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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, April 22, 2015

Seto: The Problem of Law School Tuition

Seto (2014)TaxProf Blog op-ed:  The Problem of Law School Tuition, by Theodore P. Seto (Loyola-L.A.):

In a recent op-ed in the New York Law Journal, Dean Jeremy Paul of Northeastern writes about the future of legal education. Although he makes many good points, he avoids the single hardest question facing law schools going forward: what to do about tuition? Most schools have dealt with this temporarily by holding net tuition constant. (Net tuition is nominal tuition less scholarships.) But in the long run, the parade of horribles at the bottom of each law school's class will get worse if nominal tuition rises faster than the rate of average lawyer compensation, because the bottom of each class will absorb the brunt of any such disproportionate increase.

The BLS reports that average lawyer compensation has risen at a fairly steady rate of roughly 3% per year for many decades. In my view, law schools should begin formulating long-term plans that assume increases in nominal tuition of no more than 3% -- matching the long-term increase in the cost of becoming a lawyer to the long-term increase in lawyer compensation. This will not be easy. Unfortunately, the US News rankings reward increasing both nominal tuition and scholarships by more than 3% annually. (Doing so allows schools to boost reported LSATs, UGPAs, and non-educational costs per FTE.) This, in turn, exacerbates financial pressures at the bottom of each law school's class. Such pressures will be sustainable only if Congress remains willing to subsidize the bottom of each such class in larger and larger amounts. (Such subsidies are currently given primarily in the form of income based repayment rules.)

Eventually, I would expect pre-law advisors to begin to advise students not to attend any law school that does not make a scholarship offer -- that is, to advise students to become much more sensitive to net tuition. If significant numbers of students follow this advice, the nominal/net tuition arbitrage game will become less profitable and law schools will be forced to hold nominal tuition down as well. (Or more painfully, may be forced to lower nominal tuition, as some schools are already doing.) This process will accelerate -- and perhaps become acutely painful -- if Congress places a cap on educational subsidies.

http://taxprof.typepad.com/taxprof_blog/2015/04/seto-the-problem-.html

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Comments

"The BLS reports that average lawyer compensation has risen at a fairly steady rate of roughly 3% per year for many decades."

Which is inapplicable to the 45% of law school graduates who fail to become lawyers each year. Law school grads-cum-baristas or teachers or bank tellers are considered baristas, teachers, and bank tellers to the BLS, not lawyers.

Posted by: Unemployed Northeastern | Apr 22, 2015 5:43:08 AM

I feel like everyone knows this, they just don't have an adequate solution because they do not want to give up money or work more.

Posted by: JM | Apr 22, 2015 6:18:31 AM

I think Ted Seto's last throwaway point needs endorsement. I endorse Congress putting a cap on legal educational subsidies, and I hope that Ted does too. We all can get behind that. Let's cap total GradPLUS lending at $100k, and leave the 20 year repayment in place. Let's make private student loans dischargeable in bankruptcy after a period of years (say 7 years?). Problem solved.

Posted by: Jojo | Apr 22, 2015 6:40:32 AM

I've been so advising students for at least the past decade.

Posted by: JorgXMcKie | Apr 22, 2015 4:01:36 PM

Hard to believe that when I started at Georgetown Law my cost per credit hour was $15.
Way back in 1957.

Posted by: Jim B | Apr 22, 2015 7:58:32 PM

In 1955 at Harvard the annual tuition was $800.

Posted by: john rooney | Apr 23, 2015 3:26:36 AM

In 1958 Manhattan law firms were paying military veterans $7500 per year.

Posted by: john rooney | Apr 23, 2015 3:29:00 AM

Also in 1955 the average Harvard LSAT was in the 90th percentile, not the 99th.

Posted by: john rooney | Apr 23, 2015 3:31:12 AM

Really? The "single hardest question facing law schools going forward: what to do about tuition?"

the real issue: when will law schools address the problem that they are simply sending too many graduates into an already saturated marketplace? are we benefiting the profession, are we benefiting the public?

a real world solution:

impose a mandatory "clerkship" requirement, to work two years under supervision, before receiving a law license to practice independently. Just like the "residency" requirement for a doctor, or for that matter, CPAs, surveyors, appraisers, morticians, and a host of other professions with such requirements.

the result: all law schools must cut enrollments to ensure that they can place all their grads into clerkships. Any school that can't is toast. (are there any medical schools in the US that give degrees to people for whom there is no place for a residency?)

such clerkships will significantly improve the chance of finding permanent employment with firms, and increase consumer protection when the young attorney hangs out his/ her shingle after a 2 year clerkship.

Dean Paul, Prof Seto, Prof Caron, are you guys really serious about solving the problems of the profession? or just keeping your boats afloat at our expense?

Posted by: Solo practioner | Apr 23, 2015 7:44:23 AM

In September of 1967 the tuition at Duke Law School, one of the "top ten", was $700 per semester. That was down from my undergraduate tuition at Notre Dame of $800. There were no general federal loan programs. Easy money from loans is the factor that allowed Law Schools to jack up tuition with limit.

Posted by: 30-yearProf | Apr 23, 2015 8:59:00 AM

"In 1958 Manhattan law firms were paying military veterans $7500 per year."

Posted by: john rooney


I'm not sure what your point is, but it'd be easy to repay $2400 from such a salary.

Posted by: Barry | Apr 27, 2015 10:17:45 AM