The Changing Law School Equation

[Michael A. Olivas]

Because most of us went to law school during the Golden Age, which I situate as having ended about five years ago at the top of the application apex and the height of the modern-day job markets for law graduates, most of us are blissfully unaware of recent developments that literally threaten the enterprise. I write to discuss these many moving parts and to call us to action as a community, for threats to the universe of legal education will affect us all to our collective detriment.

Let me set out the many parts, and then describe their interrelationships. A number of states, faced with ruinous economic conditions, are reducing their subsidy to public institutions. This development and the rising cost of private education have meant that it is harder to finance education without resorting to substantial student debt burdens. Many already arrive at our law schools with substantial obligations and compromised credit worthiness. Some states have privatized their public law schools, rapidly increasing the tuition prices. Private law school tuition costs have continued to outstrip the consumer price index. Both these features have meant that law student debt loads have also increased substantially. These developments have also led to internal reorganization and the creation of revenue streams to law schools,
such as increased CLE and short-term curricular offerings, executive-style programs especially at the graduate level, additional and more-specialized LLM programs (including on-line and asynchronous course offerings), and other revenue-generating and auxiliary enterprises.

In a difficult post-baccalaureate job market, law schools historically have been reasonable and accessible options to medical school, MBA programs, and other graduate or professional alternatives. While there are more law students enrolled at present than in history, the demographics of law study are shifting as well, and not all the populations will be equally able to undertake law study.
 
Students have increased information about their choices, but there are substantial information asymmetries; these can lead to imperfect self-assessments. As with choices of annuities, 401 (k) plans, and prepaid tuition plans, there are so many choices that applicants are in a position to have too much data, and a poor sense of what law school is the best for them.

Up until recently, many of our students were in a position to finance the cost of their college and professional education with subsidized loans, which they repaid from employment in a well-paid profession, where career earnings improved over the trajectory of lawyers’ careers. All the parts of this equation are shifting, and the equation itself is unlikely to continue as a working model for many of our students. Without the complex regime of relatively inexpensive and subsidized student loans, many students could not assume the growing risks of undertaking law study, at least not in the traditional three year format of fulltime enrollment.

Some institutions, especially newly established and a number of other struggling law schools, may not be able to meet the increased regulatory requirements for administering loan programs, such as the proposed “gainful employment” and 90/10 criteria. While these are very technical matters, they mean that schools with undercapitalized operating expenses (that is, they rely almost exclusively upon tuition) and poor placement and/or bar passage records for graduates will find it more difficult to operate and be authorized to administer federal loans.
 
At the same time, the law firm and legal employment markets are being restructured in a fashion that will likely lead to fewer employment opportunities; structural changes are likely to result in lower salaries and more contingent lawyer workforces. As one sign, major U. S. law firms are “outsourcing” legal work to staff attorney law firms in lower-cost cities such as Wheeling, West Virginia and Dayton, Ohio; some outsourcing of routine legal work to foreign cities has been evident for years.
 
While relatively few international lawyers seek or gain employment in the United States, several observable trends will likely result in a more globalized legal job market; these include bar admissions pressures, international General Agreement onTrade in Services (GATS) negotiations, and other flattening trends in international legal education. In some instances, these will lead to decreased opportunities for U.S. lawyers, at least those who speak only English. In-school  subsidies are ripe targets for legislative cost-cutting and budget efforts. Any changes to this and other features of the current financial aid system will lead to more expensive financing options. Not all of our enrolled students or their families will be able to avail themselves of stricter lending requirements. All the features in the current financial aid system were creatures of Congress; living by this sword can also lead to dying by this sword, should deferral periods/bar exam financing/grace periods for repayment disappear. At the least, the costs of borrowing are likely to increase, postponing the debt burden but also substantially increasing that burden. At the successful urging of legal educators, Congress adopted both an income based repayment plan and a public interest loan forgiveness program, but the same thermodynamics and Congressional action could repeal them. Our successes have bred envy and resentment, as efforts to preserve lower-cost governmental financing has been cast as special-pleading by the guild.
 
The Congressional and Administration efforts to tighten up the gainful employment/ability to benefit equation has largely been a function of undergraduate proprietary schools, but the increased scrutiny to law school employment issues, including institutional honesty and transparency, may well extend to legal education overall, which could restrict some schools from participation in the federal scheme. Law schools have not been fully scrutinized on these issues until the last year. Limitations on bankruptcy for student loans meanthat there will be pressure upon state bar authorities to use financial health and credit records in the moral character and fitness determination process. Finally, current efforts at  income-contingent repayment programs are in flux, and it is not clear our students will opt into these long term mortgages on their educations.
 
These are daunting developments in the world of legal education, and many in my list will in fact occur, knocking out or reducing the possibility of law school, especially for students from poor families, for first-generation college graduates, for immigrant families, and for minority communities. Because these communities are growing and will provide the applicants for our future classrooms, these developments are ominous and unforgiving.
 
While many people see some of these, and some see many of these, I write in the hope that the entire polity and legal education community will be put on notice that we face significant challenges in all these areas, and not all law schools can survive the end game of some of these events. One need only look at the housing bubble and credit market collapse to see how quickly and precipitously such problems can occur. To begin with, even with the stakes being so high, we are creating too many law schools for the current regulatory climate, and in my view, a number of these, even some public institutions will have to seriously consider whether they can remain open. It should be harder, not easier to start up a law school. I do not suggest for a moment that all legal educators have ignored these markers or that no one has tried to point out the problems. Indeed, many of the persons engaging in this NLJ exercise have identified and raised these issues. But most legal educators have not, and the members of the bar have not. These are where we need to place our efforts--in raising these issues and determining our best course of action.

Comments

[Luis]

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[Alberto]

I was not on the Board when the sustainability codnoirator came on board, so I'm not personally familiar with the circumstances. It's true that his salary, while paid by the City's Dept. of the Environment, is treated by the City as an in-kind expense (we are required under Prop. H to have a certain percentage of in-kind expenditures in the fund). But would I have identified a sustainability codnoirator as the highest priority in-kind service? Probably not. In any event, you might want to tune into tomorrow night's Board meeting, where Commissioners Kim and Mendoza's sustainability resolution is up for second reading I think then you'll be able to get a better idea whether you think the codnoirator has proposed useful activities or not.

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