The Perils of Law Schools and Their Rankings

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It may be inevitable: “gainful employment” rules for law schools. “Gainful employment” is a term of art coined in the wake of the U.S. Education Department’s regulations last June governing for-profit colleges and similar vocational institutions from which many students emerge with student-loan debt and few prospects for working at jobs they were trained for. It now turns out that America’s law schools have a few things in common with the proprietary sector: Both feature sky-high tuition relative to students’ ability to pay without taking on substantial debt, and many former students of both kinds of institutions have trouble earning enough money to pay back the loans made or guaranteed by the federal government that taxpayers must eventually cover.

The Education Department now plans to limit or deny federal grants and loans to students at for-profit schools that cannot demonstrate that relatively large percentages of their former students are paying off their student debt in timely fashion and in amounts that don’t exceed certain set percentages of their income. That’s what “gainful employment” means. This past fall two U.S. U.S. senators, Barbara Boxer (D-Calif.) and Tom Coburn (R-Okla.), sent a letter to Kathleen Tighe, the Education Department’s inspector general, that appeared to be a first step in subjecting law schools to similar controls. The senators asked the department to provide “transparency” information (presumably to be obtained from the law schools themselves) regarding tuition costs, bar passage rates, job placement rates (including a breakdown as to whether the jobs are full-time or part-time and whether they require a law degree), and the amount of federal and private education-loan debt students carry on graduation. The next step could well be a shutoff of the federal-aid spigot to law schools–the same sanction that for-profit schools face–if substantial portions of graduates aren’t earning enough to pay back their law-school loans.

Federal regulation of law schools sounds fairly drastic–but so is the current crisis in legal education. Here are some hard facts: Law-school tuition has skyrocketed over the past two decades. During the 1980s the average annual tuition at a private law school was $13,500. Now it tops $40,000. Law-school debt has also risen quickly. Students at private law schools currently borrow an average of $92,000 to finance their three years of legal education, while students at public law schools borrow an average of $59,000. Those amounts dwarf the average $14,000 that students at career colleges borrow to pay for two-year associate degrees. Meanwhile, because of the recession and the growing practice of outsourcing routine legal work to temporary employees, many of them abroad, the number of full-time U.S. legal jobs has declined by 15,000, according to a Northwestern University survey. Meanwhile, the number of U.S. law schools–and law-school graduates–is burgeoning. The American Bar Association (ABA) accredits 200 law schools, and about 20 more brand-new schools are in the ABA’s accreditation pipeline. Altogether the law schools churn out about 45,000 graduates a year, all competing for only 30,000 new job openings annually. That’s 1.5 fledgling attorneys for every available job that actually requires them to use their degree.

Furthermore–and this is what has led to all the cries for “transparency”–law schools have been accused of fudging their post-graduate employment numbers so as to game the U.S. News & World Report rankings. While the ABA operates as law schools’ official accreditor, U.S. News, with its rankings of the schools and its division of them into four “tiers” presumably based on their relative quality, is their unofficial accreditor. Because law schools, along with the universities to which they are attached crave their students’ tuition dollars (law schools, where expensive labs are nonexistent and large lecture courses are the rule, tend to be cash cows for their host campuses), the schools scramble to hoist themselves onto U.S. News’s coveted first and second tiers. One way to do this is to boast a high percentage in this crucial category that counts for one-seventh of the U.S. News ranking: “graduates known to be employed within nine months after graduation.”

Fudging the Facts

The “known” in the phrase “known to be employed” is the operative word. Law schools send their recent graduates surveys using questions devised by the ABA and the National Association for Law Placement. The graduates then self-report their employment, if any, and the school calculates the percentage of those who responded who say they have jobs and submits it to U.S. News. Graduates who fail to respond to the survey or who can’t be located don’t count. Furthermore, any kind of job counts as “employment,” even a job that requires no legal training. In a Jan. 8 story for the New York Times, reporter David Segal wrote: “Waiting tables at Applebee’s? You’re employed. Stocking aisles at Home Depot? You’re working, too.”

Even top-rated law schools seem to engage in this sort of fudging. Segal reported that Georgetown University’s law school, safely in the top tier with a No. 14 ranking, last year sent an e-mail to its graduates who were “still seeking employment” offering them $20-and-hour temporary jobs in the admissions office for the six weeks encompassing Feb. 15, the cut-off date under U.S. News’s nine-month rule. (Georgetown maintained that it did not count those graduates as “employed” for purposes of the survey.) As might be easily predicted from these loosey-goosey controls on survey accuracy, even the lowest-tiered law schools report astonishingly high levels of employment for their graduates. In 1997, the first year that U.S. News adopted the nine-month test, the average employment rate 84 percent, Segal reported. Last year that number had jumped to 93 percent, with some schools reporting 99 percent and 100 percent employment.

Furthermore, many law schools report starting salaries for their graduates that seem unrealistically high, given the current dismal market. In a July 16, 2011 story for the New York Times Segal noted that New York Law School (NYLS), a third-tier institution in lower Manhattan with a U.S. News ranking of No. 134, told the magazine that the median annual salary nine months after its Class of 2009 graduated was $160,000–the same figure cited by Yale and Harvard, which ranked No. 1 and No. 2 for that year. Only the largest and most prestigious law firms pay three-figure salaries to brand-new lawyers, and they hire most of them from top-tier, not third-tier law schools. In an interview with Segal, then-NYLS Dean Richard Matasar stood by the figure but pointed out that on its website the school explicitly points out that most of its graduates find jobs at smaller firms that pay between $35,000 and $75,000 a year. Still, NYLS conceded that only 26 percent of the 300 of its graduates who reported being employed included information about their salaries. So even the $35,000-$75,000 that NYLS cites are less than reliable numbers. Meanwhile NYLS charges around $48,000 a year in tuition, more than Harvard.

Playing the Blame Game

Since it’s estimated that a law graduate needs to earn $65,000 at a bare minimum in order to pay down a student-loan debt in the $100,000 range, there’s quite a bit of anger among unemployed and under-employed young lawyers burdened with staggering loans that, like other federal student loans, can’t be discharged in bankruptcy. Class-action lawsuits alleging fraud and misrepresentation have been filed by graduates of NYLS and the Thomas M. Cooley Law School, based in Lansing, Michigan. Until recently Cooley was on the fourth and bottom tier of the U.S. News rankings, but it now has no ranking at all because of failure to submit sufficient information. (Cooley has at least the virtue of being relatively cheap for a private institution, with tuition for full-time students at around $30,000 a year.) The blog Above the Law reports that the lawyers who launched the NYLS and Cooley suits plan to sue fifteen more law schools that have reported post-graduate employment rates ranging from 88 percent to 100 percent–rates that the lawyers say amount to misrepresentation. Some of the schools are attached to well-respected universities such as Hofstra and Villanova. The average debt load for the 2009 graduates of those schools is $108,829. Another currently unranked but formerly fourth-tier law school, Thomas Jefferson in San Diego, became the subject of a class-action suit for fraud and false advertising filed by 2008 graduate Anna Alaburda last May. Thomas Jefferson reported for U.S. News’s 2011 evaluations that 92.1 percent of its graduates were employed nine months after obtaining their degrees.

If the former law students blame the law schools for allegedly misleading them into mortgaging their futures for nonexistent cushy jobs, the law schools blame U.S. News and the outsize importance that its readers–potential students and potential donors–place upon the rankings, which can mean millions of dollars in gained or lost revenue. Thomas Jefferson, for example, maintains that it has meticulously abided by U.S. News’s reporting guidelines, even though 25 percent of its graduates could not be located in typical surveys. In a July 18 demurrer–a legal document arguing that Alaburda failed to state a case–lawyers for Thomas Jefferson pointed out that U.S. News had also published the school’s honestly reported bar-passage rates, which during the years that Alaburda applied to and attended the school were less than 50 percent (they have substantially increased since then). Any college graduate could do the math and see that numerous Thomas Jefferson alums weren’t practicing law right after graduation during those years, the school’s lawyers argued. Alaburda “pleads that she relied exclusively or primarily on the data in a summary chart published in a popular magazine, misunderstood it, made no further inquiries, and then spent tens of thousands of dollars on her legal education,” they wrote.

U.S. News in turn blames the ABA. In an interview with Segal, Robert Morse, who oversees the magazine’s law school rankings, conceded that his editors could demand better data from the schools. “But we’d have to create a whole new definition of ’employed,’ and it would be awkward if U.S. News imposed that definition by itself. It would be preferable if the ABA took a leadership role in this.” The ABA, for its part, blames law-school applicants themselves, who have known or should have known that the U.S. legal market has been depressed ever since the recession began in 2007–but decided to try to beat the odds anyway and load themselves with debt during the process. ABA president William Robinson, in a Jan. 4 interview with the Chicago Tribune, said, “It’s inconceivable to me that someone with a college education, or a graduate level education, would not know before deciding to go to law school that the economy has declined over the last several years and that the job market out there is not as opportune as it might have been five, six, seven, eight years ago….We’re not talking about kids making these decisions.”

Applicants and Accreditation

Robinson is certainly correct in one respect: There has been no shortage of applicants to law schools during the current recession–although the Law School Admissions Council did report a modest but significant drop-off in law-school applications during 2011. Only 78,900 people applied to ABA-accredited law schools this past year, in contrast to 87,900 in 2010. Perhaps some college students are finally getting the word that a legal career is not a sure thing. But the push is on for some private or public regulatory body to tamp down on the glut of graduates emerging every year from law schools with their sky-high debt and dismal employment prospects. The ABA has been urged to refuse to accredit any more law schools in the future–a step that the ABA, citing antitrust concerns, declines to take. That leaves the federal government. It’s clear that the transparency data sought by Boxer and Coburn could be only the prelude to some sort of regulatory regimen to be imposed by the Education Department, whether it’s cigarette pack-style warnings or gainful-employment rules that would deny federal student loans to schools with poor job-placement histories.

During the first week in January the Association of American Law Schools (AALS) held its annual meeting in Washington. The oversupply of jobless and debt-ridden fledgling lawyers was not on the AALS’s official agenda, but at a reception I attended for alumni of my own law school, the University of Southern California, the talk was of little else. I chatted with USC’s dean, Robert K. Rasmussen, about the problem. Rasmussen insisted that graduates of USC, a top-tier school (it’s No. 18 in the U.S. News rankings), have not been affected by the shrinking legal market. “Over 90 percent of our graduates get jobs within nine months after graduation–and they’re legal jobs,” he said. “Our graduates have a loan-default rate of close to zero. But it’s clear that some of those third- and fourth-tier schools are going to have to shut down.”

The question is: Who is going to do the shutting? And will law schools go the way of the for-profit colleges, under a level of federal scrutiny and suspicion that they have never known before?

Update: The Chronicle of Higher Education reports that an ABA committee has recommended that law schools be required to report detailed information about their graduates’ salaries to applicants and the public as a condition of accreditation. The salary lists would include breakdowns for 15 different categories of employment (such as large law firms, public-interest firms, and so forth), and three different percentiles of salary figures. The new recommendations will go before the ABA’s Council of the Section of Legal Education and Admissions to the Bar in March.


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