How the Legal Academy Has Changed Since the Great Recession (Hint-It's Probably a Lot More Than You Think)

I’ve had the privilege over the last year of working with two exceptionally skilled and thoughtful empirical investigators—Jerry Organ of the University of St. Thomas School of Law; and Emma Rasiel, Associate Chair of the Duke University Department of Economics.  The question that brought us together, which began with a conversation Jerry Organ and I struck up when we found ourselves stranded in New York by the blizzard at the end of the 2014 AALS conference, is whether we could develop reasonably rigorous but accessible ways of describing quantitatively how the American legal academy had changed in recent years in reaction to the circumstances changing around it.

As our work unfolded, the task became twofold:  First to depict how the academy had changed; and then to see if we could find any patterns in the changes (whether or not consciously strategic) among law schools with shared characteristics.  The result is our new paper Competitive Coping Strategies in the American Legal Academy: An Empirical Study.  It will be published by the good folks at the Nevada Law Journal early next year, and a draft is now posted on SSRN here.  We think that many interested spectators will find some of the paper’s observations surprising. 

We start with a description of how—and importantly, how much—the legal academy has changed.  Most readers of this space and other legal education enthusiasts are aware of the contraction in the new-graduate job market that began after 2007, and the substantial decline in both the number and the conventional qualifications of applicants to law school that began after 2010.  But you may not appreciate how widespread and serious its effects have been.  For the vast majority of American law schools, those effects have been somewhere between significant and devastating.

From 2010-11 through 2016-17, the number of unique applicants to accredited law schools fell 36%, and the number of applications fell a little less than 44%.  The conventional metrics by which most admissions decisions are made—Law School Admissions Test (“LSAT”) scores and undergraduate grade-point average (“UGPA”)—declined even more, as more highly credentialed applicants disproportionately stayed away.  For example, while the number of applicants overall fell 36%, the number of applicants with LSAT scores greater than 160 (roughly the 80^th percentile of all test-takers) fell 46%, while those with scores under 150 (roughly the 44^th percentile) fell only 27%.  All this has been widely discussed.

But the effects on the academy have been profound, and far more widespread than many realize.  By 2016-17, the average accredited American law school had an entering class that was nearly one-third smaller and had a median LSAT score seven percentiles lower than in 2010-11.  And while Base Tuition (a school’s published “sticker price”) had risen 15% on average over that period, the average tuition discount per student had doubled, causing the average net tuition paid per student to fall over 6% in constant dollars. 

Unsurprisingly, these effects were not distributed evenly across the academy.  Instead, sectors of the academy distinguished by their relative overall reputation for quality were affected quite differently.  Yes, a small handful of super-elite law schools were essentially unaffected, but that handful is smaller than you may think.  A number of top-20 law schools had to substantially increase their tuition discounting in order to maintain their entering-class LSAT scores.  More generally, the entering classes of the top-third strongest schools reputationally shrank on average only 13% and dropped 3 LSAT percentiles, while the reputationally weaker two-thirds on average shrank by over a third and nearly a half respectively, while dropping 14-15 LSAT percentiles.  Effects on tuition revenue were also pronounced.  Even top-third schools reputationally lost an average of $5.9 million per school in annual tuition revenue comparing 2016-17 with 2010-11, while reputationally weaker schools lost on average $11 million to $12 million annually each (in constant 2018 dollars).  We estimate that aggregate annual tuition revenue for all accredited American law schools fell over $1.5 billion in current dollars between its inflation-adjusted peak in 2011-12 and 2016-17. 

We offer a chart with details on the changes by reputational group and further discussion of what's happened in the last ten years after the jump.

Performance Changes from 2010-11 through 2016-17

Metric	Reputation Group*	2010-11	2016-17	Change
Median 1L LSAT	Stronger	166	164	-2 points =   -3 percentiles
	Middle	156	152	-4 points = -15 percentiles
	Weaker	151	147	-4 points = -14 percentiles
1L Class Size	Stronger	11,133	9,689	-13% =   -39 students/entering class
	Middle	10,523	6,865	-35% = -102 students/entering class
	Weaker	10,885	5,833	-46% = -136 students/entering class
Base Tuition**	Stronger	49,225	56,595	+15%
	Middle	41,400	45,492	+10%
	Weaker	35,580	39,817	+12%
Avg. Net Tuition**	Stronger	39,787	37,772	-5%
	Middle	34,252	28,914	-16%
	Weaker	30,974	29,231	-6%
Avg. Discount**	Stronger	9,438	18,823	+99%
	Middle	7,148	16,577	+132%
	Weaker	4,606	10,585	+130%
Tuition Revenue (millions)**	Stronger	1,349 (2011)	1,129	-16% = -$  5.9 million annually/school
	Middle	970 (2011)	554	-43% = -$11.6 million annually/school
	Weaker	958 (2011)	507	-47% = -$12.2 million annually/school

* The third of the sample with the highest (Stronger), Middle, or lowest (Weaker) Reputation Score

** Dollar figures in constant 2018 dollars

All in six short years.  It would be no exaggeration to call these changes sudden, enormous, and drastic.

While I let you pause and catch your breath, let me remind you of the other question:  whether we could identify patterns in behavior among law schools with shared characteristics.  The answer is yes.  To keep it simple but basically accurate, we identified three Performance Variables that together go a long way toward depicting a school’s reaction to the market shock that began in 2010:  The change in the entering class’s LSAT scores and UGPA over the six-year period (“ΔProfile”); the change in the size of the entering class (“ΔSize”); and the change in the average discounted tuition (after accounting for scholarships) paid per student (“ΔNet Tuition”). 

These three variables reflect three ways that law schools coped with the sudden and drastic fall in demand to which they were subjected.  The focus on change is critical:  We wanted to be sure we were measuring not the state of play before or after the shock, but how schools changed after being subjected to (and, we conclude, as a result of) the shock.  Most law schools suddenly faced with significantly fewer and less qualified prospective students had to make hard choices among the three variables in selecting each new class of first-year students.  A law school could try to preserve entering-class Profile by sacrificing Size (taking fewer students, which makes it easier to maintain, or minimize decrease in, Profile) and/or by sacrificing Net Tuition (trying to “buy” stronger students by selectively offering them lower tuition); or it could preserve entering-class Size by sacrificing Profile (taking a larger class of weaker students) and/or Net Tuition (effectively obtaining more buyers by lowering price); or it might try to hold Net Tuition higher by sacrificing Size (recognizing that fewer students are likely to pay the higher price) and/or Profile (recognizing that stronger students will likely get better tuition deals elsewhere).  Most schools mixed their poisons, rather than picking one exclusively.  And given that class Size and Net Tuition are generally the most significant forces driving Tuition Revenue, to some extent these decisions balance Profile against Revenue.

We then measured correlations between each Performance Variable and law schools’ relative general reputation for overall quality (“Reputation”).  We leave the detailed results to those who wish to explore them in the paper (again, here), but can’t resist sharing the single most surprising finding we encountered:  Among law schools in the bottom third Reputationally, Reputation was negatively correlated to a statistically significant degree with Net Tuition.  In other words, in reacting to the fall in demand for legal education, some of the Reputationally weakest schools in the academy were able to give up less in tuition discounts than many more highly regarded schools, and in a few cases were actually able to raise their average Net Tuition and Tuition Revenue even as demand fell substantially.  Here’s a scatterplot with a best-fit curve:

On its face, this seems quite odd:  Typically a product widely believed to be of inferior quality commands an inferior price relative to available substitutes.  We believe this anomaly is explained by what we call the Limited Options Effect:  That is, the weakest students who are admitted to the Reputationally weakest law schools have few options from which to choose. The Reputationally weaker law schools willing to admit them decline to negotiate tuition discounts with weaker students in essence because they don’t have to—these students have no or very limited alternatives if they wish to go to law school.  In addition, this result may reflect a different weighting of the risks and potential rewards of being a weaker student at a weaker law school among the socioeconomically disadvantaged applicants who are disproportionately represented in this cohort as compared with applicants with broader options.  As a result, some of these law schools can concede, on average, less in tuition than law schools that are better regarded and in that sense more in demand.

We conclude with what we believe are the most important things the paper offers:  Four practical implications from our observations:

First, the strongest schools Reputationally chose to preserve entering-class Profile at the expense of Size (and Net Tuition).  In other words, they pursued students with credentials at or near the levels they maintained before the shock, and were willing to accept smaller entering classes (and more highly discounted tuition) to get them.  In the aggregate, this drove literally thousands of viable candidates to less prestigious law schools.  The difference amounts to about 60 students per class in Reputationally bottom-half institutions, or the aggregate entering class of about 20 such law schools.  In short, elite and highly regarded law schools’ drive to keep their Profiles up effectively prevented the closing of as many as 20 Reputationally weaker law schools.  (h/t Brett Scharffs at BYU)

Second, many law schools sacrificed literally millions of dollars in tuition revenue per year to keep their Profiles up—roughly $5.9 million per school per year in the top third Reputationally.  If available, these millions might have been used to improve programs, curricula, faculty, and facilities.  We express no view on whether this was a wise investment choice, and concede the possibility that it might have been necessary to preserve the quality that these law schools already enjoyed given the prevailing competitive environment.  But surely the issue is worth discussing.

Third, while Base Tuition typically increased 10%-15% in constant dollars over the course of the six-year period we studied, average Net Tuition per student actually decreased, and decreased at many schools by double digits.  As a result, the range of prices students paid for a legal education increased significantly over that time.  And because almost all scholarships at almost all law schools are “merit-” (that is, predominantly Profile-) based, overwhelmingly the weakest students paid the highest Net Tuition.  In short, generally those students with the least promising prospects for obtaining or making any economically sustainable use of their law degrees are paying the highest prices to obtain them, and these inequalities grew considerably from 2010-11 through 2016-17.

Fourth and finally, both Tuition Revenue and Profile decreased at many law schools during the Comparison Period, in some cases substantially.  As a result, many law schools are welcoming the least-credentialed and least-academically-prepared classes they have ever encountered, with more students than ever in need of new or supplemental teaching and learning resources.  Yet those schools face those student needs with unprecedentedly depleted budgets because of the Net Tuition and entering-class Size reductions they have made.  Even more ironically, the weakest students, who typically pay the highest Net Tuition, are seeing their disproportionate financial contributions allocated to educational resources other than the ones that they typically need more than their classmates.  In short, the discrepancy between student needs and school resources has widened considerably since 2010—on the order of $1.5 billion per year less in tuition revenue to meet the needs of students that at many law schools are on average 15 LSAT percentiles less prepared, acculturated, and qualified.  And the needs of the students who contribute the most financially are being attended to least.  We are already seeing decreases in bar-passage statistics nationwide, to which these trends cannot be irrelevant.  The needs and prospects of these underserved students deserve to be seriously considered.

We’re continuing our work with studies attempting to compare the effectiveness of law schools’ resiliency (or more bluntly, survival) strategies, both in the education market and in the entry-level job market.  So stay tuned.  In the meantime, we earnestly hope this work stimulates some focused conversation at the many law schools that still seem to believe that they can passively wait things out with temporary stopgap adjustments to their status quo.

--Bernie (and Jerry and Emma)

Comments

[anon]

It should have come as no surprise that bottom feeders bottom feed even more ruthlessly when their prey are most desperate and vulnerable. There may be a few reasons for this, however, that aren't immediately obvious:

1. USNWR making such a substantial number of schools "unrated" allows those at the very bottom to pretend that they may be at the top of that very substantial block of schools. Prospective students may think one is as good as another, when this is clearly not the case.

2. Once you are a bottom feeder, and your faculty knows it, the level of effort goes down. Some will vigorously argue that the faculties at bottom feeders are hard working, devoted and productive, but, folks, if you've never witnessed these folks first hand, don't say that. Many are very lazy, and many are completely incompetent, in nearly every respect. Yet, they claim the compensation and privileges of "professors of law" -- and that costs money.

3. The ABA has ignored law schools that have broken its rules for accreditation in the main. Bottom feeders know that, any day, the DOE or some other real regulator might step in and cut off the student loan tap, making the exploited conduits worthless to the greedy bottom feeders. Thus, they "Make hay while the sun shines."

4. Take a look at the attrition rates at many bottom feeders. If you take a huge bite in the first year out of the 20% or more that you will throw out after that one year, you can still eek out a marginal gain.

The reality that the most pompous members of the legal academy can't face is that far too many of them just aren't the virtuous, faultless, guileless, tireless servants of all that is good and holy they think they are. Many are participants in what was, and in some respects still is, a ruthless game to feather their own nests while pretending to care only about their dear students' education and prospects.

Time should have been up a long time ago. But, like Wall Street, crash or no crash, it is hard to stop being a greedy person, richly rewarded for incompetent work.

[Random Law Prof]

This is excellent work. Really detailed, helpful information. Thank you for sharing.

[Brett Kavanaugh Macho Macho Man Association of America]

There was and currently is nothing wrong with the legal academy. It is you law professors, Rule of Law, Robert Mueller and Rosenstein that are preventing the collapse of our democracy from the rouge, authoritarian bigot at the White House. Thank god for our Judges and the Legal Academy.

With that said, here is the problem: The legal profession is just far too oversaturated with lawyers. Too many bottom feeder law schools. A few years back, one could ask a $1500-$2500 fee on a retail theft and $5000 on a DUI--for a plea. Today? I am lucky to get three bills on a retail theft. My blue collar dad made more money than I did in a typical year during the 80s than I do as a solo attorney. Don't think this provides effective access to courts for the underserved. It doesn't. I would rather sit at home blogging here than risk a malpractice beef for one hundred dollars.

[concerned_citizen]

"from the rouge, authoritarian bigot at the White House"

Haha, although a typographical error, "rouge" may actually work fine in this case.

He certainly appears to be slathered in the stuff.

More seriously, Bernie, this is really great stuff. I've pulled the draft paper and hope to be able to get through it tonight.

Your first practical conclusion/implication is really distressing to me. What a perverse outcome. I've long felt that there were too many schools pumping out too many new law grads for too few jobs (remember below?).

Back when, I heartily cheered all the schools that drew a line in the sand and refused to dumb down UGPA and LSAT standards, and didn't dip too much in regards to their normal applicant/acceptance ratios, and lost students as a result. Now ya tell us that if they'd dumbed down their classes somewhat maybe quite a few more of the bottom feeding schools would have shuttered their operations? I'm so conflicted.

These below also were "really great stuff". I fear links will get my comment hung up in the filter, but anyone who missed your commentary from ~ six years ago regarding too many grads, too few jobs and would like to read them can readily find them by searching on the titles.

What Matters Most (in legal ed these days).

More of What Matters Most - Paging Dr. Paingloss.

Still More on What Matters Most (Or, A Guided Tour of Pandaemonium)

Thanks!

[concerned_citizen]

Sorry; typo. "Dr. Paingloss" should be "Dr. Pangloss". Not sure how that crept in there... most likely "operator error".

[Bernie Burk]

Concerned Citizen, I figured it was a pun or perhaps a little Freudian slip. Thank you for your kind words, which really brightened up my day. Stay concerned!

--Bernie