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80% to 85% of ABA law schools are currently losing money

[ 113 ] November 12, 2013 |

Over the past few months I’ve studied the current operating budgets of a representative sample of the nation’s 202 ABA-accredited law schools (there are several dozen non-ABA law schools in America, mostly in California, whose operations I know nothing about).

I acquired these budgets via various routes, including asking schools for them, open records requests, tax filings, and private communications with individuals. Law school budgets are somewhat arcane documents, both because each school has its own accounting , and because most schools are located within universities. The latter fact creates various complexities in regard to measuring what are known in the business as “indirect expenses” — that is, university-wide operating expenses that must be distributed among the institution’s various schools and colleges.

Nevertheless, it’s possible to get a tolerably accurate picture of a law school’s true financial situation via budget documents, since most schools get almost all their operating revenue from two sources: tuition and gift income (the latter comes in the form of endowment income and annual giving). Indeed at most law schools tuition revenue accounts for the vast majority of operating resources — only a few schools get even 20% of their revenue from gifts. The exception to this generalization is provided by the increasingly small number of public law schools that still get some sort of significant subsidy from tax dollars. I address this complication below.

As for expenses, these tend to be both homogenous and fixed, consisting largely of personnel compensation, in a context in which serious downsizing of labor costs can’t be undertaken without declaring a fiscal emergency — a move which has serious reputational costs — and physical plant operation. Costs that can as a matter of institutional politics be treated as variable — for example, library subscriptions, adjunct faculty, and low-status staff — are by comparison relatively small.

Furthermore, law schools tend, even in the best of times, to budget on the assumption that they will spend almost all the revenue they expect to generate. This is a natural consequence of the obsession with law school rankings. It’s important to realize that this obsession provides the key ideological justification for law school budgetary practices. Law schools “must” spend more money in real terms every year because other law schools are spending more money every year. This is the all-purpose justification for hiking nominal tuition in real terms every year: we have to raise tuition because we have to spend more money, because otherwise we’ll fall behind in the competition for a crucial positional good.

Thus tuition goes up because costs go up, although, as Brian Tamanaha argues in Failing Law Schools, it would be more accurate to characterize this pattern from the other direction: law schools spend more every year because they raise tuition every year, and they raise tuition every year because they can, courtesy of the federal government’s impecunious educational loan policies. (Law schools can charge literally whatever they want to whoever they choose to admit, and, subject to trivial exceptions, the federal government will loan that entire amount, including living expenses, to the admitted students).

This system is a sure-fire recipe for creating fiscally reckless institutions, that charge prices for their outputs that bear no relation to the actual economic value of those outputs, which is of course exactly what has happened.

However, this sort of system also invariably contains the seeds of its own destruction: the pyramid collapses, the bubble pops, the extraordinary delusions that fuel the madness of crowds dissipates. And, in American legal education, this is what appears to be happening now.

Over the past couple of year, the disjunction between the cost of law school and the marginal economic benefit provided by a law degree has become sufficiently self-evident that the market for places at ABA law schools has begun to collapse. Schools have slashed both enrollment qualifications and real tuition (via semi-invisible discounts), yet first-year enrollment is down nearly 25% since 2010, and real tuition revenue is down by nearly that much (because over the past three years increases in nominal tuition have, it appears, only slightly outstripped increases in off-sticker discounting).

My survey of law school budgets suggests that, on average, law school revenues will be down this fiscal year by about 15% in real terms from where they were three years ago. Costs, meanwhile, have not decreased by the same amount — if anything, they are slightly higher (as of now the rankings struggle continues unabated). Very few law schools were running 15% operating surpluses three years ago, which means that the large majority of law schools — I estimate between 80% and 85% — are incurring significant operating deficits in the present fiscal year.

Note that this estimate is conservative, in that it treats state tax subsidization at public schools as operating revenue rather than an operating subsidy. It is also conservative in that it assumes that no universities maintain long-term budgetary policies that require their law schools to provide subsidies to the rest of the campus, in the form of significant revenue over expenses (aka, the infamous “cash cow” model of legal education).

The likely consequences of this situation will be the subject of another post.

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  1. Kurt says:

    Would it be fair to assume, when you are saying revenues are generally down 15% this year from 3 years ago, that the revenues from the entering class of 2013 are down substantially more than that? That is, the revenues from the 2L and 3L classes are not down nearly as much as the 1L class, so the full impact of the slump has not yet hit?

  2. Modest Proposal says:

    Running a law school is worth the money.

    The focus on teaching jobs is misplaced. . . . The world is guaranteed to change in unpredictable ways, but that reality doesn’t keep us from planning our lives. Moreover, the career from which we scam students, done through the medium of the law, is a career in leadership and creative problem solving. Many law faculty will find that their bullshitting experiences give them the skills to find rich and rewarding lives in business, politics, government, finance, the nonprofit sector, the arts, education and more.

    [The 2013 parody version. The original was so 2012].

  3. Susan Rosenau says:

    I swore when I graduated that I would never give a cent to my law school, and I never have. But I am sure that running a law school is an expensive proposition. The publications for the library alone must be astronomical, because purchasing them for my own firm (and I am assuming an academic discount) is a large expense, and we only purchase a very few. Faculty salaries are probably higher than normal academic salaries, since many of the teachers could make more if they were in practice (some are purely academics and don’t really have that option). They also must sustain a robust career placement department, since without it students will not pay the tuition. These are just a few of the cost-intensive factors that come to mind, and I’m sure there are more. Nonetheless, with tuition at all higher education far outstripping the cost. Tuition was damned expensive in 1985, and I am sure it is much more expensive now.

    • Unemployed Northeastern says:

      A handful of law schools have crested $80,000 per year in tuition & living expenses. Times three, and add copious interest since grad school loans aren’t subsidized anymore, and undergrad debt, and you could ostensibly be looking at $300,000 in student loans at the end of the bar exam.

      • BamBam says:

        Don’t forget the “loan origination fee” which I believe is 4% (outrageous, an additional fee for the privilege of borrowing money). For 200K debt that is 8000 which is a lot of money and will have to be paid back someday, by someone.

      • Cassady Toles says:

        Actually, at 80K/year + 20K/year living expenses x3 plus interest, plus prior loans from undergrad (these days often at or over 20-25K/year) you could be rapidly approaching a half million dollars of law school debt.

        I know people with a half million in debt, but for the money they own houses.

    • Barry says:

      “Faculty salaries are probably higher than normal academic salaries, since many of the teachers could make more if they were in practice (some are purely academics and don’t really have that option).”

      Last I heard, the overall figures were that half of faculty have zero years of practice, and the rest averaged less than 2 years. Given (historically) a 15% chance of making partner, it’s more likely that most of them would be making far, far less, working in very small practices, after failing to make partner.

      ” They also must sustain a robust career placement department, since without it students will not pay the tuition. ”

      Incorrect; schools with horrible placement statistics still filled their seats at high prices, until the past few years.

  4. MacK says:

    Paul,

    Are these law schools still loss making if you “back in” shared overhead charges from host institutions? In effect, is the main shareholder, the host institution, which has milked many law schools via 20% tuition retention AND inflated overhead charges actually seeing a real net loss?

    My own sense is that when the host institution starts seeing actual losses, i.e., it is not getting more from the law school than the real overhead associated with the institution and is actually facing a need to subsidise the law school, then those Universities will seriously consider “pulling the plug.”

    One interesting recent anecdotal trend is the number of law school deans retiring as dean of their law school to move into positions within the host institution’s governance organisations. Is this an act del preservation, are the “rats abandoning ship…”

    • Paul Campos says:

      This is my estimate of how many schools are running a real deficit this year. If a school is producing surplus revenues that are collected in the form of inflated overhead charges/retained tuition, and those surplus revenues exceed expenses, that school isn’t running a real deficit.

      In other words, the proverbial cash cow appears to have been slaughtered. It was a victim of the ratings arms race that’s been accelerating for 25 years now.

      • stickler says:

        I’m at a place of higher education, and though we don’t have a law school, we do have a few professional schools. And though one might expect decisions about which of said professional schools to keep would be based on rational accounting procedures, one would be wrong. Some of the schools (Engineering) have always been subsidized by the University, while others (Nursing) have been “cash cows.” Why keep the money-losers? Various reasons: inertia, prestige, the power of a few rich donors, the influence of the school on the administration, etc.

        That last point may be important if Law School Deans are moving in to other administrative positions — they would then have the chance to defend the Law School’s interests in the administration.

        • MacK says:

          Stickler:

          It really is not that straightforward. ABA accreditation rules limited the amount of tuition that the main school could take from the law school to say subsidise Engineering (there are budgetary games there with research grants and overheads to support other subject so it is not a perfect item to choose) was limited to 20% So in effect if tuition was $50,000 – the university could grab $10 for its general fund to support other academic endeavours.

          However, parent institutions found ways around that – and this was in shared overhead charges. So, suppose arguendo the law school is on the main campus – and that campus has a big central heating plant – the parent school could charge the law school the correct amount for heat, or it could hit it with an inflated charge. Then you have administrative costs – record keeping, transcripts, registration – again the parent institution could charge for carrying out this service – but was it a fair charge, or an inflated charge? The list of shared overhead can be huge – gym’s and sports facilities, dining hall deficits, campus security, groundskeeping, the President of the Universities office and salary, central administration costs, etc. etc. etc. The rumour is that many universities (Catholic U in DC being probably an extreme example) sucked huge amounts of cash out of law schools by inflating the shared overhead charges – so they could get from 20% to close to 40%. Catholic U had to make across the board cuts because of falling law school revenues of 20% which suggests that it was seriously “hoovering” cash out of the law school.

          The question I was asking Paul was if, after he backed in the potentially inflated overhead charges for common services, the law schools were no longer net contributors to the parent institutions bottom line – his answer is that he believes that he has taken those inflated overhead charges into account.

        • NewishLawyer says:

          Why is engineering subsidized and not a cash cow? Is it the research and lab equipment expenses? Alumni make okay money but never get super-rich and become big donor types? Combo? Other factors?

          Nursing as a cash cow kind of surprises me. I guess it does require as much science knowledge as engineering but law school can be done by anyone and that is why it was a cash cow. You can major in anything as an undergrad and go to law school without additional classes. This is not true for nursing.

          • Unemployed Northeastern says:

            Your second sentence answers your first, I think. As for engineers never becoming super-rich, at least at my law school’s parent university, the biggest donor by a country mile was one of three engineering alumni who cofounded EMC.

            • NewishLawyer says:

              Obviously people can found their own companies and become highly successful and there are always differences.

              However as I understand it, engineers make a decent salary off the bat when it comes to most majors but they can also cap at a certain point and possibly quickly. This is true for engineers not connected to Silicon Valley type of industries.

              Part of the appeal of law school (for a while) was that in theory the cap on salary would be much higher like a 7 figure amount.

              • Unemployed Northeastern says:

                Engineers also seem to encounter age discrimination in their 40′s, while most other white-collar workers don’t encounter it until their mid-50′s or so.

                • Barry says:

                  I don’t have to remind you that most lawyers don’t make that much, either.

                  I’ll be that it’s the top 10% who provide the bulk of the ongoing donations, the 1% who provides the donation of the year, and the 1% of the 1% who provides the donation of the quarter century.

      • Clarification says:

        I’m not sure this gets to the question that MacK asked. Is the university’s potential cut calculated as a fixed expense, or are you assuming that it later comes out of any revenues? If the former, even a law school losing money is still feeding the main university. If the latter, the stream of cash has reversed and the university is feeding the law school.

        It’s the latter that would really apply some pressure to close.

        • Paul Campos says:

          That’s not really the key distinction. What matters is the extent to which the university’s cut represents the law school’s share of general university operating expenses, that is, the share generated by the existence of the law school.

          Example: suppose the university retains a percentage of the school’s revenues that’s equal to the law school’s per capita share of the university’s general (non-school or college specific) operating expenses, and that this per capita method accurately reflects the extra expense to university operations created by having a law school. Now suppose that after this deduction operating revenues for the school equal expenses. In this example, the law school is, from the perspective of the university, a revenue-neutral operation: it doesn’t fund other schools or colleges, because the money retained goes to pay for expenses that aren’t generated by other schools or colleges per se, but by the operation of the entire university.

          • NewishLawyer says:

            Do you have any geographic breakdown?

            How are law schools and new law grads doing in states with few law schools as opposed to areas with a lot of law schools?

            NYC, SF, LA, Boston all have a ton of law schools and national draws.

            Wyoming and Montana and Maine. Not so much. I can’t see flagship universities in sparsely populated states getting rid of their law schools. There could also be political issues if and when public institutions try and close their law schools.

            I honestly don’t know which law schools will close first. My law school took a big hit in 2011 but they have also been around since 1913. It is hard to close a school with a century of tradition. We are attached to a local Jesuit university.

            Maybe the stand alones will close first?

            • Tom Servo says:

              I honestly think private schools even in NYC, LA, SF, Boston should close before public schools (that means UCLA over USC, etc).

              That’s how I’d look at it if I were the ABA, anyway. Every state has the right to at least 1 public (and fairly subsidized like it used to be, no $40,000 tuition at a public school crap) law school. Every state needs judges and ADAs, and public defenders, and small town practitioners. Not a lot, but some. I think Montana does an admirable job of limiting its class size, for example.

              So: public schools toward that end first. And then, and ONLY then do we decide how many more lawyers, and, therefore, private law schools we still need/will allow.

          • Dan says:

            You write: “suppose the university retains a percentage of the school’s revenues that’s equal to the law school’s per capita share of the university’s general (non-school or college specific) operating expenses … In this example, the law school is, from the perspective of the university, a revenue-neutral operation”

            You don’t really mean this do you? The per capita expense is the average cost of operating the university. Even if it is correctly calculated, it will necessarily be far higher than the marginal savings to the rest of the university from closing the law school.

        • MacK says:

          Clarification:

          Historically the parent institution’s take has been a mix of a straight payment to the parent institution – thus a fixed expense (limited by the ABA) PLUS charges for shared overhead and services which is quite un-transparent and in many cases inflated.

          In the context of the latter the problem I think Paul is alluding to is in trying to workout what is the actual cost of the shared overhead/services as compared with the amount charged. What Paul is saying (if I understand him correctly) is that the inflation is largely gone, which leaves genuine costs the law school imposes on its host institution, and the contribution to central funds is gone – and there is a net deficit none the less.

          Historically, devious accounting hid the fact that law schools were very profitable for host institutions – it would seem that the profits are gone, the accounting games no longer needed to conceal now-non-existant profits, and the law schools will cost money to operate over and above what they bring in from tuition and gifts.

  5. post docs? says:

    Are you able to post any sort of spreadsheet breakdown with the numbers and analysis you’ve done?

    It would be interesting to look at this stuff.

  6. Downpuppy says:

    For anyone who was afraid the Mitchell/Ku story at CWRU would proceed with dignity – Don’t worry.

    Kardashian divorces are handled with more class.

  7. Sam Browning says:

    Paul:

    I understand why you would not wish to share the names of the institutions, (especially if you were handed this material by someone who did so at risk of losing their job.)

    Could you however, please tell us how many schools were in your sample, and how many were private verses public institutions.

    thank you

    • Paul Campos says:

      31 schools, 23 private 8 public.

      I’m not going to get into more details, because some of the info was given to me on the condition that I not reveal the identity of the schools in question.

  8. mpowell says:

    Would it be that hard for the federal government to say, “hey, we will only loan you 80% of the national average (or perhaps median) expense of attending law school”? The remaining financing has to come out of pocket or from private lenders who take on actual risk. Then there is immediate pressure to think more carefully about cost and for mid tier schools that offer poor prospects to their students and average to above average costs the remaining 20% will have a high enough interest rate to dissuade attendees. And funding may dry up altogether in some circumstances, which would simply indicate what is already known – that loan doesn’t make sense.

    This kind of program would continue federal subsidization of the bulk of the expense but create much better cost control I would think.

    • Anonymous says:

      Alas, in that scenario, law schools would “lend” students the 20% themselves, knowing it might never be paid back. How would they make up that lost revenue? It’s quite simple: by raising overall tuition, so that the federal government’s 80% of new tuition equaled 100% of old tuition.

    • Unemployed Northeastern says:

      In the pre-GradPLUS days, which were not that long ago, private lenders had no problem whatsoever loaning $100,000 or more so kids with no work history could proceed directly from college to law school. Oftentimes, cosigners were not needed. Have you heard of the lender Access Group? It was the largest lender for graduate schools before the government took over the lending. Access is actually jointly owned by all the accredited law schools as a membership corporation.

      And the risk to private lenders is (or at least was) fairly minimal, since there are no bankruptcy protections on private student loans either AND because the lenders rolled all of those loans up into asset-backed securities called SLABS and sold them at great profit on Wall Street. SLABS are actually one of the four primary classes of asset-backed securities; back before the economic crash, the aggregate value of the SLABS market was about $2.7 trillion. This at a time when there was only about $400 billion in outstanding student loans.

    • nand says:

      Or it can be run like every other Western country: all universities are public and the government only funds seats if there is deemed a shortage of workers. (Ontario, Canada just halved the number of teacher student matriculants after the administrators expanded like crazy to make their bonus.)

  9. MacK says:

    Paul,

    Can you tell more about the various strategies being used to make up the operating deficits. Are the schools borrowing and if so from whom (central administration?), or are they looking for parent institution subsidies, or are they spending from capital in their endowments?

  10. Dan says:

    This story is deeply misleading, because it confuses two different concepts of “deficit”.

    All universities charge their constituent parts an overhead charge, which is usually calculated as an AVERAGE cost and often inflated.

    But closing a law school, or any other department, only reduces marginal costs. In the case of the law school, the marginal cost to the university as a whole of operating the law school is likely to be close to zero. The university will still have to have a library, sports facilities, grounds, admissions department, placement office, registrar, deans — and since the law school usually duplicates most of those functions, the cost to the university were the law school to close would drop almost not at all. The only material MARGINAL cost of operating the law school is the heat for the law school building.

    When Campos says that law schools historically operated at breakeven, he means, of course, after paying the university overhead charge. If that charge was running at 20% of tuition, as seems to have been the case at many schools, the school can operate at a 20% accounting “deficit” before closing it would save the central university any money (Campos’s “real” deficit). If revenues have dropped 15%, then schools are not even close to a “real” deficit.

    Eliminating the overhead charge is likely to be extremely painful for the university as a whole, and administrators will struggle to retain it by forcing law schools to absorb some or all of the lost revenue. But unless tuition drops more than Campos is finding, rational administrators will not consider closing the law school. (Administrators who have trouble with the difference between average and marginal costs may be a different story).

    • Law school to 10 years! says:

      This seems wrong. Shutting the law school will generally allow you to fire a lot of people, from professors to support staff. Most law schools have departments that duplicate university departments (admission and such) and have plenty of fireable administrators. In addition the space the law school occupies could be used for other programs or rented out. It’s not just the cost of heating the buildings but also the lost opportunity costs of doing other stuff with them. Now there may be enough transactional costs to doing these things that you still wouldn’t come out ahead immediately, but you might over the course of a few years and beyond.

      • Dan says:

        Shutting down the law school eliminates law school expenses and law school revenues. So long as the law school pays an overhead charge that is above its MARGINAL cost to the rest of the university, closing the law school is a net cost to the university. Campos contends that law schools were paying 20% to the university 3 years ago and tuition revenues have dropped 15% since then. If that’s right, the rest of the university is still better off keeping the law school open without any budget cuts at all — even in purely short-term dollar terms without regard to mission, prestige, the possibility that this recession will end, or the probability that law schools will find a way to limit their USNWR competition.

        If things get bad enough, some schools may give up on the USNWR expenses — cut back on merit scholarships, hypertrophied publicity, recruitment and placement departments, defer building. That may encourage their competitors to do the same; these expenses are just “keeping up with the Joneses,” not something that schools necessarily see as part of their core mission. On the other hand, schools may decide that USNWR ranking is more important than mission, and start raiding education to maintain the appearance of quality.

        • Paul Campos says:

          Campos contends that law schools were paying 20% to the university 3 years ago

          This is your number, not mine.

          The marginal cost to a university of having a law school in regard to indirect costs is a tricky subject. In this analysis I am not treating whatever a university labels an indirect cost an actual marginal cost incurred by having a law school. But those costs are not as trivial as you’re making them out to be. To reduce them to “heating the building” is very unrealistic.

    • (the other) Davis says:

      The university will still have to have a library, sports facilities, grounds, admissions department, placement office, registrar, deans — and since the law school usually duplicates most of those functions, the cost to the university were the law school to close would drop almost not at all.

      Can you clarify what you mean here? Because closing the law school means the university saves money by closing the law school library (and firing associated staff), firing the law school deans, closing the law school career services office, firing the law school faculty, etc. How do those items not add up to a substantial marginal cost associated with running a law school?

      • Dan says:

        Usually, law schools have their own budgets. They apply their revenues to law school expenses (including “merit” scholarships), plus an overhead charge that goes to the central university to pay for expenses that are not on the law school budget — the central library, admissions department, football team, President’s salary etc.

        The overhead charge may be entirely fictional — essentially a distribution of law school profits to its owner, the university. Or it may be based on the university’s budget: the university’s expenses that are not on the law school or another department’s budget, divided by the number of student hours. That’s what Campos is referring to when he talks about an AVERAGE charge.

        But even if the overhead charge is based on expenses, it is never based on marginal expenses. It couldn’t be: the university’s budget wouldn’t balance, since every department can correctly insist that closing it wouldn’t save anything material from the costs of running the central library, admissions office, etc.

        The upshot is that even from a pure short-term economic view, the central university will often be better off keeping a “deficit” running department open than closing it.

        So long as the deficit is smaller than the overhead charge less the MARGINAL central costs, closing the department will cost the university even more money. Even if the law school isn’t paying its full share of the central library, if it can pay anything, it is both running a “deficit” and making money for the rest of the university.

        Innumerate administrators, of course, may have trouble seeing this. And they do need to insist that some departments pay the overhead charge, or the central administration will have no funds.

        Campos tells us that overhead charges were 20% of revenues a few years ago and that revenues have dropped 15% since then. That means that his headline is referring to budget deficits not “real deficits.” Most of those law schools are still net financial gains to their universities, even leaving aside prestige and the possibility that some or all of the law job market problem will reverse if and when the US government decides to pivot from budget cutting to creating jobs.

        A revenue loss of 15% is certain to be painful for all concerned. But unless it threatens the viability of the entire university, it doesn’t imply closures.

        • (the other) Davis says:

          Okay, now I understand what you were getting at in the original post, that makes more sense now.

        • ichininosan says:

          “the possibility that some or all of the law job market problem will reverse if and when the US government decides to pivot from budget cutting to creating jobs.”

          This sounds rather naive. The job market for lawyers is not merely a victim of U.S. government policy choices. The number of summer associate positions at Amlaw 100 firms decreased from roughly 8,000 to 4,000 between 2008 and 2013. This is due to a variety of factors having nothing to do with U.S. policy. To take one prominent example: clients are no longer willing to pay first year associates to perform document review work, so it is now outsourced to Bangalore or domestic document review shops at great savings. If and when the U.S. government decides to “create jobs” I do not expect these are the jobs it will be “creating.”

  11. Warren Terra says:

    Hey Campos,
    Speaking of ludicrous law school shenanigans, I don’t think you’ve posted on this:

    tlanta’s John Marshall Law School is mired in the dreaded “Unranked” portion of the U.S. News rankings. The members of a law school’s administration can’t attract a bevy of new students with that hanging over their heads. Something needs to change, and “improving their employment statistics” is probably off the table. Having already tried conning students into applying without thinking, AJMLS has decided that it’s time to revamp the logo.
    Instead of hiring a professional graphic designer like, you know, a real institution would, the school took to a freelancer website and offered a fixed $50 fee to some lucky designer so desperate for cash that they’d sell their skills for a pittance. Here’s the listing:

    Obviously, this has already been covered elsewhere, and your inside-the-law-scam posts here don’t seek to be comprehensive. Still, it’s a great story that fits with your overall narrative (and well told at the post I linked).

  12. Anon says:

    FYI, whoever said there’s an ABA rule limiting the university “tax” of law schools to 20% is incorrect. That might be the norm (although I believe the norm ranges from 15-30%) but there is no such ABA rule.

    • Jeff says:

      It is also important how the “tax” is applied. Some schools may use gross tuition revenue (i.e., before merit scholarships are deducted) before applying the percentage take for the central university. Over time, as the percentage of merit scholarships has gone up substantially (as has nominal tuition revenue), the percentage tax can end up being much higher — and growing.

  13. Dan says:

    More misleading points:

    1. The article asserts that the “impecunious” Federal loan program was the reason why law schools could charge more than the “economic value” of their degrees. This is wrong.

    For the Federal loan program to have enabled law schools to increase tuition without regard to costs, law students would have had to be so stupid that they did not understand that loans must be paid back. (And if the program really was “impecunious” — i.e., poorly funded — how would it have provided enough loans to have an effect anyway?)

    In the real world, however, students are extremely price conscious. That is the reason why law schools offer “merit” scholarships — which are just rebates or discounts on the list price of tuition.

    The Federal loan program allows some students who’d otherwise be shut out to go to law school. But it has next to nothing to do with the forces that have led to high tuition or shrinkage in the BigLaw job market.

    • L2P says:

      In the real world, however, students are extremely price conscious.

      That’s why almost no one applies to go to Harvard – it’s so damn pricy! Wait. You say Harvard is worth the cost because you get good results? Then I guess you’ve explained why so many “price conscious” students are blowing Harvard-style tuition to head to Loyola Marymount, the 5th best school in Los Angeles!

      “Price conscious.” I do not think it means what you think it means.

    • ichininosan says:

      1. “In the real world, however, students are extremely price conscious.”

      If you are referring to the cost of obtaining a J.D. degree, this statement is demonstrably untrue. Consider that median tuition at ABA law schools, adjust for inflation was $15,438 in 1985. In 2011, median tuition was $39,915. Perhaps discounts are only just starting to roll these price increases back, but only in a “crisis” environment at the law schools and only with the help of much more information regarding the poor return on investment that most law schools offer students.

      http://www.volokh.com/2012/06/29/law-school-tuition-over-the-last-forty-years/

      2. “The Federal loan program. . . has next to nothing to do with the forces that have led to high tuition or shrinkage in the BigLaw job market.”

      Nothing, eh? Consider the following question: are young people willing to pay more for a product that is paid for by some trusted entity in the form of long-term loan whose principal is ultimately forgivable, when said product is “higher education,” which we constantly reminded, is “always worth it”?

      http://en.wikipedia.org/wiki/Optimism_bias

      • justme says:

        And the simple fact that people buy stuff on credit all the time that they cannot really afford. What makes law students so different?

        Moreover, let’s not lose sight of the fact that until recently, it was widely accepted, albeit a lie, that most lawyers made at least $120k soon after graduation.

    • Sam Browning says:

      “Law Students would have to be so stupid that they did not understand that loans must be paid back”.

      Dan, you have inadvertantly tripped over a very interesting issue, which is the different between a “soft default” and a “hard default” on “paying back” law school loans. I will explain.

      Normally if you look at the percentage of law school graduate students who have defaulted on their law school loans, you will find that as of several years ago it was in the low single digits. That is because when a law student graduates and discovers that they cannot pay say $1,100 a month on a 25 year loan because they obtained a comparitively low paying job, they will apply to join the IBR program which has become the PAYE program. Under the later they will only pay 10% of their income above the federal poverty guidelines.

      So the system is now constructed, that if a student graduates from law school and say, gets a job paying $35K to $40K, they have a federal program that will keep them from being listed in the loan default category, preserving the fiction that they are “paying back the loan” even though some of the principle and most of the interest will often never be repaid under this program. It’s designed that way.

      The original goal was laudable, instead of having many law school students defaulting because they could only make a partial monthly payment, the program adjusted to what they could actually pay. Of course with no price controls limiting the amount that could be loaned, law schools took advantage of the situation.

      Some law schools (St Louis University) have had faculty explain that this is a “back door scholarship” i.e. you can sign loan agreements to repay the money at a certain rate, then legally tranfer into a program in which you pay a much lower rate, with the Federal Government, taking either a real, or paper loss on the original loan.

      This safety net does many things. What it does not do is create price sensitivity in law students since as long as PAYE exists, (a big if) the face value on the loan and their ability to repay it can be rendered irrelevant by a income based repayment program.

      The federal government is keeping VERY quiet about how many law students and graduates have used IBR or PAYE, and how much money these programs have cost the Federal Government. Perhaps a FOIA request will eventually uncover this data. However, until the losses mount into the hundreds of millions, no one in Washington DC is likely to look behind this particular door.

      So please, don’t argue in sum and substance, that the fact that law students are still taking these loans indicates that the rise in law school tuition is not causally related to essentially unrestricted loan amounts. The educational establishment found an very effective way to decouple ability to pay back a loan, from the rising cost of graduate education.

      • Dan says:

        Interesting. Actual loan forgiveness, if it exists, changes the picture somewhat. Does it exist?

        At 10% of income (presumably joint income for couples?), and assuming that lawyers make somewhat over median US income, the loans will end up being quite profitable to Treasury — even though compound interest at 8% means that many borrowers will end up in debt for life.

        This is a cruel system. It’d be much better to go back to paying for state schools via taxes and leaving the private one to people with rich parents or high income prospects.

        • Sam Browning says:

          1) One interpretation of the regulations is that if a married couple files separately, that they would consider the PAYE participant’s income alone.

          2) Supposedly, at the end of the 20 year PAYE period, the person who took out the loan will have to pay income tax re their “earnings” regarding the unpaid amount of the loan. That could be quite interesting.

        • Sooner says:

          10% of “discretionary” income…and, now thanks to PSLF, while I may only make 40k through my government job, it’s real value is closer to 60k per year…huzzah!

    • BoredJD says:

      You sound familiar.

  14. Dan says:

    2. The Federal loan program is not a subsidy to law schools. It is a sort of excise tax on students who borrow. Students pay 8% for money that the US borrows at 0.25%. The difference goes to the US Treasury. For a student who borrows the full cost of education and living expenses, this means that well over half of the cost of “law school” is actually interest going to the US Treasury, not education or living expenses.

    If the US made loans at cost, instead of treating students as profit centers, the cost of law school for students borrowing full tuition and living expenses would drop in half.

    • L2P says:

      Student loans subsidize law schools because it provides the funds that law students would otherwise not be able to pay for tuition. IOW, law schools would not be able to collect the tuition they charge absent the availability of student loans. This monetary support, although indirect, allows law schools to fund their budgets. Whether student loans ALSO subsidize the US Government is irrelevant to how it subsidizes law schools.

      “Subsidy.” I do not think the word means what you think it means.

  15. Dan says:

    3. There is no “bubble,” “pyramid” or “delusion of crowds” here. A bubble is when buyers are willing to pay more than the fundamental value of a good because they expect to be able to sell it to someone else who will pay even more than fundamental value. A pyramid is a Ponzi scheme: when a scam artist pretends to be investing but is actually paying early investors out of later investments while taking a cut for himself.

    These are just irrelevant to the law school issue. Not every rising price is a bubble.

    The law school problem is, instead, a competition for positional goods among students and schools. The distinction matters. The internal dynamics, threats and solutions are quite different.

    Some students are trying to break into a shrinking middle class by accumulating degrees and resume points sufficient to make them more attractive than their peers. (Others may actually want to be lawyers). But they can’t all get to the front of the line, and the attempt just makes everyone waste time and money trying.

    Law schools benefitted from this competition so long as a JD seemed to be the last reliable ticket to a shrinking middle class, but they didn’t create it and they have very little control over it. The only solution to that competition is to grow the middle class — for the Federal government to run a deficit large enough to get the economy back to full employment, to tax the .1% enough to reduce their political power, to bring back unions or an equivalent, to raise the minimum wage, to lower the value of the dollar so job-export is less profitable. Law schools are only part of the problem to the extent that they have provided ideological cover for the great power and wealth grab by our economic elite, or, like Campos, deflected attention elsewhere.

    Schools, recognizing that they can only help their students fight their way into the middle class if they are high enough up on the absurd but critically important UNSWR rankings, are locked in their own positional struggle. Again, the competition often suffers from the fallacy of composition. If every school shifts more resources into buying high LSAT students, publicity and recruitment or increasing the size of the placement office, the effect is to have more expensive administration and more “merit” scholarships, but the rankings remain more or less unchanged. The competition sucks up money that otherwise could be used for education or lower tuition, making all schools and students worse off. But there are still only 50 schools in the top 50. And the number of students getting BigLaw jobs is still determined by the demand for BigLaw services.

    Competitions for positional goods generally reflect the fallacy of composition — tactics that work for one are bad for everyone when enough others adopt them. They are nearly always inefficient and counterproductive from a collective perspective. As Veblen showed a century ago, most goods are at least partly positional. This is one key reason why most markets function better with a sensible regulatory system.

    Law schools and law students would all be better off if USNWR disappeared, if the government arranged for a law school cartel to limit unproductive “ruinous competition,” or the states were still willing to fund their state universities. But these kinds of market failure are quite different from a “bubble.”

    • L2P says:

      Wow, here you’re using a word correctly but simply missing the target.

      A bubble is when buyers are willing to pay more than the fundamental value of a good because they expect to be able to sell it to someone else who will pay even more than fundamental value.

      Precisely. Law students are paying nearly $200,000 to obtain a good (a JD) that they expect to provide over $200,000 of value. However, few if any of the people buying this good will be able to get value from it. It’s a classic bubble.

      Your confusion re whether the PRODUCER of the good needs to profit is causing your problem here. Producers of tulips, just like sellers, lost big in the great tulip bubble. Likewise, law schools can lose money and still be providing a product priced in a bubble market.

      • Dan says:

        Actually, rational profit-maximizing students (and a fortiori anyone who actually wants an education or to be a lawyer) might decide to spend $150,000 in tuition even if they believe that the expected financial return is negative.

        First, it still puts them ahead of others without the degree in the positional competition. Better to be a lawyer with heavy debts than unemployed.

        Second, there is a possibility of actually succeeding. A gamble is often better than a certain loss. Many students will have no alternative investment that offers any chance of entry into the middle class.

        And, of course, most students have the option of taking a lower-prestige school with lower effective tuition. So the assumption of $150k in tuition is arbitrary.

        This is not a bubble. No one goes to law school on a “greater fool” theory and it just confuses matters to pretend they do.

        • Sam Browning says:

          Okay Dan:

          Lets walk through your assumptions.

          1) If you go to a lower ranked law school you pay less. True if you have the LSATs and grades to negotiate a better deal. However given the recent articles that LSAT scores are dropping, among remaining applicants, there will be a large pool of people applying to lower ranked law schools who will not be able to access such deals. If you’ve done any research you will find that lower ranked law schools typically charge as much for tuition as they’re more highly ranked competitors, because entering law students will pay such prices regardless of a particular institution’s employment outcomes.

          2) It still puts them ahead in positional competion. Okay, are you referring to jobs requiring a JD, or jobs for which the JD is seen as an “Advantage”. There is much anidotal evidence that outside the top 14 law schools, that law degrees effectively exclude applicants from certain positions. For example a law firm that does not wish to hire a J.D. holder as a paralegal, or an insurence firm that does not wish to hire one as an adjuster. Now there are exceptions to these trends, but since companies have discovered they can pay college graduates to be compliance officers, at a cheaper price then law school graduates, its become apparant that a JD from just any law school, will often not give an applicant an advantage in obtaining jobs for which bar passage is not required.

          • Dan says:

            I agree that students with weak test scores and grades face unpleasant options. Mostly they don’t belong in law school, and in a world with more access to the middle class, most of them would get the message and head in other directions.

            But the principle of comparative advantage applies here. A weak student may still perceive law school as the best alternative if the others are worse. (Whether those perceptions are correct is a different issue — about which we know very little.)

            And some people really really want to be lawyers.

    • Afwan says:

      Law schools do piss away a lot of money on positioning, but the bigger problem here is that law schools as a whole created the illusion that one could enter the upper middle class by attending law school. They did this through fraudulent placement statistics and a careful cultivation of law as a profitable profession, among other tactics. People were willing to pay the higher tuition based on the belief that a JD would lead to a better life. Now that the truth is out, enrollment is falling. The fraud was the major driver of the increase in enrollment and increase in law school revenue. That’s the bubble.

      • Dan says:

        As far as I know, few law schools ever had or have today any useful statistics on how their students do financially. The only number they consistently collect is the one they are required to collect — nine months out. (They are in the education business, not the statistics business, and collecting this information is extremely expensive.)

        The nine months out number is not a good indicator of life-time prospects.

        • ichininosan says:

          “The nine months out number is not a good indicator of life-time prospects.”

          Wrong again. How many lawyers do you know who made the successful transition from a bad nine-months-out outcome to a successful outcome? At best, some graduates unemployed nine-months-out will eventually find a so-called “JD-advantage” type compliance position. I’ve seen this result, but in every case, this was an example of a graduate giving up on becoming a practicing attorney and taking a job they probably could have obtained without a law degree.

        • kindasorta says:

          Since all JDs are worth an average of a million dollars, I must agree.

    • BoredJD says:

      “Schools, recognizing that they can only help their students fight their way into the middle class if they are high enough up on the absurd but critically important UNSWR rankings, are locked in their own positional struggle. Again, the competition often suffers from the fallacy of composition. If every school shifts more resources into buying high LSAT students, publicity and recruitment or increasing the size of the placement office, the effect is to have more expensive administration and more “merit” scholarships, but the rankings remain more or less unchanged. The competition sucks up money that otherwise could be used for education or lower tuition, making all schools and students worse off. But there are still only 50 schools in the top 50. And the number of students getting BigLaw jobs is still determined by the demand for BigLaw services. ”

      This is absolutely, 100%, a crock of crap, and demonstrates that you know almost nothing about the job market for entry-level grads.

      Most law jobs that are not biglaw or other elite jobs have always paid around 40-60K, inflation adjusted. In other words, for a long time most law students were able to graduate and get a “middle class” salary. The job market for 40-60K jobs is much less prestige conscious than the “biglaw” market you keep harping about- it essentially relies on alumni connections, local ties, and work experience during law school rather than subtle degrees of difference between two schools USNWR rankings. That a school is ranked 20 spots lower just does not matter as much for a 10 person shop on Long Island looking for an associate to start at 45K.

      Therefore, it doesn’t matter how much a law school charges or what its USNWR ranking is. What matters is the strength of the local legal market and how many entry-levels are trying to break into that market, the latter of which law schools have some degree of control of through class sizes, although they will never be able to match jobs with grads with the precision of medical schools.

      The other thing that law schools have control over is their tuition, and their tuition does impact how many of their students are getting a middle class existence. A middle class salary is a middle class life with 40K of debt at 3%. A middle class salary is not a middle class life with 200K of debt at 7.5%. Again, the amount of debt students go into is mostly in control of the law schools, to the extent if law faculty and deans really wanted to keep it under control, they could.

      In an ideal system, most ABA law schools would look like unaccredited law schools. They’d have class sizes around 75 and no more than 150 and cost about 10-15K per year, hopefully over two years to cut down on living costs. And those students might not place as well in biglaw, but a much larger percentage of the class would be enjoying a middle class lifestyle.

      There are many reasons law schools have chosen to chase the USNWR dragon. And a large amount of the blame can be laid at the feet of deans and “progressive” tenured faculty, who for various reasons, not all of which are altruistic, would rather work at a Cadillac law schools.

  16. Linda says:

    Paul, What percentage of a typical law school budget are so-called merit scholarships (recruiting scholarships), which the ABA task force condemned?

    • Paul Campos says:

      This actually varies a lot between schools (some schools engage in massive discounting, others don’t), but here’s a fairly typical example:

      School A has a nominal operating budget of $30 million.

      The school nominally collects $24 million in tuition, but actually collects $18 million because of price discounting.

      On paper, the school has $28 million in revenues and $30 million in expenses, but it would be more accurate to say that it has $22 million in revenues and $24 million in expenses, because the six million dollars in tuition discounts constitute an essentially fictional transaction. This means the school’s real operating deficit is 9.1% rather than 7.1%.

      • Dan says:

        Without understanding the overhead charge, this tells us little.

        Imagine that School A is paying 20% of nominal tuition to its parent university. That’s $4.8m. If the actual additional costs to the University that do not appear on School A’s budget already are only $0.5m, then you could restate School A’s actual operating results as $22m in revenues, $19.2m expenses. It has an operating surplus, not a deficit. It could run the “loss” you report indefinitely without the university administration having any incentive to close it down.

        Of course, the missing $4.3m need to come from somewhere. So there are going to be unpleasant budget fights. But School A can still absorb another 10% cut in revenues without becoming a money loser to the university — even without cutting expenses.

        That gives lots of time to shrink the faculty and staff by attrition, or to try to coordinate with competitor schools to limit the USNWR positional expenses, or for the lawyer job market to recover.

        On the other hand, the story is very different if School A has already convinced its university to waive the overhead charge, or the central administration doesn’t understand the difference between accounting and marginal cost, or if the marginal savings to the university of closing the law school are closer to $5m than $.5m, or if the law school has an endowment that would default to the university if it closed, or if the university is in trouble and depends on the law school’s overhead payment, or if it gambles and loses on a quick job recovery or a temporary jump/drop in the rankings.

  17. Unsympathetic says:

    Time for law schools to have a very small fixed component and the rest variable based on student volume.

    You know, precisely the same as actual companies that don’t get to charge whatever they want.

    The only “crisis” in higher education is that the administrators have no clue how to manage productivity.

  18. dominique wilkins says:

    The cost of law school right now favors the rich and those with large and significant scholarship money.

    Law school is not for the middle class and working class anymore – it’s for rich people.

    When people get past the bad assumption that it is a step up for working class and middle class out of their head, then law schools corrections will happen. And law schools can fix their tuition problems by raising up tuition to 100,000 per year for private schools.

  19. mike in dc says:

    Well, there have been about 50 ABA-accredited law schools founded since I was born, in 1967. That’s 1/4 of the total number of accredited law schools. I think, if that many law schools shut down over the next decade, we might see a supply-demand equilibrium achieved in the legal employment market. Bad news travels slowly, but eventually even the nigh oblivious become aware of it.

  20. dominique wilkins says:

    If American law schools want to survive, they will bring in more international students, who are rich kids, and raise up the tuition to $100,000 per year.

    25,000 students at $100,000 per year is the same at 50,000 students at $50,000 per year.

    15,000 American students and 10,000 international students (which shouldn’t be hard to get out of 6 billion people in the world).

    Middle class and working class people will be shut out, except when they have scholarship money to pay for the vast majority of tuition costs.

    • Philip Arlington says:

      Law is not an internationally transferable degree to anything like the same extent as science, engineering, or even accountancy. The only good reason for a non-American to pay that much for an American law degree would be to gain entry to the United States with the intention of staying permanently, but the tiny minority of young people whose families could afford to pay $300K plus three years living expenses to settle in America via this route could achieve the same end by other means more cheaply and without the hassle of three years of law school.

      • dominique wilkins says:

        Again, I’m talking about super rich people where 300K is not a big expense. This is not for middle and working class individuals.

        This is for the rich and super-rich kids of the world to come to America, spend three years learning, then go back to their third world countries and run whatever business they are running. And for some of these families, having someone with American legal training could be valuable, versus sending them to get an MBA.

        That’s one way to do it.

        But for now, over the next three years, law schools are going to survive via donations and having other schools shut down and take away their students.

        And of course the basic assumption that drives law schools, eventually the economy will recover, people will have money to pay for legal services (there is certainly need right now but a real of money due to the economy) and everything will go back to normal.

        And they may be right. Maybe. The problem now isn’t lack of need for legal services – the problem is the economy is bad and people can’t pay for it. Once the economy starts to recover, legal jobs will improve and this storm will be over.

  21. amsapart@yahoo.com says:

    One of the key principles of cost accounting that is being overlooked by a lot of commenters is that there is no “right” answer that determines if a law school is subsidizing or is being subsidized. Some comments have pointed out the difference between marginal and average costs, which university presidents are well aware of when looking at declining law school contribution margins, but over the longer run, marginal costs will be made to approach average cost or else you go bankrupt.

    Large public universities (Iowa?)are much less likely to pull the plug because they have more sources of alternative revenues and legislatures that are reluctant to shut down the state law school. A school like Penn State on the other hand which has a more recent law school and lots of in state alternatives including public law schools in both Philly and Pittsburgh could be a possibility though. The schools most likely to close would be small private colleges that have limited endowments, with Prof. Campos pointing out Hamline recently as a prime example.

    Notwithstanding what many here think, I believe the stand alone schools will last longer than weak schools that are part of a larger college because they have no illusion that there’s someone to bail them out. They will do whatever is needed to survive. Make fun of John O’Brian all you want but deans like him will make sure their school stays alive. Kind of like cockroaches and nuclear war.

  22. Anon says:

    “Again, the amount of debt students go into is mostly in control of the law schools, to the extent if law faculty and deans really wanted to keep it under control, they could.”

    Actually, at most law schools that are part of larger universities (public or private), it is the university that sets the tuition of its various units. So no, “law faculty and deans,” in most cases, cannot control tuition or the consequent debt.

    • BoredJD says:

      If law faculty and deans made it a priority to advocate for their students with central, then yes, absolutely tuition would go down. If they made it a priority to keep their own budgets down, then yes, tuition would go down. Why keeping debt low is not very important to modern legal academia is open to debate. but the idea that they are at the mercy of central- it’s about self-interest.

  23. Linda says:

    Paul. I am correct in saying that were it not for the discounted tuition, the school in the answer you gave to my question above would have a four million dollar surplus. Isn’t the problem, then, these merit scholarships, which exist for U.S. News purposes and which the ABA Task Force condemned?

    • Paul Campos says:

      The discounts represents price cuts that are necessary for the school to fill its seats with what it considers acceptably qualified students. A school can’t get rid of these discounts without either significantly reducing class size and/or slashing admissions standards. Some lower-ranked schools don’t have the latter option, as they’ve already essentially eliminated admissions standards.

      Prospective students are becoming increasingly sophisticated about the fact that a school’s listed tuition is very much nominal for well qualified applicants, and can be negotiated down.

  24. MacK says:

    A last word or explanation on shared overhead in academic budgeting.

    Most universities face a problem – some programs bring in relatively little revenue, less than they effectively cost to run, while other programs bring in typically substantially more revenue than they cost to run. The under-revenue programs are typically in medicine and certain of the liberal arts, and this is particularly the case in an institution that describes itself as a research university. In addition, in recent years universities have been developing lavish administrations, with very highly paid presidents (up to $1 million) followed by entourages that would make the President of the United States blush, or certainly a 4-5 star general, along with deans for pretty well every administrative issue, etc. – all of this too is a cost not covered by tuition. In addition every school wants to look like Harvard, even if it lacks Harvard’s endowment while offices, buildings etc. are dressed up like a Hollywood fantasy of what a 19th century cambridge college looked like, panelling and all, at considerable overhead/expense.

    Revenue for for universities comes in various ways – generally gifts (endowment), tuition, and research grants. Starting with the gifts (endowment) these are often restricted in how they can be used, that is to say they may be devoted to a particular program – or worse, they may have been a gift to get a donor’s name on an expensive building that lacked additional funds for the buildings upkeep (more overhead); tuition, especially for professional schools, is often constrained by formal or informal rules about how much of that tuition can be used for other programs (somewhere along the way the ABA set that number at 20% (I need to dig to find where)); research grants tend to also have severe restrictions as to how much can go into the general fund, and moreover, most research grant value is for STEM, plus in the case of law schools, the big ranker, USNWR actually looks at how much money was “spent” per law student.

    So the situation is that much of the “revenue” is supposed to spent of the program that attracted it – plus there are limits as to how much revenue can be openly diverted. Ah, but cunning University administrators have found a way around that – they spend the money on services that the program uses – it pays for those services, sometimes as shared overhead, sometimes as straight charges. Now if the cunning University administrator were to find a way of inflating the charges for those services and shared overhead … well it looks like that money is being spent on the profitable program, but in reality it is paying for the services and overhead incurred by the money-losing programs (and the new president’s house and garden party.)

    The amount of money diverted in this way is tough to work out. I do know that when Georgetown law moved its campus to Capitol Hill (4 miles from the University) the two Deans behind the move, Paul Dean and Dick Gordon (Dick was a personal friend) did so in part so as to make it harder for Georgetown University to charge inflated overhead, and in fact to try to keep tuition down (both were pretty frugal guys.) Dick was very unhappy with some of his successor’s expensive projects, which drove up costs (and his successor and her main sidekick transparently were not fond of Dick.) I suspect that the moves of many law schools to set up separate campuses are very much for the same reason.

    In any event, the point I raised with Paul was how had he dealt with this problem of hidden transfers via inflated charges – and he has indicated that he has addressed it.

    A last word – law school credit hours, for a 13 week semester are priced in most catalogues at between $1400 and $1800 – that is per student per class. So multiply by say 20-30 and divide by 13 to get the typical revenue per classroom hour, and maybe divide by 3 to get the actual academic hours (less for core courses where case-books and materials are easy to come by.) By my math that is $1000 to $2000 per working hour per professor. I know that many people entertain outlandish ideas of what law professors earn (and to be fair a small number do earn outlandish amounts), but most earn in the range of $100-$200k, which is a biggish pay check, but not vast. (Yes some will whine about the need to do research.) However, even allowing for small course loads, and the rest of the package, the numbers do not “add up” until you recognise the use of the law schools as cash cows for their parent institution.

  25. Paul Johnson says:

    Hello Paul. I recently got a report on alumni contributions from my law school (UVA) and my impression (anecdotal to be sure) is that contributions from the alums in my class and nearby classes are way, way down. I am sure this is true for other classes, and at other schools. This is interesting to me from two perspectives. Number one, it is a further hit on the budgets for the law schools. Second, if you track alumni donations as a whole to a school over time, it might give you a nice quantitative measurement of the overall financial distress hitting the legal profession in general. My suspicion is that even people in the peak of their careers are giving significantly less than they were five or ten years ago. Its not like they are any less loyal to their schools. They just can’t afford it anymore.

  26. [...] bring this up in part thanks to Paul Campos’ post on law school budget deficits. The question I asked myself is: To what extent are these deficits caused by shrinking class sizes [...]

  27. Fat Guy says:

    I don’t donate to UVA because it infuriates me that the in-state tuition has increased from about $30K for in state tuition to about $48K in less than 10 years.

  28. [...] the Lawyers, Guns, and Money Blog, Paul Campos throws out the massive system-wide operating loss figure, plus others. Despite scholarships aplenty, enrollment is down 25 percent since 2010. And though [...]

  29. ThirdTierWarrior says:

    The Valvoline Dean will not tolerate this seditious article!

  30. [...] a previous post I estimated that the large majority of ABA law schools are running substantial deficits this fiscal [...]

  31. Juris(prudence) says:

    According to the Univ. of Colorado web site, the AVERAGE salary for the school’s tenured law faculty is $180,000.

    That’s the core of the problem. Is Paul Campos willing to take a substantial pay cut? And if he isn’t, why should anyone else?

  32. Roberto says:

    Thanks for the information, this obviously took quite a bit of work to hunt everything down. Is there any way you can provide us the data so we can run some analysis of our own?

  33. [...] all law schools are losing money this year. Legal education reform needs to happen [...]

  34. [...] exactly at the same time that the legal education model is being exposed, and law schools are bleeding money, the biggest firms in the country are struggling. This truly is a profession in [...]

  35. [...] Bodie reacts to a couple of recent LGM posts pointing out that most law schools are currently losing money because [...]

  36. [...] that the legal academe has stifled education, but with applications dropping, many law schools in the red, and law jobs in short supply, it looks like more and more law school deans and professors are [...]

  37. [...] has accelerated. According to law professor Paul Campos, “Most law schools now appear to be losing money, and law school budgets almost everywhere will undergo even more severe stress as the entering [...]

  38. [...] “80% to 85% of ABA law schools are currently losing money“, Paul Campos, Lawyers, Guns, and Money, 12 November 2013 [...]

  39. [...] July 2012 was 19 months ago, and things have been going very badly for law schools since [...]

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  41. [...] schools that are under some sort of fiscal stress — a category that is coming to include the large majority of schools — will no doubt make a number of [...]

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