The collapse of the American law school financing model
By 
I have a paper that I’m planning to post on SSRN early next week, that details how over the course of the last fifteen years the basic financial structure of American legal education has been in a kind of slow-motion collapse. I started writing about the coming crisis in 2010 and 2011, which turned out to be what in the paper I call Peak Law School, that is, the moment when both enrollments and tuition revenue reached their historical highs. If anything, my Cassandra-like projections — which needless to say were met with derision by many Very Serious Law Professors — proved to be if anything too conservative in predicting what would happen over the next decade and a half. (A symptomatic statistic: JD tuition revenue has declined by 41%, and at the vast majority of schools JD tuition revenue remains the source of the vast majority of self-generated revenue). As to what the next ten to fifteen years may bring, the financial and political picture is or at least should be quite sobering. The paper’s conclusion:
Fifteen years ago, after decades of continually increasing enrollments and ever-rising effective tuition rates, relatively few law schools appeared to be running significant operating deficits. Today, a large minority of ABA law schools apparently depend on their host universities to supply half or more of their operating revenues, while over the past decade one out of every nineteen such schools, and counting, has disappeared completely. What is particularly striking is that this combination of law school closures, along with waves of sometimes extreme faculty downsizing at many other institutions, has still left so many of the surviving schools in what appear to be dire financial straits. At many institutions, the former cash cows of the university seem to have become the equivalent of impecunious adult children of what, for the moment, remain indulgent central administrative parents — parents whose patience is being tried increasingly by the financial irresponsibility of their progeny. (This irresponsibility, to be fair, has been enabled by what are by now many years of continuing heavy subsidization.)
American higher education is moving into what seems fated to be a difficult economic era. The post-Great Recession baby bust,[1] the drying up of the pipeline of full tuition paying foreign students in the wake of increasing levels of nativism and xenophobia,[2] the tremendous financial uncertainty now being generated by the possible effects of artificial intelligence and other information technologies on higher education,[3] and, looming over everything else, the overt hostility of the Trumpist political movement to intellectual life in general, and university life in particular,[4] are likely to lead to increasingly challenging financial circumstances. (Law schools will face the additional challenges produced by the new restrictions on federal student loans to graduate and professional school students).[5] In such circumstances, universities will be looking with a critical eye at enterprises, such as legal education, which once upon a time were often sources of significant surplus revenue, but have since turned into apparently perpetual drains on institutional finances.
Under such circumstances, the complacent attitude of so many legal academics toward the fact that their unusually large salaries[6] are paid in no small part by the rest of the university is likely to be shattered by sudden sharp contact with economic reality. Complacency may well give way to panic, as denizens of various law schools are forced by events to grapple with the question of exactly why their university’s English and History and Sociology and Physics departments should be paying for so much of the law school’s operating expenses.
Tenured law professors, who are among the most privileged people in the entire American system of higher education, should for both ethical and purely pragmatic reasons be asking themselves this very question. As an ethical matter, I’m not aware of any plausible argument for why departments of arts and sciences at American research universities should be subsidizing professional schools whose graduates are at least in theory entering a lucrative vocation – especially given that these schools require such subsidization only because of decades of increasingly inefficient and irresponsible financial practices.
As for the pragmatics of the situation, the sooner that law faculty face up to what will, at many universities, come to be considered the fundamental unsustainability of the current law school financial model, the more likely it becomes that this model can be altered via carefully considered internally driven reforms, rather than by sudden draconian cuts, imposed by a new generation of central administrators who, under the increasingly fraught financial conditions in which the contemporary American university finds itself, end up taking a much less indulgent attitude toward law school budgetary profligacy than that formerly evinced by their remarkably tolerant predecessors.
It has been suggested to me by several people within the legal academia that, up until now, central administrators at various institutions have tolerated the massive operating deficits that so many law schools have incurred in recent years because these administrators were willing to indulge such deficits in the pursuit of what could be called “cheap prestige.” The theory here is that law schools were fairly small parts of the overall operating budgets of these universities, and that for just a few million dollars in annual deficit spending, the university as a whole could receive a prestige boost from having, say, the 29th-highest ranked law school in the US News annual rankings, rather than the 47th, or what have you. In my view to state this theory plainly is to highlight its absurdity: Almost no law professor, let alone anyone else, has any idea whether a particular school is currently ranked 29th or 47th, and the hypothesis that such a distinction could somehow materially affect a university’s overall academic reputation seems extraordinarily implausible.
Nor is it plausible to argue that being the 29th rather than the 47th-ranked law school is going to materially affect the job prospects of law students considering which schools to attend: there is, as far as I am aware, no evidence that legal employers pay attention to these sorts of distinctions within the very broad tiers of schools that make up the law school prestige hierarchy. Relatedly, greatly increased transparency regarding job outcomes seems to have made prospective law students far more sophisticated about the relative meaninglessness of ephemeral rankings differences within broad tiers of schools, and consequently less willing to pay for such cheap “prestige.” Indeed, the only group that may actually benefit from the existence of these distinctions is the increasingly self-enclosed caste of professional upper administrators at universities, who can list such “accomplishments” on their resumes, as they seek their next promotion from their peers in that caste.[7]
Beyond all this, while it may be plausible to assume that having a genuinely elite law school provides some sort of material benefit to the university that hosts it, the fact remains that law school reputation is remarkably sticky. I have been in legal academia in one way or another for almost all of the past forty years, and membership in the group of genuinely elite law schools remains, without exaggeration, exactly the same today as what it was forty years ago.[8] This is the case despite the many billions of dollars spent by non-elite law schools in the perpetually vain attempt to move into the magic circle.
The good news is that escaping this situation presents no real theoretical difficulties. Unless one takes the implausible view that law students of the 1970s and 1980s received seriously inadequate educations relative to those law students receive today, then gradually returning to the per-student spending levels of that era would result in a relatively painless cure for most of the financial ills of most of the law schools whose reckless financial practices over the course of the US News rankings era have left them in the economic lurch in which they currently find themselves.
The sooner law professors, deans, and central administrators let go of the delusion that this incredibly expensive tournament to acquire “prestige” is anything other than a deeply irrational and socially destructive negative sum game, the sooner American law schools can begin to move toward a more ethically defensible and economically sustainable model.
[1] Melissa S. Kearney, Philip B. Levine, Luke Pardue, “The Puzzle of Falling US Birth Rates Since the Great Recession,” 36 J. Econ. Persp. 151 (2022).
[2] The Hechinger Report, “As International Enrollment Falls, U.S. Students Face Program Cuts and Higher Prices,” https://hechingerreport.org/as-international-enrollment-falls-u-s-students-face-program-cuts-and-higher-prices/.
[3] Lorraine Bennett and Abi Abusalem, “Artificial Intelligence (AI) and its Potential Impact on the Future of Higher Education,” 11 Athens J. Ed. 195 (2024).
[4] Erwin Chemerinsky, “The Assault on Academic Freedom,” ABA Human Rights Magazine, October 2025, https://www.americanbar.org/groups/crsj/resources/human-rights/2025-october/assault-on-academic-freedom/
[5] Austin Reid, “New Rules Take Effect for Student Loan Borrowers and Universities,” National Conference of State Legislatures, July 14, 2026, https://www.ncsl.org/state-legislatures-news/details/new-rules-take-effect-for-student-loan-borrowers-and-universities
[6] For example, perusing the salaries of faculty in the University of California system reveals that law professors have compensation totals that approach double those of professors of similar rank in the arts and sciences on the same campuses. See supra note ____.
[7] Of course, this explanation can go a considerable way towards explaining why these rankings continue to be taken seriously by anyone at all. For a particularly egregious example of the dynamic described above, see Paul Campos, “A Small Piece of Paper, It Carries a Lot of Weight,” Lawyers Guns & Money, September 11, 2023, https://www.lawyersgunsmoneyblog.com/2023/09/a-small-piece-of-paper-it-carries-a-lot-of-weight
[8] In the 36-year history of the annual US News law rankings, a grand total of twelve law schools have managed to achieve a ranking of higher than tenth for at least one year. By this metric, attempts by the 95% of law schools outside that elite to move into it could be estimated to have had a 99% historical failure rate.