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The Two-Year Tuition Fallacy and Other Confusion in Legal Education Reform

posted by Adam Levitin

Even the President has now weighed in about the cost of legal education, thus elevating the profile of the debate about the "dual crises" of legal education:  costs and job placement.

Let me put aside all of the possible criticisms one might make of the President weighing in on this matter and focus on one pernicious fallacy:  that reducing law school to two years would result in a corresponding reduction in the cost of legal education.  Let's call this the 2+0 approach, as opposed to the traditional 3+0 approach. There might be good pedagogical reasons for reducing law school to two years.  I personally don't think that's the case, although I do think law schools need to think more systematically about the content of legal education. 

Here's the problem:  most law school's budgets are taken up by fixed and semi-variable costs. Totally variable costs are a small part of law school budgets. That means that in the short-term, law schools simply cannot reduce their revenue (mainly tuition and endowment income) and still operate in the black. Schools cannot simply cut the salaries and benefits of tenured faculty, nor can they meaningfully reduce the costs of maintaining and operating their physical plants. This means that if law school went from 3 years to 2 years, law schools would still have expenses based on being 3-year schools. That would necessitate maintaining total tuition revenue equal to 3-years. That could be done by either increasing annual tuition or by increasing class size. The former would mean that students would still be paying for 3 years and getting 2 years of education, while the latter would flood the job market with lawyers who would still have significant debt burdens. 

Now over time, schools might be able to trim faculty sizes and reduce physical plant expenses, but we wouldn't likely see meaningful changes for at least a decade if not more.  Competition isn't likely to force down costs in the short term not least because of the limited ability of low costs competitors to scale up their operations to steal market share. To be sure going from 3 years to 2 years would enable an extra year of employment income for law school graduates. That's not meaningless--assuming that law firms don't decide to pay less for graduates with only 2 years of education.  So all of this is to say that cutting a year out of law school isn't likely to result in cost savings of any significance any time soon.  And critically there is no prospective legal education reform that can or will address the existing student loan debt problem. 

While some have proposed simply cutting a year out of the JD requirement, others have suggested retaining a 3-year degree, but with classroom time reduced to 2 years and with the third year spent in clinical education. Let's call this the 2+1 approach. Whatever one thinks about clinical legal education (and I think it is very difficult to genrealize about it), there is one thing that is undebatable about it:  when done at quality, it is incredibly expensive, much more so than for classroom instruction because the student-faculty ratio needs to be much lower than for classroom instruction.  A 40 or 80 or even 120 person classroom course can work quite well, but that's not really possible for a clinic. My school likes to pride itself on having the Cadillac of clinical legal education.  It's not cheap. By my reckoning, we spend something like 15x as much per student credit hour in our clinics than in our classroom courses. (You might rightly note that this imbalance could be corrected by giving the classroom profs a raise...) Bottom line is that the 2+1 approach is actually diametrically opposed to the 2+0 approach, as it would cost more than 3+0.  We can summarize legal education reform proposals thusly:  

(2+0)=(3+0)<(2+1).  

This observation should underscore a tension that is seldom remarked upon in the legal education reform debt:  the job market and student debt issues may point to conflicting reform agendas. Often the job market and student debt issues are seen as pointing in the same direction--legal education needs to be cheaper because the employment market cannot support the debt burden.  But they are not necessarily aligned. If the goal is better education (or at least education that makes students more employable), that may well run contrary to the goal of cost-cutting and vice-versa.

There seems to be relatively little awareness of this tension, which is something schools need to think through carefully.  I'm personally skeptical of both the cost-cutting and pedagogical reform approaches as a general matter, although the devil is very much in the details.  As far as cost-cutting, well, there just isn't a lot of room for most schools to cut costs in the short-term:  there are too many fixed costs like tenured faculty compensation and physical plant.  And there are real pressures to increase spending.  The tighter job market means that there is more competition for jobs, so there's a bit of an arms race among students (and among institutions). That arms race is about producing the best qualified, most practice-ready students, rather than doing so the cheapest, as the big law jobs still pay more than enough to service law school tuition debt.  

I'm also skeptical that any educational reforms adopted by any school will fundamentally transform its students' job market prospects in the short term. Interviews are done at the start of 2L year, and large firms have never expected any particular body of knowledge or even skill set from their entry-level associates beyond basic research and writing abilities. Basically firms are looking for smart people who are likely to stick around as long as the firms have use for them. This means that for the most part a student's employment prospects will be a function of the relative position of the law school in the relevant legal market, and much of that is the result of decades of school reputation, which are unlikely to change rapidly. 

The dual "crises" have presented an opportunity for advancing various pedagogical agendas of varying merit.  I have no doubt that most are well-meaning and made in good faith. But I object to reform of legal education solely as a reactionary measure to the "crises".  Legal education pedagogical reforms should not be crisis driven not least because they are unlikely to solve either of the "crises." Instead, we should be asking what proposals will provide better education on its own terms and turn out students who are better thinkers with more skills and a broader knowledge base. Such improvements may have long-term collateral benefits for employment of a school's graduates, but legal education reforms should be undertaken on their own merits. It seems, however, that no good crisis is going to be left to go to waste. 

Comments

Perfect example of wishful (absurd?) law professor thinking. The key fallacy that makes this whole point moot is this:

"This means that if law school went from 3 years to 2 years, law schools would still have expenses based on being 3-year schools. That would necessitate maintaining total tuition revenue equal to 3-years."

Tuition is not "inelastic." Prices are not determined by legacy business costs, they are determined by the value of a product to consumers.

You can talk about the historical business practices (tenure, etc.) of law schools all that you want. But historical business practices don't matter if not enough people will pay the price (see: automotive industry). And law school is approaching that point. Applications are rapidly falling to the point where in 1-3 years, fewer people will be applying to law school than used to enroll in law school. Ultimately, if your services as a professor aren't worth as much money to students, you are going to get paid less (duh).

Further, going from 3 years to 2 years, a law school could be operated with 2/3 of the professors, 2/3 of the space, and probably somewhere between 3/3 and 2/3 of the administration. I'm assuming some administration costs won't scale down ratably (maybe there's one guy who does XYZ, who will still have the same amount of work with fewer students). I think this proposal would mainly function as reducing the regulatory-imposed costs on an industry, enabling some market participants to reduce their own costs and prices.

If you don't try to cut your costs by that much, someone else will. And when they charge 2/3 tuition, guess who will get more students? Obviously, exceptions for maybe the top 20 law schools (looks like Adam may be covered). And it will all be marginal, but many schools will have to compete on price.

"Totally variable costs are a small part of law school budgets."

Staffing will become a variable cost, the same as it is in other businesses.

"Schools cannot simply cut the salaries and benefits of tenured faculty, nor can they meaningfully reduce the costs of maintaining and operating their physical plants."

Of course they can. See this article:
http://online.wsj.com/article/SB10001424127887323664204578607810292433272.html

Applications and LSATs are falling to the point where some law schools are going to go bust - there aren't enough good lawyer jobs for enough prospective students to want to pay current law school tuition prices. Some schools will close, some will reduce prices, etc. That is the way of the world, whether you have tenure or not.

This idea that professors are OWED a job that is paid for by students, who are taking out massive loans, is just wrong. The idea that education cannot be made less expensive is just wrong. Anything that Obama can do to crush those ideas is good. Anything that can be done to shame and ridicule the self-interested people who hold such absurd views, is good. Anything that can be done to show Americans that we don't have to just accept being ground under the boots of rentier parasites is good.

"This idea that professors are OWED a job that is paid for by students...is just wrong."

Actually, legally that's what employment with tenure does. One might fairly debate the merits of tenure, legally it does lock in costs for pretty much the entire industry. And, for better or worse, students are willing to pay the tuition costs.

There are some exceptions to the employment implications of tenure, such as when a school closes, and that may (and perhaps should) happen for some of the weaker law schools. But as the supply of law schools contracts, it will enable other law schools to maintain their pricing.

As for the WSJ article, well, those are really the exceptions. Schools can do some buyouts, but those aren't free. Schools can also cut untenured faculty, but good luck to such a school in recruiting faculty in the future. That's like eating the seed corn. In any case, note what the WSJ article does not say: the schools mentioned haven't been slashing their tuition. Instead, they're scrambling to make up for tuition short-falls by cutting every possible cost, but most cannot be cut.

Finally, it is far from clear that law students are really that sensitive to tuition differentials, exception of huge magnitudes. Say that schools could cut tuition by a sixth (let's split the difference between 1/3 and 0). That would translate to about $8,333 assuming a $50,000 tuition. I'm not sure that's likely to sway many students unless all else is equal between two schools, which it seldom is.

The more interesting question, to my mind, is whether a two-year legal education could ever provide the degree of professional training that a three-year one does. Since even three years of law school don't seem to be enough, the two-year concept is (with apologies to Northwestern) ridiculous.

President Obama hasn't been a law professor in some time and had only three years of practice experience before that. His views on the question of legal education are hard to take seriously. Doesn't he have other, more pressing problems to address?

Ultimately, these criticisms of the three year "proposal" miss the point. The President asked people in higher education to think creatively about how to reduce costs. Instead, law professors are circling the wagons and hoping the bad things will go away.

"Schools cannot simply cut the salaries and benefits of tenured faculty, nor can they meaningfully reduce the costs of maintaining and operating their physical plants."

Law schools can share physical space with other university programs. They can declare financial exigency, as Florida Coastal threatened to do, and break the tenure contracts. And of course, law professors concerned about their institution's future or their students could take voluntary pay reductions (but why would people in quasi-public non-profit institutions ever do something against their own interests?).

"classroom time reduced to 2 years and with the third year spent in clinical education."

The 3L year can be spent at an internship, externship, or job. That would essentially be free, unless, of course, the law schools try and charge full tuition for it.

"And critically there is no prospective legal education reform that can or will address the existing student loan debt problem."

Yes, there is. Return to whatever you were doing in 1980, and structure your costs the same. That means teaching four classes a semester, not being paid 200K, and reducing the army of administrators.

"This means that for the most part a student's employment prospects will be a function of the relative position of the law school in the relevant legal market, and much of that is the result of decades of school reputation, which are unlikely to change rapidly."

An astute observation, and you've described why firms aren't going to care about a year of "practical experience" taught by professors. But in focusing on biglaw you miss the other half of the employment market, which are local or regional jobs paying about 40-60K. It does not make sense to go $150,000 into debt to get one of those jobs. Students don't want to do it, and now that they know this is what's out there, that is why they are fleeing law school.

"Instead, we should be asking what proposals will provide better education on its own terms and turn out students who are better thinkers with more skills and a broader knowledge base. Such improvements may have long-term collateral benefits for employment of a school's graduates, but legal education reforms should be undertaken on their own merits. It seems, however, that no good crisis is going to be left to go to waste."

Look, this is going to be hard for you, but perhaps you need to consider that law school doesn't serve much of any purpose except as another credential that a prospective lawyer must jump through. The three-year law school was a fart of history, something created by a bunch of old white guys to keep undesirable people out of the profession. You might learn some critical thinking skills or the definitions of words like "tort" and "reliance damages"- not enough, of course, to pass the bar without paying $3000 for a bar prep class. But nobody has even begun to show that students receive "skills and a broader knowledge base" justifying the enormous costs.

1. There is some cost cutting ability, but it is not game-changing. Sharing facilities doesn't really work if there is no one who needs/wants to share or if the facilities are already at capacity. Voluntary pay cuts? Perhaps, but that's also a great way to lose your best faculty, either to other schools or to non-academic jobs.

2. By "existing student loan debt problem" I was referring to debts already owed. 3 to 2 can't fix that.

3. Returning to 1980 means more courses, but also more many students per course, and probably a worse education. But yes, teaching loads are lighter than they need be and administration has grown.

4. Internship/externdhip are wastes of time. Better to cut a year than to bloat it with fluff.

5. Yes, a $150k law school education isn't a great idea for a $40-$60k job without debt foregiveness.

6. As for "practical experience" taught by professors, I think that really depends. Maybe my perspective is biased given that our adjuncts include some of the top practitioners in the world and we've got a number of non-adjunct faculty who maintain serious engagement in practice. Remember that formal training at law firms is usually pretty worthless. The real training is from a parter or senior associate taking a junior through what needs to be done one-on-one. That's mighty expensive to do.

7. I have no illusions that law school is primarily about credentialing. The really smart students could function as attorneys after a semester, and top firms like Cravath basically do have their summer associates running simple deals with minimal supervision. That said, I know that law school made me a much sharper thinker and communicator. There's value there. Whether it justifies the costs is something that is hard to determine, but I don't regret my education.

8. As for the bar exam--it's an idiotic test. I think law schools should be praised for not teaching to it. Simple example: the bar exam tests on common law crimes, even though those have not existing for decades.

1) Many law schools have cut class sizes severely. Reducing the number of professors+admins, increasing class sizes, fewer classes, will free up more space. Law school classrooms are versatile and can be used by any number of UG or grad programs or even as office space. Those other programs might move into the law school building and their facilities sold or leased out. Might be difficult for a school like GT with a separate campus, I'll give you that.

As for existing faculty, am not sure how many schools are in a position to grow their faculties. It might be a little dry out there.

If you're looking at new hires, one thing law schools might want to think about is how to have a hiring system that does not mimic how elite corporate law firms hire. Using elite law schools, summer associateships at top firms, and prestigious federal clerkships to cull the hiring pool may save time, but it increases costs. Even assuming those people wouldn't still jump at the chance to be professors if salaries were lower and teaching loads higher, there must be people out there who will work for relatively less money, teach more, and still produce decent scholarship.

2) Thanks for the clarification. There's not much law schools can do for already graduated folks short of pushing for retroactive debt forgiveness or interest rate reduction.

3) "worse education": maybe. The question is how much worse, and if the debt savings are worth it. If I'm in a large lecture class, 100 or 200 students doesn't particularly faze me. I'd also be interested to know what people who graduated in 1980 thought of their education. It certainly didn't produce unsuccessful graduates.

4) I'm with you on cutting a year, but I found a year in an actual law office doing legal work is extremely rewarding on both a educational and professional perspective- you develop a bit of expertise, get connections, and look much more attractive to employers. I had an excellent clinical experience at my law school, but also great experiences volunteering for government organizations. Mileage may vary depending on placement, but one thing that is not disputed is that an internship is a lot cheaper.

Of course, the problem with a year of internships are that a lot of schools are not located in places where there are a lot of organizations who can use volunteer legal help. I expect DC is an exception.

6) I went to a top school in a major metro market, so we were able to attract fantastic adjuncts. Nothing like being taught caselaw by the people who litigated the cases.

"The real training is from a parter or senior associate taking a junior through what needs to be done one-on-one."

Or simply handing down assignments and expecting the junior to rinse and repeat until they learn how to do something. Legal research using Wexis is a prime example of this. You only really learn by doing it a hundred times under varying time pressures and scope. Since a law school can't reproduce this atmosphere, it's going to be hard to teach practical skills at a level that will make employers want to hire.

7) There's certainly some value in legal education- I'd be surprised if anything that cost 150K didn't deliver at least some value. At a top school like GT, where the "sorting" aspect of school is done by the end of 1L year and there is a lot of flexibility to do whatever you want (large lectures, seminars, clinics) I think you're right.

But to ask whether it's a good system in the universe of possible pedagogical methods is another question. How would 25 GT law students stack up in core competencies against 25 people with similar entering credentials who worked in a DAs office for three years? Or a small general practitioner firm?

8) I agree- for the MBE there was "bar law" which we were expected to know until the exam and forget the day after (the state portion tested actual state law). Though I don't see why the 1L criminal law class (which taught only a few provisions of the MPC) can't teach bar law, but using the Langedellian method instead of Barbri's memorize and regurgitate method.

I think it would be interesting to see what would happen if a law school offered a semester long, 12 credit, "bar prep" course, for students who did not have employers to fund their study courses.

The outgoing Chair of the ABA's Council on Legal Education, Kent Syveruud, recently said that law professors and deans are grossly overpaid. Kent is the Dean of the Washington University School of Law and has some knowledge in these matters. Tenure may make it hard (although not impossible) for law schools to lay off professors, but it does not prevent them from reducing faculty pay. That seems increasingly likely given the hard facts of the matter (falling demand, falling revenues, lower opportunity costs).

"Actually, legally that's what employment with tenure does."

Actually, legally there are probably all kinds of ways that schools can get around employment contracts - reducing salaries, reducing health care and pension funding, bumping up research requirements, bumping up teaching requirements, furloughs, financial emergency, legal restructuring to different business entities, not granting tenure to newer professors, etc. The ABA is even now moving towards not requiring schools to grant tenure (presumably this wouldn't immediately affect profs with tenure already). If you don't think that's going to happen, probably sooner rather than later, you're wrong. I bet you there are quite a few law school deans thinking about how to renege on employment contracts as I'm typing this.

This is simply a variation of "debts that cannot be paid, won't be paid." If schools cannot keep tenure-related promises (and they won't be able to), they will not keep them.

The schools that have already laid off tenured and non-tenured faculty are not the exception - they are just the first to do so. They're the canary in the coal mine.

As to eating the seed corn - there are so many highly qualified people who would love to be law profs, that firing untenured faculty could probably be done without harming a school's ability to recruit very highly qualified candidates. Especially with the law profs that will be laid off in the next few years. BoredJD has already pointed this out more eloquently than I.

I think that you can only assert that students are indifferent to tuition, that layoffs are the exception, etc., because this trend is just starting. Until 2008 or 2009 applications were actually increasing - they have only been in free fall a couple years. This graph shows the trend, but doesn't quite capture it:

http://www.lsac.org/lsacresources/data/three-year-volume

By all accounts, scholarship offers are up, and revenue per student is down. Today, there's a lot more information available about the perils of law school. The cultural narrative has shifted, and is well on its way to being mainstream. Even the NY Times, the most middle - lowbrow publication on the planet, is on board.

Finally, what would happen with any kind of real student loan reform that ties loan availability to debt repayment ability?

@silly

(1) The ABA may do something foolish, yes. Tenure is perhaps the most important in a normative field like law. But even if the ABA ceases to require tenure for accreditation, I think we'll see a change only at the bottom of the market.

(2) I agree that debts that can't be paid won't. But for most schools that just isn't the situation they're in at this point. It's possible that things change, but I would be surprised if the law school application trend continues indefinitely. There needs to be some right-sizing of legal education, but that doesn't require a whole-scale change of the business model. It can be affected by more modest cuts from most schools to balance out smaller class (faculty attrition can cover a lot) and the closure of a few of the weaker schools. Awful for the faculty at those schools, however.

"Awful for the faculty at those schools, however."

I thought they could all go back to making $1 million in big law firms?

"The ABA may do something foolish, yes. Tenure is perhaps the most important in a normative field like law."

Perhaps if there were fewer abuses of tenure, it would not be under attack.

There's a balancing act involved in any policy choice. Tenure has benefits, but they are outweighed by the fact it's become part of this idea that law schools need to pay professors well and give them perks so they don't go off into the private sector. I read a lot more of that than stories about professors who are in danger of suffering an adverse employment action because of a radical position.

"There needs to be some right-sizing of legal education, but that doesn't require a whole-scale change of the business model."

The underlying numbers don't add up. That's not right-sizing. That's a serious threat to the business model.

Even Georgetown is starting to get a reputation as a school that is located in an extremely saturated market, is graduating way too many students, and will put you $300k into debt. Somebody has to pay sticker for the system to work, and there aren't enough rich kids to go around.

The 2 vs 3 year is really a irrelevant distraction. the only rational reform of legal education would be to turn it into an undergraduate degree (like the rest of the developed world). there is simply no counter argument to this reform.

I'm surprised how many professors seem to misunderstand tenure; all it ensures is that the faculty member possessing it cannot be fired without some sort of formal process. A school that cannot afford all its tenured faculty can fire some on economic grounds as long as it follows a transparent process and gives the faculty members an opportunity to be heard on the issue.

"(2) I agree that debts that can't be paid won't. But for most schools that just isn't the situation they're in at this point. It's possible that things change, but I would be surprised if the law school application trend continues indefinitely. There needs to be some right-sizing of legal education, but that doesn't require a whole-scale change of the business model. It can be affected by more modest cuts from most schools to balance out smaller class (faculty attrition can cover a lot) and the closure of a few of the weaker schools. Awful for the faculty at those schools, however."

This is nonsensical. Obviously, no trend can go on "indefinitely." See, compound interest. All trends must eventually slow or stop - otherwise there would soon be only a fraction of a person applying to law school, which, I agree, would be quite surprising. Way to set up a straw man argument.

There will very soon be wholescale change throughout the legal education industry. Not just at the lowest schools, but even the middle schools are facing severe declines in applications. This is so accepted that I don't even feel the need to cite - although I could if requested.

Also, I clearly never said most schools are in that situation "at this point." But, 2 years ago, schools weren't at the point they are now. Another 20-30% decline in enrollment (2-3 years at most) and the wholesale changes needed will be obvious. At that point, there will be very significant excess capacity, at a very high cost to law schools (and students). They will cut costs (some by going to 2 years) or go out of business.

"Awful for the faculties at those schools" - perhaps, but great for the students that don't go to those schools, who will not be enslaved to pay massive debts. I hope some of those profs who get fired and end up homeless taught law and economics and are right-wing.

In sum, nobody on this earth owes law profs a job. Nobody is owed a job for "legal scholarship." If law profs cannot create sufficient value for their students, they won't get paid. If an online or more efficient competitor comes up with a way to credential people as lawyers at a lower cost, law profs won't get paid. It's very, very simple.

The only real value of a law degree is future earnings from going to law school. If people cannot get a job as a lawyer (because it is obvious that a law degree doesn't help most people, non-T14, outside of law), then a law degree has no value to those people. Therefore, law profs don't do anything for those people worth paying for. There are some exceptions, but that's increasingly the situation. That's the bottom line - there is nothing else.

I will make a simple point. Much of what I learned in law school that has been useful in my 30+ years of practice I learned in my 3rd year. But I would not have had the base knowledge necessary to take those courses during my 1st or 2nd year. I can conceive of no way a "clinical program" or an internship at a law firm could have provided me with the overall grasp of my field of specialty that I received from my law school classes.

"Internship/externdhip are wastes of time. Better to cut a year than to bloat it with fluff."

Are you kidding me? My internships were infinitely more valuable for developing actual legal skills than any class I took, except for MAYBE LRW.

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