By Michael A. Olivas

It is a fact universally acknowledged that law faculty are in want of purpose. It takes a lot to get us riled, and even more to call us to the barricades. But the current state of financing legal education is just such a burning theater, and we all should be troubled by the fast-churning events. 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. [1]

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. [2]

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. [3]

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. [4]

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. [5]

The law firm and legal employment market are being restructured in a fashion that will likely lead to lower 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. [6]

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 on Trade 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. [7]

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. [8] 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. [9]

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. [10]

Limitations on bankruptcy for student loans mean that there will be pressure upon state bar authorities to use financial health and credit records in the moral character and fitness determination process. [11]

These are daunting developments in the world of legal education, and many in this 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 to put the entire polity and legal education community 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.

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. One of the more thoughtful in our community is New York Law School Dean Richard Matasar, who has pointed out many of these issues, and has done so in both scholarly fashion and through his service on the Board of the Access Group. I urge you all to read his forthcoming article in the Iowa Law Review, The Viability of the Law Degree: Cost, Value, and Intrinsic Worth. [12] If he is right, and I suspect he is absolutely correct in his diagnosis of the problems, we all owe him a debt of gratitude—in this context, I mean debt in the literal sense. As I will note at the end, he and I strenuously disagree on what the conditions will require, so we do not read the problems as driving the same solutions, but I start with the premise that we all need to look at the developments, or they shall surely engulf us at high tide, and there will be no safe harbors. Indeed, by his metrics, schools all across the spectrum will encounter serious problems, not just the more-marginal schools that are part of our expansive universe.

After detailing a number of the developments that I have highlighted in bullet format, Dean Matasar notes, “The simple answer is that the law degree will continue to be viable… for some. Law schools with ancient and powerful reputations will prosper over the short to mediumterm. The very few schools currently offering inexpensive degrees should survive, joined by newer, innovative, less costly programs that will emerge. For the remaining, expensive mid-tier schools, the degrees they offer will become less and less attractive, unless they seek to create value for their graduates commensurate with their costs.” He also notes, and this may be the most important admonition he raises, “And for a large group of wanna-be lawyers, the degree will make sense only if they properly evaluate its cost, their expected financial returns, and most importantly, the intrinsic value of becoming a lawyer.” (emphasis added) He also resorts to a clever (and devastating) characterization, one that will resonate for the politics of many legal educators: “If Robin Hood took from the rich and gave to the poor, law school often does the reverse. It gives scholarships to top students, who have employment opportunities at firms that pay top salaries, funded by full-paying, lower-ranked students, whose employment will often be at organizations paying more modest salaries.” I stand shoulder to shoulder next to him in this critique, and have dedicated my professional life to inculcating this view and trying to persuade all who will listen that “merit” has many metrics, not just how well one did on a Saturday morning in a large group, with a no. 2 pencil.

Even so, as I indicated, he and I fundamentally differ on our solutions or prescriptions for what we both agree is an ailing system. For example, he has successfully articulated a need to increase the number of contingent faculty as a cost-control measure. (For example, his views have substantially affected deliberations on ABA security-of position proposals.) In my belief system, this top-down managerial approach would compromise the entire system, rendering the cure worse than the ailment. He concludes that “law schools, law-school regulators, and the profession must be willing to experiment and permit new models of legal education to arise that can produce sufficient value at a reasonable cost in order to assure the continued viability of the law degree.” I am not as sanguine, and believe that a number of these developments will lower the quality of instruction to a deplorable level, particularly if some of the tenure-eliminating proposals making their way through the Council of the ABA Section on Legal Education and Admissions to the Bar process are adopted, and if more legal study is delivered by internet and distance education. In my calculus, losing some lower-quality or inefficient law schools may be an acceptable price to retain the core faculty and traditional governance structures. As I wrote in my first column to readers, these indispensable features of legal education in the United States are like our democratic processes: worse than anything except the alternatives. Increasing the number and percentage of contingent and transitory faculty will diminish the overall quality of the enterprise, and should be resisted vigorously. [13]

But all of us similarly have a dog in this fight of cost containment and in making legal education accessible and affordable to our students. We cannot simply hope that the problems will resolve themselves. We have erected a substantial system of training lawyers, one that is a spectacular success by any measure, notwithstanding the cracks in the infrastructure. We all need to keep up with these developments, counter challenges to our existence, and work harder to explain why our system is worth saving at its core. We also need to do a better job of explaining the large role of lawyers in the world society, not only as technicians with attention to detail but as defenders of important core values and democratic principles. I do not view the migrating role of lawyers to civilian life across non-law fields as evidence of our declining competence, as some commentators have in analyzing legal employment figures, but rather this as robust evidence of the growing value of being a lawyer and applying our skills to the many societal problems in need of our multifaceted talents. It is no accident that a disproportionate number of lawyers serve in business enterprises, as well as in positions of governmental leadership and civic participation, giving generously of our time and talent.

Perhaps most importantly, we need to be cheerleaders for legal education writ large and our way of life, and to be critics that hold it to high standards. In many countries, law faculty are entirely part-time, and widespread student access is limited by a filter of counterproductive and inefficient attrition. This is not the path we have chosen, and it is our glory. At the least, we should not weaken our chosen profession by inattention, avarice, or acrimony. Speaking out against lawyers is an ugly habit, yet I have witnessed law teachers do it in public venues. Others will attempt to diminish both the rule of law and its means of transmission, so we need not add to this chorus. We should not belittle law’s accomplishments, just as we should not overlook its weaknesses or inefficiencies or inequities. The bell will toll for all of us, even if we do not always hear its loud peals.

 

References

I acknowledge my substantial debt to Dean Richard Matasar for his scholarship and service in this important area. I also thank Lauren E. Schroeder and Professsors Peter Winograd and Phil Schrag for their useful suggestions, and note the work of my two official food-tasters (Dean Larry Dessem and Professor Robert Gorman) for their efforts in reviewing all my AALS columns. Of course, we all disagree on many of these issues, but their views have substantially affected my attention to the subject.

  1. Tamar Lewin, “College Loans Weigh Heavier On Graduates,” N.Y. Times, Apr. 12, 2011, at A1. (2/3 of all bachelor’s degree recipients graduated with debt in 2008; in 1993, it was fewer than 50%. In 2010, college graduates who took out loans averaged $24,000 in debt). But see Ann Carrns, “College Students Don’t See Debt as Burden,” N.Y. Times, June 15, 2011, available at: http://bucks.blogs.nytimes.com/2011/06/15/college-students-surprising-attitude-toward-debt/?nl=your-money&emc=your-moneyema5 (suggesting the opposite, that students were not burdened with debt). See also Daniel de Vise, “College merit aid produces bidding wars,” Wash. Post, May 30, 2011, available at: http://www.washingtonpost.com/local/education/college-merit-aid-produces-bidding-wars/2011/05/17/AG7JwzEH_story.html?wpisrc=emailtoafriend
  2. See Michael A. Olivas, “Paying for a Law Degree: Trends in Student Borrowing and the Ability to Repay Debt,” 49 J. Legal Educ. 333 (1999). For a more recent study, see David Barnhizer, “Redesigning the American Law School,” Mich. St. L. Rev. 249 (2010).
  3. As one example of a call to simplify, see Libby Nelson, “White House Urges States to Make College-Savings Plans More Usable,” Chron. of Higher Educ., Sept. 9, 2009, available at: http://chronicle.com/article/White-House-Urges-States-to/48345. For a study of more vulnerable populations, see Michael A. Olivas, “Undocumented College Students, Taxation, and Financial Aid: A Technical Note,” 32 Rev. of Higher Educ. 407 (2009).
  4. For recent stories about undergraduate employment markets, see Catherine Rampell, “Many With New College Degree Find the Job Market Humbling,” N.Y. Times, May 19, 2011, at A1; the most recent and devastating legal employment figures are regularly reported by NALP: Press Release, The Association of Legal Career Professionals (NALP), Class of 2010 Graduates Faced Worst Job Market Since Mid-1990s: Longstanding Employment Patterns Interrupted (June 1, 2011), available at: http://www.nalp.org/uploads/PressReleases/11SelectedFindings.pdf.
  5. Frank Donoghue, “The Gainful-Employment Rule—New Developments and Implications,” Chron. of Higher Educ., June 20, 2011, available at: http://chronicle.com/blogs/innovations/the-gainful-employment-rule-new-developments-and-implications/29690
  6. See Catherine Rampell, “At Well-Paying Law Firms, a Low-Paid Corner,” N.Y. Times, May 24, 2011, at A1 (domestic outsourcing); John Markoff, “Smarter Than You Think: Armies of Expensive Lawyers, Replaced by Cheaper Software,” N.Y. Times, Mar. 5, 2011, at A1 (restructuring of legal work through technology).
  7. Penn State law professor Laurel S. Terry is among the leading scholars on this complex subject, and I am in her debt for spelling out the likely effect that GATS negotiations will have in more-easily allowing foreign lawyers to practice in the U.S. A sampler of her recent articles include: “The Future Regulation of the Legal Profession: The Impact of Treating the Legal Profession as ‘Service Providers,’” 2008 J. Prof. Law. 189 (2008); “The European Commission Project Regarding Competition in Professional Services,” 28 NW J. Int’l L. & Bus. 1 (2009); From GATS to APEC: “The Impact of Trade Agreements on Legal Services,” 43 Akron L. Review. 875 (2010); “An Introduction to the Financial Action Task Force and the FATF’s 2008 Lawyer Guidance,” J. Prof. L. 3 (2010); and “Transnational Legal Practice: 2009 Year-in-Review,” 44 Int’l L. 563 (2010).
  8. Paul Campos, as one such critic, accuses law schools of misrepresenting graduation placement figures. Paul Campos, “Served, How law schools completely misrepresent their job numbers,” New Republic, Apr. 25, 2011, available at: http://www.tnr.com/article/87251/law-school-employment-harvard-yale-georgetown. See also Eric Kelderman, “American Bar Association Takes Heat From Advisory Panel on Accreditation,” Chron. Higher Educ., June 9, 2011, available at: http://chronicle.com/article/American-Bar-Association-Takes/127869/?key=SWglIgU5ZXVKZnlqZj0UYD0AbH1tNxh2YnhNPnotblxREw%3D%3D (ABA not in compliance with 17 regulations, but accrediting status renewed)
  9. Jack Crittenden, “A 45% employment rate? How law school employment numbers are inflated,” Nat’l Jurist, May 3, 2011, available at: http://www.nationaljurist.com/content/45-employment-rate-how-law-school-employment-numbers-are-inflated. See also Philip G. Schrag, “The Federal Income-Contingent Repayment Option for Law Student Loans,” 29 Hofstra L. Rev. 733(2001); he published a fuller version as a book: Repay As You Earn: The Flawed Government Program to Help Students Have Public Service Careers (2001). More recent authoritative research on the subject by Professor Schrag include: Philip G. Schrag, “Federal Student Loan Repayment Assistance for Public Interest Lawyers and Other Employees of Governments and Nonprofit Organizations,” 36 Hofstra L. Rev. 27 (2007) and Philip G. Schrag & Charles W. Pruett, “Coordinating Loan Repayment Assistance Programs with New Federal Legislation,” 60 J. Legal Educ. 583-612 (2011).
  10. See William Seth Howard, “The Student Loan Bubble and the Race to Princeton Law School,” Geo. Mason J. L. Econ. & Pol’y (forthcoming, 2011) [available in SSRN: http://papers.ssrn.com/abstract=1850354] (conservative critique of law school financing policies); Gene R. Nichol, “Wages, Work, Privilege, and Legal Education,” 5 Harv. L. & Pol’y Rev. 401 (2011) (liberal critique of these issues).
  11. As two of literally hundreds of bar admissions cases that turn on financial responsibility, including bankruptcy issues, see Application of G. W., 13 A.3d 194, 161 N.H. 401 (N. H. 2011) (financial irresponsibility, fraud, and deceit in bar application); “In Re Application of Griffin,” 128 Ohio St. 3d 300, 2011-Ohio-20, 943 N.E.2d 1008 (2011) (concerning bankruptcy). For a thorough review of the bankruptcy hardship provisions affecting students, see Rafael I. Pardo & Michelle R. Lacey, “The Real Student-Loan Scandal: Undue Hardship Discharge Litigation,” 83 Am. Bankr. L.J. 179 (2009); Rafael I. Pardo & Michelle R. Lacey, “Undue Hardship in the Bankruptcy Courts: An Empirical Assessment of the Discharge of Educational Debt,” 74 U. Cin. L. Rev. 405 (2005).
  12. Richard A. Matasar, “The Viability of the Law Degree: Cost, Value, and Intrinsic Worth,” 97 Iowa L. Rev. (forthcoming, 2011). He has a long record of scholarship in this area, including Richard A. Matasar, “Does the Current Model of Legal Education Work for Law Schools, Law Firms (or Anyone Else)?,” N.Y. St. B.J. 20, Oct. 2010 (legal education financing in 2010).
  13. Michael A. Olivas, “Academic Freedom and Academic Duty” [2011 AALS Presidential Lecture], 2011-1 AALS News 1 (Mar. 2011), available at: http://www.aals.org/documents/newsletter/february2011.pdf.