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

Sunday, January 15, 2017

Leef:  Feds Should Eliminate Student Loans For All Law Schools, Not Just Charlotte

FCForbes:  We Have Too Many Law Schools, But This Isn't The Way To Thin The Herd, by George Leef (Pope Center for Higher Education Policy):

It makes no more sense for the government to help a student with a 175 LSAT pay for Harvard than to help a student with a 145 LSAT pay for Charlotte.

On Dec. 19, the U.S. Department of Education announced that as of the end of the 2016, it would no longer allow students to use federal aid money at the Charlotte School of Law (CSL). The reason for this unprecedented move was the decision by the American Bar Association in November to place CSL on probation because of the low passage rate among its students on the most recent administration of the North Carolina bar exam.

Whether CSL will survive is not yet known, although it has announced that it will continue its scheduled spring semester. Whether it should survive is debatable. The question I want to explore is whether the Department’s decision to pull the plug on federal aid is a sensible one.

I have long argued that higher education is a “bubble,” which is to say that enrollments will eventually decline when people realize that the costs often exceed the benefits. There is no better example than law school. ...

Law school enrollments peaked at just short of 38,000 in 2010 and since then have fallen by more than 30%. University of Colorado law professor Paul Campos put his finger on the problem in this New York Times story [more here]: “People are coming to terms with the fact that this decline is a product of long-term structural changes that are not going away. It’s kind of a watershed moment.”

That watershed is having a tremendous impact on many law schools.

The high prestige law schools like Harvard, Yale and Stanford hardly notice it, but as you go down the prestige list, schools are increasingly desperate to maintain their revenues. With fewer and fewer sharp students --as indicated by their scores on the Law School Admission Test (LSAT) -- applying, lower-tier schools have largely chosen to accept students who would have been rejected in the past because of their low LSAT scores. ...

CSL has a lot of company in the sinking low-tier law school boat. Many others have similarly kept their enrollments up by accepting students with relatively weak academic profiles.

As law school deans Craig Boise of Syracuse and Andrew Morriss of Texas A&M, writes, “In the face of a nationwide application slump, many law schools have admitted students with ever-lower LSAT scores – of all races and ethnicities – to prop up tuition revenue. They now seek to avoid accountability for the resulting poor bar passage results.”

But only CSL has been hit with the Education Department’s ultimate sanction: the loss of federal student aid. ...

In the past, other law schools have been put on probation for the same apparent weaknesses in admitting and teaching their students. In 2005, Golden Gate Law School and Whittier Law School were put on ABA probation over low bar passage rates, but were given time to improve and got off probation. CSL wants the chance to do the same.

So why was the Department of Education so eager to administer a severe penalty that will disrupt many students and potentially prove fatal to the school?

The answer, I believe, is that the Obama Education Department, which has been on a crusade against for-profit education across the board, saw this as a final opportunity to take down what they consider an unwanted institution. Fresh off their annihilation of ITT Tech and the accrediting agency ACICS, the Department was not about to let CSL get away unscathed. With only month left in power, the administration saw its chance and acted.

As was the case with ITT, the Department focused only on the bad aspects of CSL and ignored the good. Where the Department saw only the bad side of the coin with low admission standards and weak results, others might view the opposite side and see an institution that gives students who probably couldn’t otherwise get into law school a chance to prove themselves. ...

[I]f CSL goes under, many of the students who would have enrolled there will just find another school willing to accept them. Eliminating one law school does nothing to solve the basic problem, which is that the output of law graduates is far in excess of the number of jobs in the legal profession.

Instead of an administrative decree that one (or even dozens) of the schools with low bar passage rates will be denied federal student aid money, the right move would be to stop subsidizing law students entirely. If there was ever a case for using federal aid to encourage people to go to law school (I think not), that case evaporated years ago. It makes no more sense for the government to help a student with a 175 LSAT pay for Harvard than to help a student with a 145 LSAT pay for CSL.

Congress should change the law so that federal student aid money may not be used for law school, perhaps with a three-year phase-out. Schools will then compete as best they can for those students who can arrange to pay for their degrees with money from willing funders. (That would also put pressure on the ABA to relax its rules that drive up the cost of legal education, a serious problem that law dean Lawrence Velvel addresses in this article.)

No doubt there will be attrition among law schools, but far better that it come from market competition rather than bureaucratic diktats.

http://taxprof.typepad.com/taxprof_blog/2017/01/leeffeds-should-eliminate-student-loans-for-all-law-schools-not-just-charlotte.html

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Comments

The Pope Center never met an educational institution it didn't want to starve until it was small enough to strangle to death in a bath tub.

Posted by: Pope Center | Jan 15, 2017 12:45:39 PM

Lending money to people who are likely to pay it back with interest, and pay lots of extra income and payroll taxes to boot? Don't they know that taxes are for workers to pay and subsidies are for corporations to reap?

Clearly the government has lost its way and is infringing on our civil liberties. Student loans, quartering troops in civilian households, really, what's the difference? It's tyranny either way, I say!

Posted by: A libertarian take on student loans | Jan 15, 2017 1:14:32 PM

"If there was ever a case for using federal aid to encourage people to go to law school (I think not), that case evaporated years ago. It makes no more sense for the government to help a student [...]"

"University of Colorado law professor Paul Campos put his finger on the problem in this New York Times story [...]"

It is difficult to take seriously an "analysis" that elides, or doesn't seem to understand, the difference in meaning between the words "encourage" and "help". When that "analysis" goes on to quote as authority Paul Campos's widely and justifiably criticized, even ridiculed, NYT piece, that difficulty turns into an impossibility.

Posted by: Rob T. | Jan 15, 2017 1:22:38 PM

Almost every lawyer I know financed their legal education--at least in part--with federal student loans. In fact, I don't know anyone who didn't have a federal student loan for law school. But then, I don't hail from the oligarchical class and I don't work in a BigLaw firm. Elimination of student loans for law studies would shut out the middle class almost entirely, not to mention the offspring of the working class. Almost as surely, a majority of law schools in this country would close their doors. Perhaps those are the results the author seeks.

Posted by: Publius Novus | Jan 15, 2017 1:30:08 PM

From a different New York Times article:

"From 1989 to 2009, when college tuition rose by 71 percent, law school tuition shot up 317 percent." http://www.nytimes.com/2011/07/17/business/law-school-economics-job-market-weakens-tuition-rises.html

100% federal student loan financing of law school has only been possible since 2006, so virtually all of that 317% tuition growth happened because of private sector forces... and for the same reasons, we should not expect to see law school tuition plummet if federal student loans go away. Students will borrow private loans (and have a much harder time paying them back, as they are not eligible for IBR plan) and life will continue.

Posted by: Unemployed Northeastern | Jan 15, 2017 3:54:29 PM

Why can't law schools arrange for private loans for their students? They might have to guarantee said loans but given the high incomes that they promise their students, that shouldn't be a problem.

If that's too tough for you all, why not limit federal loans for schools that set tuition at no higher than, say, $15K? This is where the tuition at Harvard would be today if they had taken their 1980 tuition and increased it by just the rate of inflation. Certainly lesser institutions should be charging less than them.

Posted by: PaulB | Jan 15, 2017 5:28:49 PM

The expansion of the gross amount a student could borrow in student loans for graduate education, including tuition and expenses, allowed law schools to increase tuition and fees more quickly, frequently and to higher levels that represented a significant wealth redistribution to law faculty and administrators in terms of salary and other benefits and perks. There has been no real control on the ability of law schools to feed off the easy availability of deferred loans where students who really had a limited idea of finance became little more than a pass through mechanism for the increased wealth of the law schools. This removed the need to justify tuition and fee increases or to connect the financial burden being placed on law students to the actual benefits of a legal education. If student loans are capped or linked to some legitimate benefit what will occur is a reduction in law school budgets, reduced salaries for tenure track faculty and administrators, some schools going out of business and an increase in different track law teachers. This would not be all bad depending how it is done. And it is likelier to actually occur than ever before and the schools and faculties had better start thinking about the needed adaptations.

Posted by: David | Jan 15, 2017 6:13:15 PM

It must be sad to not only be the kind of low-life sleaze that works at a think-tank--almost entirely people who wished they were professors but aren't good enough to cut it--but to also work at a think tank noone has heard of.

Posted by: Sad | Jan 15, 2017 7:52:45 PM

''The first thing we do, let's kill all the lawyers.'' Mr. Leef could have chosen to argue that the federal government should cut off loans to dental students. Same federal program. Same terms. Same arguments. And dentists’ median earnings are more than 30% higher than lawyers’, so they can clearly afford private loans. Or perhaps cut off federal loans to all of higher education. Let the market decide. But no, he chooses to targets lawyers alone.

Why? Lawyers force governments (and powerful private institutions) to follow rules. More often than not, it’s conservatives who find this inconvenient – perhaps the source of Mr. Leef’s angst. Or perhaps it’s the fact that only poor or middle-income students need loans to go to law school. If all law students came from the moneyed classes – as they once did – perhaps the world would be a more congenial place.

Posted by: Theodore Seto | Jan 16, 2017 12:09:23 AM

Cui prodest? Cui bono? I know exactly who received the funds I could have used to start a family.

Posted by: Law School Customer | Jan 16, 2017 7:59:46 AM

The vast majority of law school graduates aren't employed as lawyers. The majority of those that are employed as lawyers are making very modest wages. A vast pool of people making 45-65k a year. And every one of them knows that there are a thousand qualified people waiting to take their place, so they gladly work 60-70 hour weeks and toe the party line. Job mobility is very very low unless you have a substantial book of business. Every job I ever interviewed for, even years into my career, had a huge pool of qualified people competing for each opening.

A lot of the people I graduated with ended up trapped in the legal profession because they had nothing else to fall back on, so they just struggle along doing wheel cases, real estate closings and other low tier work to pay the bills. They're perfectly good lawyers but there's just so many hungry mouths chasing every crumb of paying work. Others ended up in paid clerkships.... and then promptly never left for private practice. It's kind of weird thinking of a staff attorney at a mid level state appeals court being a good career, but these days it is. Others had non-legal backgrounds and drifted back to those backgrounds after a while. A few struck it rich doing personal injury work, or moved back home and went to work for their parents' firms. A few even got biglaw (those that didn't get Lathamed). But for the most part, it's utterly dismal. And these are people that graduated before the peak.

Posted by: Jim W | Jan 16, 2017 8:49:36 AM

I say get rid of federal student loan guarantees and (in addition to repealing the 2005 BAPCPA) make student loans dischargeable in BK.

Obviously this will make it very painful for the concept of educational loans to persist in any form but this is a good and necessary thing. I believe we can and should return to the educational finances of 1960-70s, when someone could attend harvard law and pay cash for the tuition, funding it by working a part time job. This used to be how things were done. What changed?

I also think freeing millions of people from debt slavery would be a good thing.

Posted by: Jim W | Jan 16, 2017 9:04:22 AM

@Ted,

Perhaps the reason Leef is going after lawyers is because of the eight years of headline news about terrible job and debt outcomes for law school grads. Structural changes in the profession and all that.

Posted by: Unemployed Northeastern | Jan 16, 2017 9:40:45 AM

Jim W nailed it. I went to college in the late 70s and graduated from Duke Law School in the 1983. With planning and discipline one could do that without incurring debt. Relaxed loan rules were undoubtedly well-intended, but their chief consequence was to allow colleges and universities to add unnecessary services/amenities and increase prices. No villains here. Schools often had to add these services/amenities to compete in a perverse environment.

Posted by: Mike Petrik | Jan 16, 2017 3:37:17 PM

The Federal government should not be funding any educational field that has a weak jobs outcome for the graduates.

Posted by: Old Ruster from the former JDJunkyard | Jan 17, 2017 6:44:43 AM

The bad employment outcomes stretch up deep into the T14, btw. They are cooking the books to hide this, but the problems are increasingly obvious. Which is probably why a lot of the good candidates have stopped applying in the first place.

Posted by: Jim W | Jan 17, 2017 8:25:51 AM

Again, you're producing 49,000 JD and LLB degree holder's every year when a generous estimate has it that about 26,000 new positions open up in the legal profession each year. You shouldn't be subsidizing the production of law degrees.

Posted by: Art Deco | Jan 20, 2017 1:26:00 PM