Paul L. Caron
Dean





Saturday, June 18, 2016

Reactions To Yesterday's NY Times Article On The Human Cost Of The Law School Crisis

NY Times Dealbook (2013)Following up on yesterday's post, NY Times: As Law Grads Seethe With 'Atavistic Rage' At Their Financial Plight, Many Law Schools Confront Stark Choice: Continue To Admit Marginal Students, Or Shut Down:

Paul Campos (Colorado), End Game:

Over the last few years, all but a handful of the most elite law schools have had to engage in some combination of reducing class size, cutting admission standards, and cutting effective tuition (sticker minus discounts). Valpo has done all three. The school cut admissions standards drastically three years ago, with its median LSAT dropping from the school’s historical 150 range to an astonishing 143. The last two entering classes have compiled 50th/25th LSAT percentiles of 145/142 and 145/141. These scores all but guarantee that the school will be unable to come anywhere close to meeting the new ABA requirement that 75% of a school’s graduates who take the bar pass it within two years of graduation. ...

I emphasized to Scheiber that Valpo’s historical journey from a modest but respectable regional law school that didn’t cost much to attend to an institution with something resembling Harvard Law School’s financial structure (minus HLS’s two billion dollar endowment of course) is a completely standard one in the context of American legal education. ...

Here’s the average tuition at private ABA law schools over time: (All figures have been adjusted to constant 2016 dollars):

1956: $4,178
1974: $11,232
1985: $16,803
1995: $26,480
2005: $35,550
2015: $45,123

Stephen Diamond (Santa Clara), New York Times Takes Another Shot at Law Schools and Puts Up an Air Ball:

Apparently Scheiber was not interested in an accurate picture of the costs and benefits of law school. Instead of, for example, examining the standardized data on employment and income exhaustively collected every year by the Bureau of Labor Statistics he consulted with scambloggers who have a variety of vested interests in attacking law schools even when they have been the beneficiary of those same institutions.

Scheiber’s piece is disturbing for another reason: his uncritical acceptance of the narrative of the scambloggers who have less than zero understanding of the higher education environment. He ignores the peer reviewed and widely lauded data collected and analyzed by legal scholar Michael Simkovic and finance scholar Frank McIntyre who have shown unequivocally that a JD leads to a significant lifetime earnings premium over just a BA, even when taking into account the short term downturn of 2007-2008. 

Rod Dreher (American Conservative), The Law School Trap:

I knew things were not great for law school grads these days, but damn, not that bad. It’s almost like they were holders of journalism degrees, or something.

Law School Truth Center, New York Times Chronicles Human Cost of Law School Bubble Deflation:

Law students are there for three years.  They take their degrees, move on, make money.  Tenured professors are stuck there.  It is their life, much as a monk or nun chooses low-profit servitude to higher powers.  They come to rely upon that meager, sub-partner level six figure check for teaching three courses a year and writing an article about the Canary Islands.  These people counted upon a constant influx of fresh meat to make the butcher's shop glisten with that patina of fresh blood. ... [T]he law professor having his cannibalistic gravy train rudely interrupted by the global financial crisis and its effect on American lawyers is the most tragic story of the last decade in legal education.  Many of these professors are over or approaching sixty and have been banking on the six figure checks to continue as long as possible.

Derek Muller (Pepperdine), Some Evidence That Big Firm Law Jobs Have Not "Dried Up" For Top Law School Graduates:

[O]ne purported cause of the current crisis struck me as rather curious:

A decade ago, a large majority of graduates from the top 10 to 15 law schools who wanted full-time work at a big law firm could get it, said Paul F. Campos, a law professor at the University of Colorado. ...  With big-firm jobs drying up, however, many of these graduates began competing for lower-paying spots at midsize firms, which also downsized, and certain government jobs they wouldn’t have sought in an earlier era.

“That takes those jobs off the table,” Mr. Campos said. “It has ripple effects all the way throughout the profession, so that a small law firm in northwest Indiana can say to recent grads: ‘We want you to work for free. We won’t pay you.’”

Law schools, for their part, seem strangely oblivious to all this.

This didn't strike me as accurately describing the situation confronting law schools in the year 2016. So I did a little digging into the ABA's Employment Statistics database. ...

Muller

It might be that law schools are "strangely oblivious" to this trend because the trend, in all likelihood, doesn't exist. There are undoubtedly many challenges facing "non-elite" law schools (and even "elite" law schools), ranging from indebtedness of graduates, to bar passage rates of those with declining predictors, to securing meaningful employment for graduates. But the notion that a principal cause of the crisis facing schools like Valparaiso and others is a result of a loss of placement of elite law school graduates into elite big law firm positions resulting in increased competition at "lower-paying spots at midsize firms . . . and certain government jobs they wouldn't have sought in an earlier era" is, I think, from my examination of the evidence, not accurate.

Elie Mystal (Above the Law), Vivisection Of A Dying Law School:

This [article] is actually a case study of one, totally screwed, lower tier law school. It’s jammed packed with personal anecdotes that put a human face on the tragedy of bad law schools. ... [T]he confluence of bad decisions is just amazing. ...

John Acosta had a good job and not $200,000 of debt, and he traded it for a Valparaiso Law Degree and the magic beans of hope. ... Kyle McEntee and Paul Campos pop up throughout their article. They’re there to try to keep the focus on the larger racket that the school is running, instead of the individual marks the school has duped.

Michael Simkovic (Seton Hall), An Open Letter to New York Times Journalist Noam Scheiber: Journalists Should Consult Peer-Reviewed Research, Not Bloggers:

I have a number of concerns about factual inaccuracies in your recent story, “An Expensive Law Degree, and No Place to Use It” and your reliance on “experts” such as Paul Campos who lack any technical expertise or even basic financial or statistical literacy.

Your readers would receive more reliable information if you concentrated less on sources like Paul Campos and internet “scamblogs” and focused instead on peer-reviewed research by professional economists using high quality data and well-established methods of statistical analysis.

Michael Simkovic (Seton Hall), Six Factual Errors and Several Misleading Statements in Recent New York Times Story by Noam Scheiber:

New York Times reporter Noam Scheiber was kind enough to respond to my open letter and ask if I could point to anything specifically factually wrong with his story.  My response is below. ...

The story states that: “While demand for other white-collar jobs has rebounded since the recession, law firms and corporations are finding that they can make do with far fewer full-time lawyers than before.”

This is incorrect.  First, the number of jobs for lawyers has increased beyond pre-recession levels (2007 or earlier), both in absolute terms and relative to growth in overall employment. (error #1) ... Second, employment has not rebounded to pre-recession (2007 or earlier) levels outside of law. (error #2) 

The story states “Such is the atavistic rage among those who went to law school seeking the upper-middle-class status and security often enjoyed by earlier generations, only to find themselves on a financial treadmill and convinced their schools misled them . . .”

This implies that things were better financially for “earlier generations” of law graduates than they are for recent graduates. That’s incorrect. (error #3). ...

You have a quote from Campos saying:  “Why does Valpo have an economic structure that looks like Harvard Law School’s? . . . It makes absolutely no sense to do it. It’s why they have to charge Harvardesque prices.”

This is incorrect.  Harvard at full price costs about 50% more than Valpraiso at full price. (error #6)  Valpraiso’s annual tuition is $40,000.  Harvard’s annual tuition is $60,000

Jordan Weissmann (Slate), A New Generation of Law School Grads Are About to Be Screwed:

Perhaps you thought reporters had exhausted the reservoir of stories about jobless law school graduates struggling to pay off their student loans. Think again! If anything, I'm guessing this depressing genre is about to see a whole second wave. ...

Scheiber's story is a profile of Valparaiso University Law School, afourth-tier institution that pursued the race-to-the-bottom strategy for a while until administrators realized it wasn't sustainable, and has now begun cutbacks on its faculty and class size. As Above the Law notes, the piece includes some stunningly candid reflections from a former professor and associate dean, Bruce Berner, who admits that the school sacrificed its standards for the sake of its finances. ...

[T]hat leads us to people like Sarah Tapia, a Valparaiso grad who idealistically enrolled in law school to help people like her siblings, who'd been “in and out of jail,” but is currently working a low-wage retail job, having failed the bar exam twice. She describes her student debt load as “massive.” She's determined to pass the bar and start her legal career.

Graduates like Tapia aren't necessarily the norm these days. With so many fewer J.D.s entering the job market, employment rates areactually up a bit, and at the rarefied top of the industry, salaries for young associates at corporate firms are finally rising after years of stagnation. If you can get into a reasonably decent law school, I'd still argue this is a good time to go. But the more that places like Valparaiso rely on marginally qualified students in order to keep themselves afloat financially, the more stories like Tapia's we'll see. The people who suffer are generally going to be the least sophisticated students in the law-school ecosystem, the ones who never really had a chance of graduating with anything other than a big load of debt, and who a lot of schools have shamelessly exploited.

https://taxprof.typepad.com/taxprof_blog/2016/06/reactions-to-yesterdays-ny-times-article-on-the-human-cost-of-the-law-school-crisis.html

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Comments

The pro law school argument seems to rely too heavily on the Simkovic study and the statement "the present value of a law degree typically exceeds its cost by hundreds of thousands of dollars." That study doesn't factor in tax rates and the fact that no one pays cash for a law degree. That $150,000 degree gets quite expensive with an artificially high 7% interest rate.....good luck paying that off in post-tax income even if you get a decent job.

Posted by: Jacoby Wyatt | Jun 20, 2016 8:20:15 AM

Nice collection of different viewpoints here. I still believe the heart of the problem is too much unlimited Federal loan .money.

Posted by: Old Ruster from JDJunkyard | Jun 20, 2016 3:32:51 AM

Mr. Sprading,

Mrs. Carswell tells me I embarrass her everyday. She says I have a big mouth. You are her are in good company.

Posted by: Captain Hruska Carswell, Continuance King | Jun 19, 2016 6:35:48 PM

Mr. Sprading,

Thank you for that. My "handle" is a parity or spoof of the Illinois Super Lawyer or Leading Lawyer designation or magazine. I once called their toll free hotline and asked if my buddies could nominate me for effectively advocating for continuances. They told me that "this is a serious publication." I like to laugh. I can find humor in damn near anything. I went to law school for a serious reason and by representing three bill retail thefts, I have fulfilled my purpose. I represent the underserved because there are more of them. My difficulty has been monetizing that as of late.

Posted by: Captain Hruska Carswell, Continuance King | Jun 19, 2016 5:42:15 PM

Cap'n, once again. The world does not revolve around you. Frankly, I'm not a lawyer, but if I were, I would be embarrassed to call myself the "continuance king." Is this why you went to law school?

Posted by: Dale Spradling | Jun 19, 2016 4:13:24 PM

Empiracal data: Go to any courthouse across the country, rural, urban or suburban and ask a Solo what kind of fee she got for one court appearance that killed an entire morning. You will be astonished. A few hundred dollars? Perhaps.

Posted by: Captain Hruska Carswell, Continuance King | Jun 19, 2016 1:24:15 PM

"This implies that things were better financially for “earlier generations” of law graduates than they are for recent graduates. That’s incorrect. (error #3). ..."

I have crunched the publicly available debt and salary info for Michael Simkovic's very own law school, Seton Hall. A student who receives the median discount of $25k/year - and only 62% receive discounts - will be starting at around $213k in student loans around the time they pass the bar exam, after one takes into consideration interest (grad school loans aren't subsidized anymore), bar expenses, and average undergrad debt (and interest on that). Seton Hall's median starting salary is just $50,707, only a few thousand more than the median starting salary for bachelor's degree recipients across all majors in 2015. The standard student loan payment of $2,365 per month, after taxes, will fully eat 2/3 of that student's takehome salary in South Orange, NJ. Fact. So they must - MUST - go on PAYE. Using the PAYE calculator at finaid.org, and presuming that the student eventually claws their way to the BLS median salary for attorneys of $116k, that Seton Hall student will eventually accrue more than $250,000 of interest on their principal and have more than $350,000 written off in 20 years' time - an amount that will be taxed by the IRS. I would just love to hear how this is a better outcome than for past generations of law students.

Posted by: Unemployed Northeastern | Jun 19, 2016 12:25:28 PM

Thank you Law School Transparency -- and now the ABA as of plans released last week! -- for vetting the the employment statistics released by law schools. It is quite clear that in any very large group of people there may be some bad apples -- and that law schools are not immune from this. The problem of honest reporting by law schools is ongoing.

Posted by: Jan | Jun 18, 2016 2:15:59 PM