Paul L. Caron

Tuesday, March 20, 2012

Decline in LSAT Test-Takers Portends 'Death Spiral' for Low-Ranked Law Schools

Following up on yesterday's post, LSAT Test-Takers at Ten-Year Low:

Legal diplomas are apparently losing luster.

The organization behind the LSAT reported that the number of tests it administered this year dropped by more than 16%, the largest decline in more than a decade. ...

The decline reflects a spreading view that the legal market in the United States is in terrible shape and will have a hard time absorbing the roughly 45,000 students who are expected to graduate from law school in each of the next three years. And the problem may be deep and systemic.

Many lawyers and law professors have argued in recent years that the legal market will either stagnate or shrink as technology allows more low-end legal work to be handled overseas, and as corporations demand more cost-efficient fee arrangements from their firms.

That argument, and news that so many new lawyers are struggling with immense debt, is changing the way law school is perceived by undergrads. Word is getting through that law school is no longer a safe place to sit out an economic downturn — an article of faith for years — and that strong grades at an above-average school no longer guarantees a six-figure law firm job.

For some law schools, the dwindling number of test-takers represents a serious long-term challenge. What I’d anticipate is that you’ll see the biggest falloff in applications in the bottom end of the law school food chain,” said Andrew Morriss of the University of Alabama School of Law. “Those schools are going to have significant difficulty because they are dependent on tuition to fund themselves and they’ll either have to cut class size to maintain standards, or accept students with lower credentials.”

If they take the second course, Mr. Morriss said, it would hurt the school three years later because there is a strong correlation between poor performance on the LSAT and poor performance on the bar exam. If students start failing the bar, then the prestige of the school will drop, which would mean lowering standards even more. “At that point,” Mr. Morriss said, “the school is risking a death spiral.”

Yesterday, news came out that the number of people taking the LSAT declined for the second year in a row. Sharply declined. ... So what’s going to happen to the law schools that exist by the grace of the stupidity of prospective law students? Well, the New York Times is eager to start throwing dirt on the graves of the law schools at the bottom…. Fewer applicants will put some pressure on law schools that shouldn’t be here, and discourage other universities from opening up a new one.

[W]e should anticipate about 66,000 law school applicants this cycle, which would represent nearly a 25% decline in the course of the past two years. These numbers would wreak havoc with law school admissions if law schools kept their admissions standards constant. Two years ago 69% of applicants were admitted to at least one school, and 18% of admitted applicants didn't end up enrolling. ... Retaining those ratios would yield a total of 37,300 matriculants for this year's class at ABA schools, i.e., a shortfall of about 27.5% relative to the total 2011 entering class.

Since large numbers of lower-tier schools, which are heavily tuition-dependent, could not reduce the size of their classes on anything like that scale without wrecking their balance sheets, they will engage in some combination of cutting admissions standards, decreasing class size more modestly, and cutting their operating budgets. This will especially be the case at the 20 or so proprietary ABA schools who can't ask central university administration for a break on the skim, that is, the portion of law school revenue extracted by central for the law school's share of general university expenses -- this is a legitimate operating expense like any other -- and, more controversially, for cross-subsidization of other university programs. ...

It seems unlikely that any of this will have any immediate fiscal effect on elite schools, where demand for admission will remain relatively high. ... But at some point down that line a harsh fiscal reality is already kicking in for schools that aspire to be a homeless person's Harvard.  And it seems likely that point in the line is going to be moving up the law school hierarchy at a brisk pace.

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Already, roughly one out of every 300 Americans is a lawyer. That's insane. We are becoming a nation of, by and for the lawyers. They should close about half of all the law schools, tear down the buildings and salt the ground to keep anything from growing there ever again.

Posted by: Larry J | Mar 20, 2012 11:18:06 AM

have to wonder how the decline in test taking is affecting kaplan-the parent company(deep pockets) of the wapo.

do higher quality students tend to take the prep classes to 'refine' their scores, more often than lower quality tend to take it to achieve a higher minimum?

imho, the higher end students are starting to do more cost analysis, accepting a lower score which gets them into a cheaper school. this leads to fewer retakes.

the other burning end of the candle has to be the the number of potential law students, who are under crushing debt-(student loans, underwater housing, credit card debt0, and have the sense to realize that three more years of school just means more debt.

or, more likely, their deep pocketed families are retiring-
paying 30k for a child to go to 'more' school when you are working at 90k a year is far less of a stretch than when you have just a 401k, which hasn't performed in years, and 24k/year from social security ofr your retirement.

Posted by: mark l. | Mar 20, 2012 11:57:00 AM

Just one small, possibly uninformed quibble with Mr. Morriss's take on things:

He says that the casualties will be found amongst the lower-tier schools. I disagree, and see the mid-tier schools talking the hit.

I went to law school late - at 35 - and attended a small local law school with a four-year night program as well as the more usual three-year day program. I did the nights. Total cost of the degree was far, far less than our huge state school (well ranked) or the other local private schools with better reps.

But grads of those other local non-state schools were no more likely than I was to get into Biglaw. We all ended up scrapping for the same sorts of small-to-midsize lawfirm jobs, or the same basic corporate routes, or we opened our own practices and scrimped for a few years.

Difference was, I graduated with no debt. Paid it off as I went along, since I was still working FT and the cost was so low. (As a humorous aside, comparing notes with my law friends from bigger schools, when you offset their higher incomes with their ungodly student loan debt, I was netting more than them from about year four onward.)

So, I think the lower-tiered schools are going to be seen as offering a value that most other schools can't match. If a quarter of each graduating year never shows up, I bet it's those middling-rep-but-quality-priced schools that feel the pain first.

Or, I could be completely deluded. I did, after all, attend a bottom-tier law school.

Posted by: bobby b | Mar 20, 2012 6:23:11 PM

"Already, roughly one out of every 300 Americans is a lawyer. That's insane. We are becoming a nation of, by and for the lawyers."
- - -

That is, after all, a natural consequence of being a nation of laws. There are eight or nine laws for everything, and at least three exceptions, and so it is beyond the normal non-law-educated skill set to understand even the indexing system for those laws, much less their historical context and foundational principles.

It would be far simpler to drop most of those laws and simply have someone in charge who could retroactively decide if you've violated his personal sense of rightness. It worked well for Idi Amin Dada.

Posted by: bobby b | Mar 20, 2012 8:04:32 PM