During my service as a member of the accreditation committee of the American Bar Association, the ABA added a 200th school to their roster of accredited law schools. This growth could be seen as a cause for celebration– the roster of new schools included many with missions that would clearly benefit society. Public service law schools, schools specializing in clinical legal education and schools with a mission to serve underrepresented constituencies, for example, enlarge and enhance the quality and availability of legal services.
Also among these 200 schools — particularly those of more recently vintage — were a number operated to return a profit for investors. The rise of the for-profit law school model posed a number of problems, but they were set aside by an ABA finding that these schools were to be judged according to the same standards applicable to independent, not-for-profit schools, and to the traditional university-affiliated schools. This approach was grounded in anti-trust interpretations that required basically the same standards for all schools so that the ABA would not bar entry to the market for competing law schools.
In large part, it was the threat of anti-trust sanctions that kept the accreditation committee from exploring and establishing additional criteria that might limit the growth in the number of law schools. The U.S Justice Department had, in a consent decree in 1995, negotiated an agreement with the ABA that severely circumscribed the accreditation committee’s discretion. There would be, in short, no limit to the number of schools that could be permitted by the accrediting body. The logic behind this lay in the notion that such behavior by the ABA would be seen as anti-competitive, violating the freedom of applicants seeking to establish new law schools. So the ABA had no way to address the real issue: There are too many law schools and too many people studying law – at least the kind of law that the ABA insisted upon – namely, law that would allow graduates to obtain admission to the bar. Thus, in the name of greater access, the ABA was limiting the law school’s ability to have law studied in different modes and in different styles. The accreditation standards called for many limits on what an academic enterprise might think would serve student needs better.
In taking its position, the Justice Department seemed to embrace market forces, rather than the decisions of elites, to govern entry into the law school market. At first glance, the theory is quite consistent with policies that encourage competition. But, while the Justice Department argued for market forces, other parts of the government apparatus were busy upending them. And, as a result, the law school market has suffered from great distortions. While a true market model like the one encouraged by the Justice Department might have served as a legitimate check on the increase in the number of law schools, the government’s extension of cheap money (in the form of direct loans and various government subsidies and guarantees) to potential law school students seriously eroded the underlying premise that market forces would influence behavior. Growth in the number of schools was virtually guaranteed.
Throughout the last decade, cheap money has been available to students, and so has ample government support for the notion that legal education is a worthy pursuit in almost all cases. These factors have meant that students could borrow a lot of money – often more than they could afford to pay back. And, the information available to prospective student borrowers remains inadequate in light of the magnitude of their investments. In almost all cases, prospective students have not been provided accurate information about the true cost of borrowing. The government’s subsidizing of student loans has also enabled law schools to increase tuition to levels well beyond what students can afford. This leads me to the conclusion that the government’s role has been more destructive than constructive.
Whereas there has been some reform in areas like home mortgages, meaningful student loan reform has failed to keep pace. The true impact and depth of the student disappointment has not yet been fully appreciated because student loans which are underwater have not been accurately portrayed by the federal government. True student defaults are masked by the intricacies and inefficiencies of a reporting system that obfuscates the true status of many student loans. And, the traditional belief that school is a good place to ride out an economic downturn is still believed by many hopeful candidates. Thus law schools, up to the present, are still growing, and so is the number of law students.
There are, however, at least two forces at work which may soon clarify the issues of law school student loans and ultimately result in the closing of several law schools. The first of these factors is the significant backlog of young lawyers who are still in the market for their first legal job several years after completing their legal education and being admitted to the bar. We have ample anecdotal evidence that law schools have been very creative in attempts to understate the poor placement rate of these graduates. For example, many law schools mask the true plight of recent graduates by providing some version of paid internships for those who cannot find employment. These graduates are not recorded as jobless, but they really are. Adequate and honest data on the employability of law graduates is still not available. Too many law schools, in pursuit of higher rankings from unofficial rating organizations such as U.S. News, distort the data in many categories. Reform is badly needed.
Data on starting salaries for new lawyers can also be misleading. The average salary of newly minted lawyers – if they can find work – is not an accurate statement of what the starting salary of an individual graduate is likely to be. High salaries for the elite lawyers from elite schools exceed $100,000, and skew the data toward a high average. The average student, however, is not likely to realize the average salary. In short, law schools’ expense, a return on funds invested in attaining the degree, and the cost of repaying student loans show that, economically speaking, the average law school graduate today is not getting a good deal.
Thus, in many ways, the law school student debtors resemble the home owner with the underwater mortgage – saddled with a debt that might be uneconomic to repay. Of course, these results are tragic because they alter life decisions and available trajectories. And, unlike what is happening with the mortgages, word is just beginning to get out.
While the Tea Party adherents haven’t yet focused on this issue — who wants to bail out lawyers? – the problem of government meddling in the market place makes the certainty of rising costs crystal clear. Unless the government dreams up further intrusions such as loan forgiveness and loan guarantees, the number of law students should decline and a number of law schools will close their doors. However, note the caveat: “Unless the government dreams up further intrusions.” Do not underestimate the government’s willingness to kick the can down the road.