school higher salaries to do less real work.

I certainly don’t want to discount that perspective, given that there is obviously a great deal of self-dealing going on inside America’s law schools, although, precisely because the ideology of “quality education” is so pervasive and successful, much of that self-dealing remains invisible even — or perhaps especially — to its direct beneficiaries.

But here I’d like, for the purposes of argument, to assume both that the motivations of the purveyors of higher cost/higher putative quality are pure, and that the radical increase in the cost of legal education has indeed produced significant improvements in the quality of that education. Even assuming this, two questions would seem important to answer:

(1) Does this hypothetical increase in quality justify the very non-hypothetical increase in cost; and

(2) Is there any rational and/or foreseeable end point to this process? Should we be aiming to lower average student-faculty ratios to what they now are at the most elite schools, thus replicating the process that took place over the previous generation? Should the average school have twelve clinics, instead of the six it currently has, or the three it had 30 years ago? Should the average law professor’s compensation be doubled again over the next 30 years, as it more or less was over the past 30? All these things would surely improve the quality of legal education. They merely require having the will to raise tuition to $75,000 or $100,000 per year, which in percentage terms is actually a modest increase, in comparison to that which took place over the last three decades.

Or could it be that our methods have become unsound?

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  • James

    I think you are misreading his description. When he says projections are in “current dollars” – that means he has not adjusted for inflation. If he meant that everything was in 2013 dollars, he would have said “constant dollars.”

    • Paul Campos

      Updated to reflect.

  • H. Rumbold, Master Barber

    Any research out there as to whether or not those lucky enough to get law jobs with all this quality education win more cases, get bigger civil settlements, construct tighter trusts and estates, write more cogent corporate financial advice, comply better with government regulations, make more profit for their employer corporations or write scarier cease-and-desist letters?

    • BoredJD

      From what I can tell there has been almost no attempt to measure the value of legal education against anything, comparing it to other possible pedagogical methods, similarly situated lawyers who did not go to law school but read the bar, similarly situated candidates who attended cheap unaccredited schools, etc.

      Lawprof obviously knows the literature much better than I, but the defenses of the current system seem to boil down to Legal education in 1980 was good, now legal education costs X times who legal education in 1980 cost, thus, legal education msut be X times as good.

      • Paul Campos

        You got it.

  • Is there any rational and/or foreseeable end point to this process?

    Anything that puts a serious hitch in the lending/borrowing process should do it. (There’s Door # 2 in which sufficient numbers of people say to heck with law school, there are no jobs, but I don’t see that happening.)

  • Burt Harbinson

    Rome wasn’t burnt in a day. The applications are dropping, which is why you’re starting to see the crying victimization by law school apologists.

  • Jonny Scrum-half

    I don’t see any method at all.

    • AcademicLurker

      He was also a fine man, a humanitarian man. He went to law school and after that his ideas, his methods, became…unsound.

  • thelogos

    Amusing side bar ad: Abraham Lincoln University School of Law.

    Thanks Google!

  • You are mistaken

    The cost of tuition will not be $70,000. It will be 10 percent of your income per year times 20 years.

    Goodbye meaningful pricing, hello moral hazard, thank you taxpayers.

    It’s not like we can do anything better with the money. I mean, having the taxpayers subsidize law schools to the tune of billions of dollars is at least as important as K-8 education, scientific research, food stamps, military improvements, telecom improvements, infrastructural improvements, space exploration, addressing any part of our health care system. Right?

    • Sooner

      Discretionary income! Whoop whoop!

  • You are mistaken

    Didn’t I just read that a law degree is worth $1 million? Why not just borrow against it to pay your tuition?

  • Bill Smith

    Law schools are a sorry joke. The fact that they don’t even pretend to prepare their students to be lawyers is bad enough, but their reliance on the promiscuous availability of federal loans to pay exorbitant tuition is shameful. It’s almost as bad as some of the law review articles that inexplicably find their way to print: they’re where footnotes go to die.

  • Sam Browning

    PAYE which is the successor to IBR, is what “You Are Mistaken” is referring to. PAYE is a soft default mechanism, which law schools will now encourage their students to use, as a first resort, rather than a last resort.

    The original official prediction on PAYE was that it would only cost taxpayers $2.1 billion over 10 years. (My source is Robert Kelchen’s blog “Kelchen on Education”. February 11, 2012 entry.

    Under a number of possible scenaros, law students may be able to cost the government this amount all by themselves in the first 10 years.

    The reasons for this are that law schools keep raising their overall tuitions and PAYE does not impose any limits on these costs. or how much a law student may borrow. PAYE also does not have any upward limit upon how much a recepient may be earning before they are disqualified from this program. As long as you can show that under a ten year repayment plan, you would have to repay X a month, and 10% of you income (minus 150% of the federal poverty guidelines) is less then this amount you are suffering from financial hardship and you will be eligible for PAYE.

    Since this program will allow law schools to continue to enroll as many students as can obtain federal loans, this will probably kick the bursting of the law school tuition bubble, back for 5 to 10 years, or until there is a Republic president, or until someone in Washington, in power, notices, and cares, that this Federal program is hemorraging far more money the was originally predicted.

    Hypothetically if the law schools were constrained by some sort of cost controls, under some scenarios, law students would come close to at least paying of the principal amount of their loans (as verses the interest) But such controls are unlikely to to be enacted, given how much they would damage the financial interests of the institutional beneficiaries.

    The Federal Government of course has many different aid programs that lose money, with no pretense that they will ever make money back. The question is why, we will continue to subsidize our network of 202 or 203 ABA accredited law schools to produce almost twice as many lawyers a year as can be gainfully employed.*

    *22-23,000 lawyer jobs as verses 45,000 JDs. (Based on BLS predictions of the number of lawyer jobs for 2010-2020)

    • BoredJD

      The federal government has absolutely no qualms about using the student loan system as a “tax” on young people without having to actually claim that they are taxing people. But like any loan company, there is nothing stopping it from realizing a select portion of its portfolio is unprofitable and taking steps to limit loans given to that group. That is what will happen with GRADPLUS, and it will either be very bad for the schools (caps on the GP loan limits) or very bad for the students (exempting GP loans from PAYE).

  • Junipe

    I am not sure I am following this methodology. Why is Faulkner, one of the cheaper schools today, grow to be one of the most expensive in a few years?

    • Anonymous

      Because the can get it.

  • mch

    “Should the average school have twelve clinics, instead of the six it currently has, or the three it had 30 years ago? Should the average law professor’s compensation be doubled again over the next 30 years, as it more or less was over the past 30?”

    Friendly queries here. First, why 30 years as a baseline for measuring law professors’ salaries? I ask this as an academic who started as an asst. prof. (not in law!) in 1976, when salaries were as low as they had been since the 1930’s, and it always annoys me when the late 1970’s are used as a baseline for assessing today’s faculty salaries. Yes, faculty salaries overall are better now than in the 1970’s (for non-adjunct positions, to be sure — that’s another story), but shouldn’t they be? So, what’s the situation with law professors? Were they being greatly underpaid 30 years ago? Maybe not — but is there something special about 30 years as a baseline?

    The 30-year measure re clinics doesn’t bother me — the point being made stands. Still, if well designed and administered, won’t clinics address many of the shortcomings for which current legal education is rightly criticized? Who knows the best number of clinics? — that’s a good and difficult question, one that serious administrators will have to grapple with, each for their own law schools. But clinics will cost. I speak as the mother of a daughter who benefited most of all from her two clinic experiences in law school, and whose law-school friends also did. Problem wasn’t/isn’t with the clinics (at least, not at my daugther’s law school), it’s with the jobs available at the other end, whether in criminal defense, prosecution, immigration law…. There’s no shortage of need for attorneys in these areas, but rather a shortage of funds (esp. public funds) to support these vital areas.

    It makes me wonder: instead of directing our criticism chiefly at the law schools (at least, the serious ones — “serious” need not equal “top tier”) on this front, should we be directing it more at the politicians, state and federal, who do not put our common wealth where it is needed?

  • The Infosphere

    Any idea what these new faculty members are doing? Most of my classes were still taught in the standard big rooms.

  • Epicurus

    Does this hypothetical increase in quality justify the very non-hypothetical increase in cost; and

    (2) Is there any rational and/or foreseeable end point to this process?

    The simple answer to both of these questions is “no.” As to why it’s happening? Please see Sutton, Willie re: banks and money. The student loan fiasco is a purely Republican (Party) piece of mischief. Thanks, GOP!

  • High Plains Lawyer

    I am unclear on what constitutes a “quality education.” Specifically how is a law degree from the University of Colorado today, better than the one that I received from the University of Colorado 30 years ago? I am sure most alumni would be interested in knowing how the education they received years ago was substandard compared to the education being offered today.

    Ultimately, I view law school as a rather ineffective barrier to entry into the legal profession. After all, the only thing a person with a law license can do, compared with someone who does not have a law license, is appear before a judge. One really does not need a law license to do legal research, to prepare legal documents, to review land titles, to investigate cases or to negotiate settlements.

    Non lawyers provide “scrivener” services in the preparation of divorce and bankruptcy cases. Non-lawyers work for title insurance companies which research land titles. Former insurance adjusters are hired by personal injury firms to handle and negotiate PI cases. Human resources staff are hired to maintain compliance with labor laws. Paralegals are hired to do legal research and monitor regulatory compliance. Many of these jobs pay far more than that being paid to people with law degrees.

    Again, I do not see how this “quality education” does anything to increase either the status or the compensation of the people paying a premium to get it.

    • High Plains Lawyer

      In fact, come to think of it, law schools are missing out on a golden opportunity to offer training which might actually be useful and provide a decent income.

      For example, landsmen, typically are well paid, making up to $400 per day. However, there are no accredited programs which teach landsmen the basics of the field: how to research mineral rights and prepare reports. Oil and gas rights can be extremely complex, particularly in places like west Texas and New Mexico. Yet, the way most landsmen learn how to do this is hire onto a crew.

      Training and certification for this type of work might actually be useful and provide well paying jobs which justify the cost of the education.

      However, the law schools appear to be mired in a model of legal education which is over a century old and has as much relevance in the modern world as the horse and buggy.

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  • Anonymous

    Paul,

    At least with a luxury car, even without an engine, a purchaser could use the vehicle as a place to sleep. Whereas the only beneficial survival aspect of a piece of paper law degree is as a firestarter or toilet paper.

  • Law Student

    Paul Campus has been talking about schools starting to operate in the red. In turns out that is true.

    “For the fiscal year ended, June 30, 2012, Brooklyn [law school] reported a $996,000 operating deficit, the report said.”

    http://www.crainsnewyork.com/article/20131015/FINANCE/131019936

    Standard & Poor’s lowered its outlook to negative, citing declining enrollment and tuition revenue.

  • anon

    Has the student-faculty ratio gone down to increase quality in teaching or to reduce faculty teaching loads so that faculty can produce more scholarship?

  • Moment of clarity

    What about future law salaries?

    – “I’m not where I thought I was going to be at this point in my life. I was living the high life…Now my family is living with my parents. My husband just graduated from law school and he’s making $37,000 a year.”

    http://money.cnn.com/2013/10/17/news/economy/walmart-mom-economy/index.html

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