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Obama’s Good, and Hopeless, Idea for Law Schools

When President Obama spoke recently about the need for reform in higher education, he turned first to for-profit colleges and their lack of accountability. Then he called on law schools to eliminate the third year of formal legal education altogether. Here’s the link between his two points: For-profit colleges and law schools have similar underlying business models. That model begins to explain why the third year of law school won’t disappear anytime soon, even though it should.

For example, in discussing for-profit colleges’ abuses, the president lamented the fate of students “loaded down with enormous debt.” Check that box in a big way for young lawyers. Over all, law students are graduating with an average educational debt of more than $100,000, far exceeding that of college grads.

“They can’t find a job,” the president continued. Right again. Nine months after graduation, only 56 percent of the law school Class of 2012 had found full-time, long-term employment (defined as lasting more than a year) requiring a J.D.

Meanwhile, he observed, the educational institutions are “making out like a bandit.” You could say that again. Tuition at private law schools increased by 375 percent from 1985 to 2009, far exceeding both the inflation rate and the tuition-growth rates for the rest of the academic world. Tuition at public law schools increased even more drastically.

Recently, Kent Syverud, the courageous dean of the School of Law at Washington University in St. Louis, told the American Bar Association’s Task Force on the Future of Legal Education: “Law professors and deans are paid too much. … The whole problem of costs would go away tomorrow if our salaries were halved.”

Faculty salaries won’t be halved. Law schools’ irrationally high tuitions will persist, student debt will grow, and job prospects for many new graduates will remain bleak. Meanwhile, the third year of law school will survive not because it’s necessary (it isn’t) but because it is a vital contributor to every institution’s revenues. This perverse confluence exists because deeply embedded interests benefit from a dysfunctional system of financing higher education.

It’s the Model, Stupid

A major obstacle to meaningful reform is law schools’ prevailing business model. It requires maximizing revenue, which means filling classroom seats, regardless of students’ real-world prospects when they graduate. By now, everyone knows that the number of law-school applicants has declined from recent highs. Less discussed is the fact that, to maintain enrollments, acceptance rates have increased even though the expected number of jobs for new lawyers has been moving in the opposite direction. In 2003 law schools over all admitted a little more than half of all applicants. For the class entering in the fall of 2012, the schools admitted almost three out of four.

Still, the drop in applications has troubled most deans of non-elite law schools. To combat the growing visibility and discussion of the dismal job market for new lawyers, many—including, most notably, Lawrence Mitchell of Case Western Reserve—have become pitchmen, arguing that now is the perfect time to apply to law school. (Dean Mitchell’s high-profile strategy may have backfired: Case Western’s first-year enrollment plunged from 165 in 2012 to 104 this year.)

Perhaps 2013 will be different, but through 2012 rhetoric about reducing the size of law schools’ entering classes hasn’t generally translated into reality. In 2003 first-year enrollment hovered around 48,000, and it remained there until 2009, as college graduates flocked to law schools as safe harbors during the depths of the Great Recession. Compared with the rest of the decade, the enrollment dip in 2012, to 44,500, was relatively modest.

The problem is that 44,000 new lawyers every year is about 20,000 too many. The Bureau of Labor Statistics estimates that, through 2020, law schools will produce two new lawyers for every available legal job (including replacements for death and retirement).

Help From Nowhere

The ABA offers little hope for those seeking to reduce the cost of law school by eliminating the third year. Its accreditation standards require a course of study that typically consumes three academic years. Most schools with two-year accelerated J.D. programs simply jam three years of classes into two calendar years while charging the same total tuition as they do for their three-year programs.

The ABA won’t compromise schools’ third-year revenue streams because the organization itself is a victim of regulatory capture. We were reminded of that recently when the ABA’s Legal Education Council voted to give law schools yet another break in reporting unpleasant employment results for their most recent graduates. Instead of assessing job status nine months after graduation, the schools will now use 10-month numbers. A one-month delay may not sound like much, but it will (1) allow more time for job searches that should increase the percentage of recent graduates who find employment; and (2) require most prospective law students to make nonrefundable tuition deposits without knowing the fate of a chosen school’s most recent graduating class.

Finally, President Obama suggested that taxpayers are left holding the financial bag for educational loans that go bad. But they’re not the ultimate victims. Like for-profit colleges, law schools depend on federally insured student loans that can’t be discharged in bankruptcy. After students pay tuition, the schools have no skin in the game. Sure, deans would like to see all of their students in well-paying positions requiring a J.D. degree. However, the schools will suffer no financial penalty if the job necessary to begin repaying those loans six months after graduation simply isn’t there.

For graduates who can’t repay loans (or take advantage of income-based repayment programs that may or may not survive future battles over budgets and deficits), default means dealing with government-hired collection agencies. For many borrowers, the result is America’s 21st-century version of debtors’ prison.

Several years ago, Northwestern Law School used outside focus groups to help develop its long-term strategic plan. Practicing lawyers voiced widespread support for making the third year more meaningful. In fact, “a “significant number of participants believed that the third year could be eliminated entirely.” Unfortunately, sometimes the power of a good idea can’t compete with the power of vested interests determined to kill it.

Steven J. Harper teaches at Northwestern University and is the author, most recently, of The Lawyer Bubble: A Profession in Crisis (Basic Books, 2013). In March, The Chronicle published an essay adapted from that book.

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