More New Law Schools Opening

Coming on top of news of the sharp declines in law school applications, the Wall Street Journal reports today on new law schools opening.  The headline captures it: “A Crop of New Law Schools Opens Amid a Lawyer Glut.”  Jennifer Smith reports that thought law school applications are at “their lowest in a decade,” a handful of universities are moving forward to open new law schools:

 Some of the new schools are intended for regions where law schools are scarce or are being built to round out a university’s suite of professional schools. But many of them are likely to find themselves competing for a shrinking pool of would-be lawyers and sending hopeful graduates into one of the toughest markets in years for law jobs.

Indiana Tech’s new law school in Fort Wayne will be the state’s fifth when it opens this fall. The law school the University of North Texas plans to open in Dallas next year will be just down the road from Southern Methodist University’s Dedman School of Law, and less than an hour’s drive from one in Fort Worth that Texas A&M University is in the process of buying from Texas Wesleyan University, one of nine in the state.

The numbers don’t favor these new schools. Last year the pool of law-school applicants shrank to about 68,000, down about 13% from 2011 and more than 30% from the past decade’s peak of about 100,000 in 2004, according to the Law School Admission Council, a nonprofit group that administers the Law School Admission Test and compiles admissions data.

Probably many of these universities figure that they can afford long time-lines, as the article points out, and so can treat the current downturn as merely cyclical.  These law schools have also probably been in the university pipeline for years, with long-running strategic plans that have been underway for a decade or two.  Shutting down these kinds of major plans must be very hard for a university, especially if it has invested significant resources pulling the project together.  However, the basic bet for these schools is that this current downturn is merely cyclical and not structural.  As to that, I have serious doubts.

The upfront cost of law school plus borrowing costs seems completely out of synch with the returns to law practice.  Worse, for all but the very top schools, the investment in law school appears less and less predictable.  If you’re at the top, it can still be treated as an investment with a greater or lesser net return.  If you’re very far out of the top schools, it looks like a bet – even before you can get to the net return on your lawyer job, you have to go through an up or down bet on whether you’re going to get employed in a “lawyer” job at all.  I don’t see anyone predicting a cyclical return to the growth rates of the last couple of decades in lawyer employment or general upward movement in salaries; the question is whether it gradually recovers to bring us closer to the numbers of new lawyers produced each year in relation to the law jobs out there, so to close the gap.  That would be the “good” recovery scenario, and even that one appears brutal on the business model of legal education and many of the students in the system.

The reports on LSAT numbers and law school applications are striking for the steepness of the downturn.  But something I don’t fully understand is why the decline is so sharp among the highest LSAT scores – 170 and above, and (if I understood correctly) even steeper at 175+.  Do these students have such wonderful opportunities outside of the top five or six law schools that would make it not worth picking up the degree as a credential along with way, and then going on to hedge fund work or whatever, still making a zillion dollars? Especially as there has to some softening of the competition to get in to the top five schools.  Is the cost of that education so high that even a Harvard or Yale law degree, even as a pure credential, is no longer worth it?  Are there other ways of signaling talent that make even those law degrees no longer as valuable as credentials – meaning, you actually have to plan to practice law for some years and take into account the cost of borrowing and opportunity costs for some other activity.

Have the costs and benefits of the most elite degrees shifted so very much for those who are competitive for those schools?  This is something I don’t understand very well. If you have a somewhat competitive but still considerably lower LSAT, I understand why you might very rationally conclude that the bet is not worth it, especially given the burden of actually paying off the loans even if you do get a decent lawyer job.  But if you are competitive for the top five, perhaps top ten schools?

Meanwhile, talk is turning to layoffs and buyouts at bottom ranked law schools.  Vermont Law School, the Boston Globe notes, has turned to both. No faculty were involved, but Bill Henderson is quoted in the Times story on what happens when lack of tuition-paying bodies meets law school expenses:

“In the ’80s and ’90s, a liberal arts graduate who didn’t know what to do went to law school,” Professor Henderson of Indiana said. “Now you get $120,000 in debt and a default plan of last resort whose value is just too speculative. Students are voting with their feet. There are going to be massive layoffs in law schools this fall. We won’t have the bodies we need to meet the payroll.”

The pain will not be spread evenly, however – “we” law schools are not a homogenous cohort.  It’s obvious that schools at the bottom face enormous pressures; they were able to price for a long time thanks to loans but also the fact that they were a little bit like a monopoly supplier: students rationally go to the best school they can get into.  Since Harvard won’t admit them, that school, no matter how ranked, is essentially their “Harvard.” That being so, schools have the ability to charge approximately what Harvard does to those students.  At some point the gap between what students pay and what they might eventually earn widens to overtake that dynamic, but it means that law school pricing bears no relationship to any ordinary pricing model that the highest ranked schools charge the most for their degrees.

In my experience of discussions of these business model issues, the assumption is that if you teach anywhere in the mid tier schools, there will belt-tightening and budgetary constraint, but not disaster.  It’s the bottom tier that’s in trouble.  Which might be true.  But I think the distress might be much more widespread into the mid-tier.  The reasons are two-fold.

One is that even if one closed the bottom twenty percent of law schools, I’m skeptical that it would take the pressure off lawyer employment in a meaningful way – and by extension, on law schools further up the food chain.  The bottom tier students are mostly not competing with the mid-tier schools and their students for jobs; they inhabit different credential and employment worlds, so much so that even if all those annual graduates disappeared from the market, it wouldn’t really help the mid tier or above students, because they weren’t competing for those (non)-jobs anyway.  The structural problems of lawyer employment are not just a glut of homogenous graduates, but that the jobs that traditionally existed for mid-tier law students-lawyers, but not really for bottom tier graduates, have cratered structurally for reasons all their own.

The other reason is something that University of Baltimore professor Richard Bourne noted in a 2012 paper – the cost structures of the T-15-T-50 schools resemble those of the T-15 schools, but without the deep resources to support them.  That amounts to supporting the research agendas of the professors and the upwardly mobile aspirations of these schools which require scholarship.  Much of it turns out to be Red Queen behavior – running in place since all the other schools in that tier are doing the same – and consuming ever greater resources doing so.  But the professors find it in their individual interests to play the free-agency game, particularly as the rewards at the very top schools have increasingly been not merely prestige but monetary, and the schools have their own reputational reasons.  This also means doing everything possible to purchase the highest LSAT scores – with the effect, Bourne argues, that the lower performing students (locked into finishing law school by having jumped over the first year cliff in borrowed money for tuition) wind up subsidizing the higher performing students who bring better LSAT scores.  There’s a looming question whether this cost model can be supported by schools that have small or negligible endowments and essentially tuition dependent.  But those schools, Bourne points out, are often ranked T-15 to T-50.

(The Atlantic also has a scary – if you’re a law professor, anyway – article titled, “Law School Applications Are Collapsing (As They Should Be)“.)

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