Grade Inflation: It Depends How You Define ‘Educational Quality’

On VoxEU, we have Raphael Boleslavsky and Christopher Cotton’s, “The unrecognized benefits of grade inflation.” The authors write:

Our analysis reveals a surprising link between grade inflation and investment in education quality – schools invest more when they are allowed to inflate grades than when grade inflation is banned. …

With grade inflation, student transcripts convey less information, and therefore the employer relies less on transcripts and more on school reputation when evaluating graduates. In this way, grade inflation increases the incentives that schools have to undertake costly investments to improve quality of education, and the average ability of their graduates. To the extent that school investments and a student’s own study efforts are strategic complements in human capital development, students who anticipate greater investments by schools in turn have greater incentives to increase their own efforts. [Emphasis LSTB]

You could replace the emphasized bits about “education quality” with “wasteful spending” or the like and you’d have an accurate description of what goes on at law schools.

For instance, we have expanding faculties:

Law School Faculty Per School (Calendar-Year Average, Index 1999=100, Excl. P.R.)

(Source: Official Guide, author’s calculations)

We have lots of internal grants and scholarships:

Spending on Internal Grants and Scholarships Per Law School (2013 $)

(Source: ABA (pdf), Bureau of Labor Statistics, author’s calculations)

We have no (net) positive impact on job outcomes:

Percent Employed by Status (NALP)

(Source: NALP)

We have a decline in legal sector labor productivity:

Legal Sector Labor Productivity (2005=100)

(Source: Bureau of Labor Statistics)

…And all this is covered with tuition hikes on the poor souls who are paying full tuition (if that):

Median Full-Time Law School Tuition (2013 $)

(Source: ABA (pdf), FinAid.org, Bureau of Labor Statistics, author’s calculations)

None of this is necessarily the result of grade inflation, which the authors’ model takes to be endogenous when I happen to think it’s exogenous (Hell, even the law school deans say so). If anything grade inflation is a symptom of the same pressures the schools are under to signal their degrees’ prestige to employers. But job outcomes is most of what this all comes down to. If there weren’t such a wide dispersion of jobs and salaries, then there’d be less motivation to engage in these kinds of wasteful behaviors. The free student loans are the accelerant.

However, there’s no reason to believe that, in the face of grade inflation, colleges and universities would improve their reputations by carefully investing in better student outcomes; rather, they would invest the bare minimum of what the employers want to see—not what actually makes the graduates more productive. That’s why the employers complain about how law students take frivolous courses but keep hiring from elite law schools nevertheless.

Revealed preferences, people. Revealed preferences.

54,527 Law School Applicants in 2014

…Which is down from 59,426 in 2013, an 8.2 percent decline. It appears the number of applicants is plateauing. The number of applications is down to 352,406; it was 385,358 last year. This and more you can read on the LSAC’s Web site.

Last year I speculated that the applicant decline would be 6,000, but it was lower at 4,900. I’m surprised that so many people are interested in law school. I sincerely thought the drop in applicants would be sharper than it’s been. Maybe the siren song of tuition scholarships is too much to resist.

Here’s what this year looks like compared to previous years.

No. Applicants Over App Cycle

No. Applications Over App Cycle

Interestingly, the number of applications per applicant has stabilized.

No. Applications Per Applicant

Last year’s decline clearly meant that the types of people who weren’t applying were those who would submit their applications early in the cycle. That’s still true to a great degree: The number of applicants from week 10 until the end is roughly the same at about 12,000. Week 4 to week 10, by contrast, has plummeted from 26,700 in 2010 to 15,700 this year.

2014 also differed from previous years in that the number of applicants didn’t really “accelerate” into the cycle based on a comparison of average monthly estimates of the final count to the actual number of applicants.

Average Monthly Final Applicant Estimate Variance

For example, last February it looked like there would be 56,500 applicants, but in June it looked like it’d only be 53,000. These are further indicators of a plateau in the decline.

Next year, though, I bet we’ll see an unusual sight: The number of applicants will be less than the number of incoming 1Ls in 2010 (52,448). I think by now everyone acknowledges that this applicant collapse is unprecedented, but that factoid should really bring it home.

Go in peace.

The Law Apprenticeship Scam

“It’s a cruel hoax. It’s such a waste of time for someone to spend three years in this program but not have anything at the end.”

So says Robert E. Glenn, president of the Virginia Board of Bar Examiners. No, Glenn wasn’t talking about Liberty University’s 34.4 percent employment rate in full-time, long-term, bar-passage-required jobs for its class of 2013, which had an average debt level of $81,045 (only!). Rather he was referring to the low bar-passage rates of Virginia’s law readers, who along with their peers in other states are the subject of a New York Times article, “The Lawyer’s Apprentice.”

Citing data from the National Conference of Bar Examiners, which the Times deserves credit for researching, we learn that only 28 percent of apprentices passed the bar versus 73 percent of ABA law school graduates. This fact prompts the ABA’s Barry Courrier to declare:

“The A.B.A. takes the position that the most appropriate process for becoming a lawyer should include obtaining a J.D. degree from a law school approved by the A.B.A. and passing a bar examination,”

I find this response disappointing for a few reasons: One, even if these statistics are for first-time test-takers only, a 73 percent pass rate is lousy. Law schools should be held to higher standards for what they charge students.

Two, the article appears to tacitly accept the ABA’s position that we can’t have good lawyers without many years of law school (and probably college too). The elephant in this room is selection bias. The reason people go to law school rather than these apprenticeship programs is that law schools broker jobs to people who already do well on standardized tests, to wit, the LSAT. Certainly in the age of PAYE, someone who can crush the LSAT has much better odds of finding a good law job by going to law school than trying to find a lawyer who will train him or her. If anything, law school is a more reliable path to qualifying for the bar exam. Indeed, the article acknowledges that “the lack of class rankings put clerkships with judges and plum gigs at big firms out of reach” for law readers.

If you’re wondering why people who don’t do well on the LSAT go to law school instead of these programs, I give three responses. One, they aren’t widely known and have no advertising. Two, many law students still buy into the versatile JD myth. Three, the largest proportion of people opting out of law school are people who don’t do amazingly on the LSAT anyway. So there. (The Times says these programs are “underpopulated,” but given the effort the would-be apprentices must go through to get established, one might think the problem is that there really isn’t much demand for new lawyers.)

I acknowledge that many of the apprentices interviewed in the article are sincere in their desire to avoid debt and only want to do small practice work. If anything, bar authorities should make it easier for people to choose that route. Instead they offer a post hoc rationalization for credentialism in legal education.

Inside the (Alaska) Law School Scam?

Sorry, that should be “the Alaska Law School, In God We Trust,” which appears to have been founded by an attorney in Palm Springs, Calif.

If you throw http://www.thealaskalawschool.com into your browser you’ll be treated to what’s either a scam, a transparent hoax, or a genuine law school whose Web site does not leave readers believing that it’s sincere. What you will find for sure, though, is something that concerned the Alaska Bar Association so much that its bar counsel asked the ABA Section of Legal Education if it was legit (pdf). From where I’m sitting, it appears the Alaska Law School, In God We Trust is misrepresenting its application for ABA accreditation and its students’ eligibility for federal loan dollars.

Speaking of which, tuition for in-state students will be $43,000, including books. What a deal!

01 The Alaska Law School, In God We Trust

If the Alaska Law School, In God We Trust is real, however, incoming law students will be treated to a unique learning environment: two boats the school received as an anonymous donation!

02 The Alaska Law School, In God We Trust

Who doesn’t want to attend a law school featuring a global law library of Alexandrian proportions? (Don’t knock it. These folks know their ancient history.)

I think the rest speaks for itself.

Top 6 Underreported Changes to the ABA Accreditation Standards

(That should read “proposed” changes, but I wanted to keep this parody listicle under 71 characters.)

I’ve seen some of the reporting on the changes to the ABA’s accreditation standards that the Council of the Section of Legal Education proposed on June 6. The ABA’s House of Delegates will decide on them in August; you can read here about the intricate procedural shenanigans that ensue if the house chooses not to concur with the council.

That page also contains the link to the pdf of the revised standards, which I read through, and frankly I think others commenting on the proposed changes should have as well, for there are some juicy nuggets there that have gone unreported and underreported. Just about all of the coverage has been on two topics: (a) the council’s decision to disallow course credit for paid externships, and (b) the rule allowing up to 10 percent of a law school’s entering class to forgo the LSAT under certain circumstances. I have nothing to add about the paid externship rule, but the LSAT requirement will be number one on the list. So…

(1)  The 10 percent LSAT rule is not open ended.

Really, this topic was badly underreported, and anyone who didn’t read the actual proposed change was led to believe that law schools would be able to admit up to 10 percent of a class without an LSAT score for just about any reason whatsoever. Not even close. The new Interpretation 503-3 only allows applicants to forgo the LSAT if either (a) they’re undergraduates at the same institution to which they’re applying to law school, or (b) they’re seeking a dual-degree at that institution. The benefits will go primarily to law schools putting together 4-2/3-3/3-2 (for masochists) undergrad-J.D. programs and those touting their dual-degree offerings.

Even then, applicants in both circumstances must still take a standardized test. They must have scored in the 85th percentile or higher on the ACT or SAT if they’re undergrads at the same institution. If they’re seeking a dual-degree, they must have scored at the 85th percentile or higher in the GMAT or GRE. No one gets into law school without taking a standardized test and doing very well on it. Applicants must also have either ranked in the top 10 percent of their undergraduate classes “through” six semesters (I’m unsure if this means six semesters total or six consecutive semesters) or achieved a cumulative GPA of 3.5 or greater.

Bottom line: Very few applicants will benefit from this interpretation, and in no way is it watering down the aptitude requirement because only very sharp people will be able to use it. If anything, I doubt even those who are qualified would even know about it. At best it excuses a bunch of would-be elite law school students who would’ve crushed the LSAT anyway.

(2)  Death to the full-time faculty calculation!

Interpretations 402-1 and 402-2, which set out the convoluted rules for calculating full-time-equivalent faculty has been crossed out. No longer shall full-time legal writing instructors be treated as seven-tenths of a full-time teacher.

(3)  Goodbye dusty reporters in the library…

Standard 606 and Interpretation 606-2 have added the language “reliable access” to describe the “core collection” law school libraries must provide their students. “Reliable access” can include subscription and publicly available databases as well as “formal resource-sharing arrangements.” Anyone talking about onerous library requirements will have nothing to complain about now. (Okay, maybe less.)

(4)  …And hello office-sharing for professors.

Yup, Standard 702(3) (now 702(4)) has been modified from “an office for each full-time faculty member” to “office space for full-time faculty members.” Now deans can retaliate against petulant faculty by making them share offices with their ill-mannered colleagues.

(5)  No more taxation without documentation.

The new Standard 202(b) requires law schools that are attached to parent universities to obtain an annual “accounting and explanation for all charges and costs assessed against resources generated by the law school and for any use of resources generated by the law school to support non-law school activities and central university services.” Those of you with longish memories remember in 2011 when the University of Baltimore ousted its law school’s dean, Phillip Closius, allegedly for disclosing that the parent university confiscated all but $81,000 out of a $1.4 million tuition hike. After the ABA’s regular inspection, it asked for (read: demanded) such an accounting by the parent university. If this standard goes into effect—and this one absolutely certainly will—a lot of universities will have to confess the extent to which they’ve been looting their law schools. This might lead to more awkward conversations between ABA accreditors and university administrators. Who knows, maybe students will get more of their money’s worth or even a tuition cut?

(6)  Dishonor before death?

In a cryptic pair of new standards, 202(c) and 202(d), law schools will be deemed not in compliance with the standards if their “current financial conditions” and even their “anticipated financial conditions” (whatever that means) has—or is reasonably expected to have—”a negative and material effect on the law school’s ability to operate in compliance with the standards or to carry out its program of legal education.” 202(c) is a modified version of Interpretation 201-1, but 202(d), the “anticipated financial condition” appears new but ported from the original 201(a).

I’m not sure what conditions would trigger a non-compliance situation due to anticipated financial problems, or its consequences, so I don’t know what this means or how it’d be enforced. I include it because law schools are in tough times, so I can imagine a central university shutting down its law school if it reasonably believes it won’t be in compliance with the standards in the future. I seriously doubt a law school would lose its accreditation due to anticipated financial reasons before being shut down.

This concludes the listicle. Take care folks.

Japan’s Legal Profession Doesn’t Need Law Schools

…Is really all I have to say in response to the May 30th Yomiuri Shinbun editorial titled, “Law School Reform Urgently Needed, Essential for Profession’s Future.” I discussed the striking data underlying this topic last week. The newspaper that owns the indomitable the Tokyo Giants baseball team writes:

The primary cause of this situation [people qualifying for the bar exam by taking the preliminary test rather than blowing ~$16,000-$45,000 on two to three years of law school] lies in the fact that law schools have failed to perform their function of nurturing the legal profession.

Launched in 2004, law schools aim to foster work-ready legal professionals. Therefore, their curricula emphasize practical business skills, and essentially exclude preparation for the bar exam. The result is low pass rates. It could be said that law schools fail to fulfill the original purpose for their establishment.

It is, of course, necessary to cultivate practical business capabilities. But, first and foremost, it is essential to help students acquire the abilities needed to pass the bar exam. Reconsideration of curricula is essential in this regard.

What nonsense. Prospective lawyers are behaving rationally. If it’s less risky to take the preliminary test than be nurtured into a “work-ready legal professional” at law school at their cost, then that’s what people will do. The fact that the bar exam is the necessary condition to becoming a lawyer in Japan means that the law schools’ purpose is frivolous. If the state thinks the exam is more important than learning professionalism or whatever, then concerned newspapers should be lobbying to either change the test to cover practical skills or reduce its impact altogether. It sounds to me like Japan’s legal profession’s future doesn’t need law schools. The government’s failed policy has pretty much said as much.

Law School Applicant Collapse: Japan Edition

Readers might recall last month when UC-Irvine’s law school defenders took to The New York Times‘ op-ed pages and told us that America’s legal education is so amazing that even Japan was emulating it. Well, The Yomiuri Shinbun tells us how that experiment turned out:

Number of Law School Applicants (Japan)

Ouch. In 2007, law schools received more than 40,000 applicants, but this year they’ve managed to haul in 11,450. Most of the applicant collapse is due to news getting out about graduates’ low bar passage rates. And all this without any scamblogs! (to my knowledge)

Apparently Japan created a “preliminary test” in 2011 as an alternative to law school, and this year it beat out regular schooling to the alarm of some officials who now want to limit the number of people who can take the test. Good luck with that. It’s time to admit the Americanization of legal education didn’t work and shut the schools down.

Scalia on Law School Sustainability: Concur and Dissent

…Is up on The American Lawyer.

Speaking of Financing Legal Education…

So the ABA has promptly acted on the Task Force on the Future of Legal Education’s recommendation to convene a new task force to investigate the financing of legal education. I think the stakes for this task force are going to be higher than for the previous one because its focus is more specific and it will have to address concrete questions like what impact the federal loan program has on law school costs. Its mission?

The task force is charged with looking at the cost of legal education for students, the financing of law schools, student loans and educational debt. It will also consider current practices of law schools regarding the use of merit scholarships, tuition discounting and need-based aid.

To commemorate the task force, here’s some info on tuition and discounting from the Official Guide for the 2012-13 academic year, the most recent one for which data are available. Notably, the average private law school lost many students who were paying full tuition.

Mean No. Full-Time Private Law School Students by Grant Received

This translated into a sudden loss of $215 million in revenue from full-time students for private law schools, which comes to about $1.9 million per school on average.

Aggregate Revenue From Full-Time Private Law School Students Paying Full-Tuition

As a result, the percentage of full-time students paying full tuition at the average private law school fell below 44 percent, a loss of about 10 percentage points since 2001. Public law schools follow the same trend.

Percent Full-Time Law Students Paying Full Tuition

Increasingly, the stated tuition price is not indicative of what the first year of legal education really costs.

That’s all for now.

********************

[Updated for comments below, here are the first two charts with lines excluding the top 20 private law schools by U.S. News ranking.

Mean No. Full-Time Private Law School Students by Grant Received Aggregrate Revenue From Full-Time Private Law School Students Paying Full TuitionThe decline in students receiving no grants is slightly steeper when you exclude the top 20 (~-3%). Same goes for aggregate revenue from full-time students paying full tuition.]

WSJ: Big Numbers Divided by Small Numbers Yield Large Percentages

The Wall Street Journal tells us that 1.63 million people are now on IBR, up from *gasp!* 1.32 million last quarter and (avert your eyes innocent readers!) 950,000 in the third quarter of 2013. That’s SEVENTY-TWO PERCENT GROWTH! HOLY COW! (Note: These figures are only for borrowers with Direct Loans. The actual figure is higher when you include guaranteed-loan borrowers.)

…Or it’s just what you’d expect to happen when you divide large numbers by small ones, especially when the government has been lamenting low IBR enrollment rates. Indeed, I recall way back in October 2012 when Inside Higher Ed dared to run an article titled, “An Underused Lifeline,” in which we learned that only 1.1 million borrowers had enrolled in IBR and 474,000 on ICR (clearly one of these two publications knows how the federal loan programs work better than the other).

Apparently, though, the world changed when I wasn’t looking, and now IBR and its friends are monstrous, out-of-control, “fastest-growing forms of financial assistance” because the Obama administration’s efforts to sign people up are working better than intended. Don’t tell the WSJ, but if you include Direct Loan borrowers on ICR, the total is 2.23 million borrowers. Another 850,000 are in “alternative” or “other” repayment plans, which will probably have the same effects as IBR/ICR/PAYE do on the budget. It’s all on ED’s Web site.

It’s like you can report on people signing up for IBR but not the PPACA exchanges.

Aside from mastering basic math skills, there are a few other points worth noting from the article:

(1). Treasury’s deputy secretary Sarah Bloom Raskin says seven million people are currently in default on their government student loans. There are currently 40 million federal loan borrowers, leading to an overall default rate of 17.5 percent. If you’re going to sensationalize the potential losses on IBR, you should be pointing out that the federal loan program has been a disastrous failure all along. Instead, the coverage appears to focus on how to “fix” IBR as in point (4) below.

(2). Thou shalt be specific in thy reportery:

The programs’ popularity comes as top law schools have taken to advertising their own plans that offer to cover a graduate’s federal loan repayments until outstanding debt is forgiven—opening the way for free or greatly subsidized degrees at taxpayer expense.

To my knowledge, only one “top law school” has advertised such plans. The WSJ should have been specific. Also, the story might be newsworthy in law school reporting, but overall, I consider it pretty minor. Georgetown University Law Center grads don’t number 2.23 million and not all of them are on IBR, ICR, etc.

(3). The motivations of the Obama administration:

The Obama administration has sought to boost enrollment in income-based repayment to reduce defaults, which have soared in recent years amid the weak labor market.

If I were cynical, I’d say Obama’s student loan policies are just a ploy to kick the student debt can down the road for his successors to deal with.

Also in case you’re thinking of tarring the Democrats by saying IBR is a handout to the 47 percent or whatever, recognize that it was enacted during the Bush administration.

(4). More Lucky Ducky Debtors:

The Obama administration, while touting the overall benefits of the programs, has voiced concerns that they could benefit some borrowers who need the help the least—namely lawyers and doctors making high incomes. The White House proposed in its budget earlier this year to limit the amount forgiven under the programs.

Has anyone bothered to calculate how many high-debt, high-income lawyers there are on IBR? What proportion are they of the total? How big would the losses be?

(5). …Which leads to the issue of the article’s tone. Consider the title, “Enrollment in Student-Debt Forgiveness Programs Soars in 2014.” IBR is not a “student-debt forgiveness program.” That’s a feature of IBR, not its primary purpose, which is to reduce monthly payments for struggling debtors. Thus, the title misleads readers because it implies that everyone who signs onto IBR will have their loans canceled.

Now, it’s true that the average IBR debt is about $55,000, that many debtors will probably never be able to repay their loans, and that taxpayers will probably have to accept a write-down on student loan debts. However, IBR just masks the student debt crisis. Without these programs, highly leveraged debtors would still be highly leveraged, and taxpayers would still have to cancel many bad student loans. IBR changes none of this other than rescuing people from debt servitude in exchange for tax liens on their incomes.

Despite the sudden hype, we have no idea what the dispersion is for IBR debts (and (future) incomes). It could be that a majority of the IBR debtors have small debts that will be paid off in fewer than 20 years. A bigger problem is the Grad PLUS Loan Program (another Bush-era invention), which is a blank check to the aforementioned lawyers and doctors, or, rather, their universities. Good reporting would have told readers this.

[Note: corrected typos.]

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