Law school applications continue to decline

The first applicant data are now available for this law school admissions cycle. They indicate that applications will be down for the fifth straight year, although it appears the pace of decline is likely slowing. The less than completely bad news, from the perspective of law school and university administrators, is that the year over year decline in applicants (8.5%) is considerably smaller than the comparable decline at the same point in the previous two cycles. If this pattern holds — that is, if the year over year decline in applicant totals lessens over the course of the entire cycle — the final number of applicants may be down only slightly, or may even flatten out completely, compared to last year. (On the other hand, applicant totals declined by 38% between 2010 and 2013, so a repeat of the 2013 numbers is likely to still be a very big problem for a number of schools.)

Assuming for the moment that the current 8.5% decline holds for the entire cycle, this will yield a total of 49,600 applicants (ABA law schools admitted 60,400 applicants four years ago). Given the tuition-dependent structure of most law school budgets, it’s no surprise that admission standards have been declining even faster than applicant totals, with the result that while 55.6% of all applicant were admitted to at least one school ten years ago, last year that total had risen to 76.9%, and that number was probably a percentage point or two higher for this fall’s entering class.

If we assume that the trend toward open admissions policies at the bottom 50 or so schools continues, and that 80% of all applicants are admitted somewhere, this will yield 39,670 admissions, which in turn, given the consistent tendency of 86% to 88% of all admitted applicants to matriculate at some school, produces a predicted first year class of 2015 of approximately 34,500.

This would mean that, while the 201 ABA law schools operating in 2009-2011 matriculated a total of 153,900 1Ls in those three years, the 203 ABA law schools (yes, the ABA is still approving more law schools, while none have as yet closed) operating in 2013-15 will matriculate a total of 111,975 in those three years — meaning that the average school will have gone from having (leaving aside attrition and the fractional complexities created by part-time four-year programs) 766 JD students to 552: a 28% decline.

And because schools have been offering larger and larger “scholarships” (tuition discounts, subsidized by students paying full boat) to more and more of their students, the decline in tuition revenue is on average probably even larger. And of course “on average” is a deceptive concept: while schools near the top of the legal academic hierarchy have for the most part neither reduced their class sizes nor their effective tuition rates, many of those in the middle and toward the bottom are getting hammered by declines in tuition revenue of 40% and 50% (many low ranked schools depend on tuition for 90% to 97% of their operating revenues).

It’s not surprising that all this has resulted in hiring freezes, aggressive buyout programs, and straight-up layoffs of staff and even tenure-track and tenured faculty at some schools. What is perhaps a bit surprising is that no school has actually closed yet, or formally merged with an erstwhile competitor.

This can probably be explained by two factors:

(1) As Thomas Jefferson’s (the law school, not the president, after which it was so aptly named, considering his habit of borrowing money he couldn’t pay back) recent bond restructuring illustrates, creditors won’t shut down a free-standing law school if there’s any reasonable prospect that the school’s income stream going forward will be more valuable than its — usually modest — liquidation value. And that income stream will still consist of millions and even tens of millions of dollars of annual tuition revenue, courtesy of unsecured loans, provided unwittingly by taxpayers to people who need to demonstrate to such schools that they have the ability to sign their names to government loan documents.

(2) University central administrators don’t want to incur the reputational costs of closing a law school, at least until it becomes perfectly clear, as Richard Nixon used to say, that no amount of restructuring and economic “recovery” is going to stop the red ink from flowing in the foreseeable future.

We shall see if that time is now approaching. In any case, it’s good to see that the law school reform movement has produced at least some significant pressure toward the eventual rationalization of the economic structure of American legal education.