The Law School Crisis

Message from Dean Deanell Reece Tacha: One of my goals as dean of the Pepperdine School of Law has been to address the questions and concerns being raised about the current climate of legal education. Among those concerns is the financial burden that, for many, accompanies enrollment in law school. The fact is, applications to law schools nationwide and at Pepperdine are down significantly. Student debt load is at an all-time high. At least in the short-term, the legal employment market is providing fewer employment opportunities for graduating law students than at any time in the recent past. In this piece Paul Caron, D&L Straus Distinguished Professor of Law, provides his perspective on these issues and more.

American legal education is in the midst of an existential crisis. National media have extensively reported on the plight of law schools and law students, as have legal blogs. New academic press books and law review articles have detailed the problems and proposed solutions. Several U.S. senators (including California senator Barbara Boxer) have called for investigations into law school practices. I have covered the four fronts in the perfect storm facing law schools from my perch on TaxProf Blog (http://taxprof.typepad.com).

First, the number of law schools and law students have increased dramatically. From 2000 to 2012, the ABA approved 18 new law schools bringing the current total to 202—the ABA approved eight law schools in each of the prior two decades. From 2000 to 2012, the number of JDs awarded increased 18 percent (38,000 to 45,000)— JDs awarded were under 30,000 in 1976; 20,000 in 1972; and 10,000 in 1964.

Second, law school tuition has skyrocketed. Tuition has grown 3.5 percent annually at private law schools and 6.5 percent at public law schools over the past 20 years. In 2011-2012, tuition averaged $50,000 at the Top 14 law schools (as ranked by U.S. News & World Report), $40,000 at private law schools, and $32,000 (nonresident)/$21,000 (resident) at public law schools. Tuition at many law schools has quadrupled over the past 40 years, and doubled over the past 20 years (in inflation-adjusted dollars).

Third, law student indebtedness has increased dramatically. About 90 percent of law students take out loans to attend law school, and the average student debt is over $100,000—a total of $4.5 billion from 45,000 law school graduates. (These figures do not include undergraduate debt, which averages over $25,000; aggregate student loan debt now exceeds $1 trillion.) Law school loans carry high interest rates (6.8 percent and 7.9 percent) and are not dischargeable in bankruptcy.

Fourth, those 45,000 graduates are entering a constricting legal job market. The Bureau of Labor Statistics projects 20,000 new jobs for lawyers each year over the next decade. This is not just the result of the deep 2007-2008 recession; it continues a three-decade decline in the share of the American economy devoted to legal services—from 2.01 percent in 1978 to 1.37 percent in 2009 (a 32 percent decline). For the Class of 2011, only 55 percent landed full-time, long-term, legal jobs (8 percent with law firms of greater than 250 attorneys).

At Pepperdine’s April 2012 symposium “The Lawyer of the Future,” Bill Henderson of Indiana University presented data showing a structural shift in the legal profession from law firms (with higher salaries) to alternative legal service providers (with lower salaries). He argued that the new normal for law graduates increasingly will be positions in outsourcing firms and legal technology providers (such as e-discovery firms and Legal Zoom), or as document reviewers and contract attorneys.

There are simply not enough legal jobs available to graduating law students, and many of the legal jobs that are available do not pay enough to meet the debt service on student loans. So what can be done?

Several years ago, I cowrote an article on applying the principles from Michael Lewis’s book Moneyball to legal education titled “What Law Schools Can Learn from Billy Beane and the Oakland Athletics” (Texas Law Review, 2004). The article asked what Billy Beane would do as the dean of a law school to capitalize on the inefficiencies in legal education.

Perhaps a better model for the crisis facing legal education today is Jimmy McMillan, who ran for New York governor in 2010 with the slogan: “The rent is too damn high.” Law school tuition is simply too damn high. Administrators and faculty need to ruthlessly examine law school budgets and cut areas that are not essential to the school’s mission. Law school is twice as expensive as it was 30 years ago (in inflation-adjusted dollars), yet no one would argue that legal education is twice as good today.

Many law schools are shrinking the size of their entering classes in light of the declining job prospects for law graduates. But most of these schools are also raising tuition to make up for the lost revenue. Saddling even a smaller number of students with increased debt is not an acceptable solution.

More fundamental changes are needed to reduce tuition and student debt. One area of low-hanging fruit is the cost of course materials. Law students spend over $1,000 per year on their books—cumulatively, well over $100 million per year. The nonprofit Center for Computer Assisted Legal Instruction (CALI) offers free open-source e-books through its eLangdell program for use in law school classes. Students thus would save more than $3,000 over their law school careers if faculty would commit to writing and adopting open-source materials in their courses. (Disclosure: I am vice president of the CALI board of directors, for which I receive zero compensation.)

In his new book Failing Law Schools (University of Chicago Press), Brian Tamanaha of Washington University suggests that the ABA eliminate accreditation standards that force law schools into a one-size-fits-all model. Instead, he proposes that law schools be permitted to experiment with various cost-saving measures, such as two-year JDs, increased use of adjunct and non-research oriented faculty, and greatly streamlined libraries in light of the accessibility of online legal resources. He also argues that Congress should end unlimited law student borrowing and tie the availability of loans to how each law school’s graduates fare in the job market (as has been done with for-profit colleges).

Our Moneyball article closed with these words:

Like Michael Lewis, we have told a story about a profession and people we love. We are proud of the work law schools and law professors do in teaching future lawyers and producing legal scholarship to the betterment of American law and society. As institutions and as individuals, we have nothing to fear from the accountability and transparency spotlight. Indeed, we do our best work in the light. We should welcome the opportunity to tell the world what we do and help them measure our performance as teachers and scholars. If we do not, the story will be told by others and it will no longer be our own.

Law schools need to take immediate action to confront today’s crisis. The current model—convincing 45,000 people each year to assume six-figure debt loads to chase 20,000 legal jobs (most of which do not pay enough to service the debt)— is simply unsustainable. Market and political forces are gathering steam. Law schools that embrace change will emerge stronger from the current storm.

Postscript: For those wishing to follow Prof. Caron’s coverage of the law school crisis, you can subscribe to his blog posts via Twitter (@SoCalTaxProf) or RSS feed (http://feeds.feedburner.com/typepad/OYMG), or via his e-mail distribution list (contact me at paul.caron@pepperdine.edu). If you would like to read more on the topics covered in this article, see the list of articles collected at http://taxprof.typepad.com/taxprof_blog/2012/07/a-law-school-crisis-reader.html.

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