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Editor: Paul L. Caron, Dean
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Tuesday, October 21, 2014

Organ: Will 10% of Law Schools Close by 2019, Just as 10% of Dental Schools Closed 25 Years Ago?

Following up on my previous post, Will Top Tier Law Schools be the First to Close, Like Emory and Georgetown Dental Schools?:  The Legal Whiteboard:  What Law Schools Can Learn from Dental Schools in the 1980s Regarding the Consequences of a Decline in Applicants, by Jerry Organ (St. Thomas):

Dental SchoolAlthough there may be a number of people in the legal academy who continue to believe that somehow legal education is “exceptional” – that market forces may impose financial challenges for law schools in the near term, but will not result in the closing of any law schools -- this strikes me as an unduly optimistic assessment of the situation. 

To understand why, I think those in legal education can learn from the experience of those in dental education in the 1980s. In the 1980s, dental school deans, along with provosts and presidents at their host universities, had to deal with the challenge of a significant decline in applicants to dental school. 

At least partially in response to federal funding to support dental education, first-year enrollment at the country’s dental schools grew throughout the 1970s to a peak in 1979 of roughly 6,300 across roughly 60 dental schools.  ... By the mid-1980s, applicants had fallen to 6,300 and matriculants had fallen to 5,000.  As of 1985, no dental schools had closed.  But by the late 1980s and early 1990s there were fewer than 5000 applicants and barely 4000 first-year students – applicants had declined by more than two-thirds and first-year enrollment had declined by more than one-third from their earlier peaks. ...

How did dental schools and their associated universities respond to this changing market?  Between 1986 and 1993, six private universities closed their dental schools: Oral Roberts University, Tulsa, Oklahoma (1986); Emory University, Atlanta, Georgia (1988); Georgetown University, Washington, D.C. (1990); Fairleigh Dickinson University, Rutherford, New Jersey (1990); Washington University, St. Louis, Missouri (1991); and Loyola University, Chicago, Illinois (1993). ...

In terms of applicants and enrollment over the last decade, the trends law schools have experienced look remarkably comparable to the experience of dental schools in the 1970s and 1980s. ...

Chart 2

The law school experience tracks pretty closely the dental school experience over the first ten years reflected in the charts. For law schools, 2014 looks a lot like 1985 did for dental schools. ...

[T]he provost and president of a university with a law school likely will be asking:  How “mission critical” is the law school to the university when the law school has transformed from a “cash cow” into a “money pit” and when reasonable projections suggest it may continue to be a money pit for the next few years?  How "mission critical" is the law school when its entering class profile is significantly weaker than it was just a few years ago, particularly if that weaker profile begins to translate into lower bar passage rates and even less robust employment outcomes?   How “mission critical” is the law school to the university if its faculty and alumni seem resistant to change and if the law school faculty and administration are somewhat disconnected from their colleagues in other schools and departments on campus?

Some universities are going to have difficult decisions to make (as may the Boards of Trustees of some of the independent law schools).  As of 1985, no dental schools had closed, but by the late 1980s and early 1990s, roughly ten percent of the dental schools were closed in response to significant declines in the number and quality of applicants and the corresponding financial pressures.  When faced with having to invest significantly to keep dental schools open, several universities decided that dental schools no longer were “mission critical” aspects of the university. 

I do not believe law schools should view themselves as so exceptional that they will have more immunity to these market forces than dental schools did in the 1980s.  I do not know whether ten percent of law schools will close, but just as some universities decided dental schools were no longer “mission critical” to the university, it is not only very possible, but perhaps even likely, that some universities now will decide that law schools that may require subsidies of $1 million or $2 million or more for a number of years are no longer “mission critical” to the university.

http://taxprof.typepad.com/taxprof_blog/2014/10/strongorgan-will-10-of-law-schools-close-by-2019.html

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Comments

This is not unreasonable. Since 2000, the number of schools increased by 10 percent. Is there anyone who thinks that expansion was a good idea? It now threatens the expanded schools plus another 10 or 20.
We need approximately 20,000 graduates per year. It bothers me that taxpayers subsidize a glut that helps no one save law faculty

Posted by: Jojo | Oct 21, 2014 6:19:40 AM

For now, a lackluster economy is keeping a lot of law schools afloat. Can you imagine what would happen to the applicant pool if the current labor market were stronger than it is now? Previous declines in the law school applicant pool occurred in the midst of booming labor markets and strong wage growth (dotcom economy of the 90s and housing bubble of the 2000s). The current decline in the law school applicant pool is happening in the midst of a weak labor market! The good news for law schools is that another boom is unlikely until after the next crash.

Posted by: Nathan A | Oct 21, 2014 7:13:47 AM

A lot more than 10% of schools will close. Maybe not by 2019, but by 2025, probably 33% of schools will have closed.

Law school administrators and professors simply do not understand the dynamics of this application decline. They continue to anticipate that stabilization in the JD labor market will automatically result in stabilization in applications. THIS IS INCORRECT. The decline is based on growing cultural awareness of the burden of high student debt. Huge numbers of students still enroll in law school each year that will immediately regret the decision upon graduation if not earlier. This message continues to permeate hard-headed undergrads like rainwater seeping into the ground. It is happening at a moderate, but steady pace.

There is no explanation from a labor-market perspective for the 9% decline in June 2014 LSAT takers. Hiring out of law school has been stable for a couple of years now. This is just the slow and steady process by which a once venerated institution loses its reputation.

The decision to attend law school will only work out for about 15,000 of the annual enrollees (w/ current tuition levels), and we can expect the decline in applications to continue until it converges relatively close to this number.

Posted by: JM | Oct 21, 2014 9:49:17 AM

A very interesting article that provides more insight into the dental school closures is available here: http://news.vin.com/VINNews.aspx?articleId=27460

Posted by: CBR | Oct 21, 2014 9:52:41 AM

I don't think he accounts for increase in LLM and juris masters students that schools have admitted.

Posted by: JayA | Oct 21, 2014 9:56:27 AM

I do think the market will result in law schools closing. However, I don’t think it will happen the way it happened to dental schools. The two situations are different in ways not pointed out in the primary article.

One of the linked discussions pointed out that many dental schools opened in response to federal funding support of dental schools. What it failed to point out is that it was the removal of that federal funding support that made a big difference in some of the bigger name schools closing. We haven’t seen an analogous change for law schools.

Additionally, dental schools were more expensive to run than law schools.

Finally, Ogden’s discussion of the average law school ignores a hugely prevalent practice that makes a difference to the ultimate conclusion regarding financial viability. He says transfer practices would reduce the number of students at the average school. In actuality, there are no average schools by and large. A number of schools (lowest in USNEWS rank) lose large chunks of their student bodies without being able to replace them. Other schools end up with larger second year classes than first year classes by large margins. And those new second year students are almost always paying full tuition, unlike a lot of first year admits. Schools use this to trick everyone in to thinking their LSAT and UGPA numbers are higher than they actually are while maintain something close to previous levels of tuition revenue.

To make a long story short, all the pressures are pushed onto the lowest ranked schools, both through downward pressure on admissions and the predatory transfer practices. This would seem to indicate, to me at least, that we will see closures in those bottom schools first and foremost, unlike the dental school experience. Additionally, since we have not seen an analogous change to the removal of federal funding of dental schools, the closures will be much more drawn out affairs with schools struggling more and more with outputs (e.g. bar passage) and then accreditation.

Just my 2 cents.

Posted by: ATLprof | Oct 21, 2014 1:02:00 PM

"One of the linked discussions pointed out that many dental schools opened in response to federal funding support of dental schools. What it failed to point out is that it was the removal of that federal funding support that made a big difference in some of the bigger name schools closing. We haven’t seen an analogous change for law schools."

Oh, there are plenty of policy papers and advocacy groups calling for the end of GradPLUS loans, PSLF, and PAYE. The multi-billion dollar question is whether the private lenders - Sallie, Nelnet, AccessGroup (which is jointly owned by all the law school as a membership corporation, don't you know) - will once again step in to fill the yawning gap between graduate Stafford loans and the cost of attending law school. And whether prospective students will borrow ~$100k to $150k in private law school loans, knowing it will result in a four-figure payment regardless of where or if they find employment.

Posted by: Unemployed Northeastern | Oct 21, 2014 2:51:25 PM

Yes, Unemployed Northeastern, that suggested change would be the equivalent (and then some) to what happened with dental schools. If we get a major cut-back in loan availability, then the pattern will be closer to what happened with dental schools, although I still think it would largely be bottom-up in terms of who closed. (The number of law schools closing would be greater than the number of dental schools that closed.)

But even though there have been plenty of policy papers and advocacy groups calling for the end of such loans, I haven't seen any indication at all that such a move is getting any traction.

Posted by: ATLprof | Oct 22, 2014 8:07:33 AM

Universities (and law schools) should be thinking about what would happen if there were significant lending restrictions put into place. I think it could happen quickly, and it would be a big shock to many schools. Ending the federal loan programs altogether is unlikely and would take time, but significant restrictions--for example, limiting federal lending to graduate students to a maximum of $20,000 per year--could happen relatively suddenly (and could probably happen at the agency level outside the legislative process, meaning that it could go through much more quickly than wholesale changes like ending GradPlus). At many schools, the policymakers (deans, faculty) are unaware of how much individual students are borrowing. They should know--or find out--the various borrowing levels of their students (not just the average--at least by quartiles, but hopefully even more granulated), and they need to know how much of the school's revenue comes from federal lending (at tuition-dependent law schools, it is not uncommon for at least 90% of school revenue to come federal loan programs).

Posted by: CBR | Oct 22, 2014 11:47:43 AM

JM from two days ago makes the important point: "the decline is based on growing cultural awareness of the burden of high student debt." This is due to some honest/helpful professors plus the work of young lawyers who filed cases against law school fraud. The cultural shift is noticeable. Even though the plaintiffs did not recover from the law schools sued, they helped to bring about real change in the law school industry.

Posted by: Reader | Oct 23, 2014 12:21:29 PM