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Wednesday, March 13, 2013

WSJ: Shakeout Hits Law Schools

Wall Street Journal:  Shakeout Hits Law Schools, by Ashby Jones:

WSJNorthwestern University School of Law, one of the country's top law schools, said it will reduce the size of its incoming class by about 10%, citing declining applications and a "shakeout" in the market for legal jobs. ...

[T]he move by Northwestern's law school, based in Chicago, signals just how sharply the demand for young lawyers has dropped in recent years, and to a grim new prospect for law schools: that the legal profession may never return to its prerecession prosperity. ...

The downsizing trend has been driven largely by a desire to stem a slide down the law-school rankings, said Bill Henderson, a law professor at Indiana University who studies the market for law jobs."The worry is that if you try to fully subscribe your class, your median admissions statistics will drop and you'll plummet in the rankings," he said. "And then it'll be even harder to attract students."

Mr. Henderson said that other top schools were likely to cut their class sizes as well. "Any school that has the luxury of being able to afford admitting fewer students is going to think hard about it," he said. "Otherwise, it's just too difficult to hang on to those statistics."

Update: Kyle McEntee (Law School Transparency), How Fortunate You Are:

Dean Dan Rodriguez has written to his students at Northwestern University Law School to announce a class size reduction, a tuition increase, and a commitment to increase scholarships and to cover LRAP costs. ... The letter is a mostly honest assessment of the challenges faced by Northwestern, its peers, and law schools generally. There are too few jobs; attending law school costs a lot of money; and the legal economy is undergoing (and has undergone) a significant shift. ... The far bigger challenge is having legal education leaders provide solutions that actually combat the problems they rarely struggle to articulate. ...

In the rest of this post, I respond to three of the solutions adopted by Northwestern to combat the problems facing law students, recent graduates, and the legal profession. ...

Class Size.  Legal education is in an interesting place when an elite law school like Northwestern reduces class size due to a weak entry-level hiring market that cannot absorb all of its graduates. Each school needs to do its part to reduce size. ... ...

A “Moderate” Tuition Hike.  Rodriguez takes a page out of the higher education administrator’s playbook when he talks passively about tuition increases, as if they just happen to schools. According to this play, schools simultaneously deserve credit for restraint and sympathy for having to raise tuition. ...

Northwestern Tuition & Fees, Last 10 Years


Tuition $ % CPI x inflation
2004 $35,896

2005 $38,372 $2,476 6.90% 3.40% 2.03
2006 $40,680 $2,308 6.00% 2.50% 2.41
2007 $42,942 $2,262 5.60% 2.80% 1.99
2008 $45,332 $2,390 5.60% 3.80% 1.46
2009 $47,472 $2,140 4.70% -0.40% -11.8
2010 $49,714 $2,242 4.70% 1.60% 2.95
2011 $51,920 $2,206 4.40% 2.90% 1.53
2012 $53,168 $1,248 2.40% 2.10% 1.14
2013 $54,763 $1,595 3.00% 3% 1
$18,867 52.56% 20.80% 2.53

Tuition Discounts.  While scholarship money sometimes comes from limited purpose endowments, they’re usually tuition cross subsidies. That is, a scholarship for one student comes from the tuition revenue of all others. Need-based scholarships are scarce, so a huge chunk of scholarship expenditures comes from the tuition revenue from the students least likely to succeed. These students subsidize the students with the best incoming LSAT scores and GPAs (i.e. those most likely to succeed). ...

Digging into Northwestern’s three solutions, even if presented as non-exhaustive, takes some polish off of Rodriguez’s letter. These are conscious spending decisions dressed up as solutions to various aspects of the legal education crisis that’s hitting even students at elite law schools. Unfortunately, continuous boasting from law schools about how they’re ahead of the curve on reform, when their solutions can only hope to make tiny dents into the legal education crisis, proves how far we are from affordable legal education that provides entry into the legal profession.

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Looks to me that about 35/287 recent Northwestern law grads had terrible employment outcomes (unemployed seeking/part time/short term/solo).

If they cut class size by about 25 students, then they could likely fund an extremely generous safety net for the few (15-20) underemployed grads, many of whom would likely find work in due time.

I think propective grads would rather know their debit is totally insured if they fail to get a job than have an extra $10k-$15k academic scholarship coming in.

Posted by: JM | Mar 13, 2013 10:17:34 AM

So Northwestern is upping its competition for elite students by enrolling fewer sub-elite students. If emulated, that should allow second-tier schools to close some of the gap with the elite schools, even without enrollment reductions. Of course, if they reduce their own enrollment too, the gap closes further.

Apparently they do not see tuition as the issue. I.e., lower cost schools aren't beating them out for students. If a second-tier school lowered its costs (online courses in third year?) would they pull elite students in their direction?

Posted by: Larry | Mar 13, 2013 3:09:09 PM