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Wednesday, March 21, 2012

The Beginning of the End of the Law School Tuition Bubble?

American Lawyer, U.S. News Data Show 2011 May Be Beginning of End for Law School Tuition Bubble, by Matt Leichter:

U.S. News is the first organization to publish standardized data on ABA–accredited law schools each year. ... [A]verage full-time tuition at private law schools grew less than 1%, with most of that growth occurring at the country's more expensive schools. This is a significant break from previous years, and indicates that down-market law schools are responding to the decline in applicants. In other words, 2011 may be the beginning of the end of the law school tuition bubble. ...

Here's real adjusted law school tuition from 2004-2011. ...

Chart 1

In 2011, the schools in each quintile increased their tuition at a slower rate than in previous years, and this year's distribution looks more like 2005's than in the other years.

Chart 3

What caused such a change? Last June, Brian Tamanaha wrote an article for Balkinization titled, The Coming Crunch for Law Schools [TaxProf Blog coverage here and here], in which he argued that the less-prestigious law schools would face the fiscal consequences from over-expansion and applicant declines first. Thus, it's almost certain that the slower tuition growth, weighted down-market, reflects the impact of an applicant nosedive. In the past, some law schools reacted to these situations by increasing tuition to cover the shortfall, e.g. Albany Law School. ... It appears this option is no longer available. Schools that have fewer applicants have less of a reason to invest in new faculty and new buildings, preferring to wait out the storm caused by scambloggers and the media. ...

The number of applicants per law school is projected to reach a record low. ... People who normally would've applied to law school are either choosing other graduate-level programs or none at all instead of law school. This is an unprecedented event facing the legal academy, and it is very likely to continue. The real question is at what point law programs will start retrenching by excusing staff, cutting salaries, and reducing tuition, or when universities begin shutting them down.

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Comments

the bubble analogy only makes sense if it eventualy deflates or bursts. It only looks like the balloon is inflating slower.

Posted by: Bob | Mar 21, 2012 10:07:40 AM

It is not necessarily the lower-ranked law schools that will come under increased financial pressure. It is the ones whose tuition does not justify the likely income of their graduates. It appears that only the graduates of a very small number of most prestigious law schools will get the six-figure starting salaries of the big corporate firms. The rest of the schools will be competing based on a mixture of prestige and price. A mid-level law school with a high price may be in bigger trouble than a lower ranked law school with a lower price. To use an analogy to the car industry, you can sell a lot of Hyundais at the right price but it's hard to sell a lot of expensive Toyotas.

Posted by: Tom | Mar 21, 2012 10:38:48 AM

When I went to law school in the 1970s tuition was $2,000 a year, which adjusted for inflation is $7,500 today. Where does all the extra money go?

Posted by: MarkInFla | Mar 21, 2012 11:29:13 AM

"Where does all the extra money go?"

To low-to-mid six figure salaries for profs who are in the classroom for 6 hours *per week*.

Posted by: sc721 | Mar 21, 2012 4:49:25 PM