Links Are You—LL.M. Programs & How to Finance a Law School

I’m running low on Who albums, but not on links!  Here’re two good ones for you.

(1) Karen Sloan, “‘Cash Cow’ or Valuable Credential?: Law Schools Add LL.M. programs, but their value may be limited,” The National Law Journal

Growth in attendance of LL.M. (Legum Magister, since no one ever knows what it stands for) programs is exploding.

Neither the ABA nor the National Association for Law Placement (NALP) collects employment data or salary data specifically for the graduates of these programs, as they do for J.D. graduates.

Uh oh…

Schools can admit students into the programs without worrying about compromising their ABA accreditation or U.S. News & World Report rankings, since the ABA does not accredit LL.M. programs and U.S. News does not look at the test scores or grade-point averages of those students. “All schools need to be aware of the perception that LL.M. programs are just one more way to get another year of tuition from students who have already paid too much,” said Chapman’s [Director of Graduate Programs Ron] Steiner.

The “perception” Director Chapman refers to is an argument from ignorance: we don’t know what the outcomes of LL.M. programs are, so we can’t say whether they’re effective or not.  However, given that people are going into the programs to distinguish themselves from those with mere juris doctors, especially with those from ünter-law schools, we can assume that the value of a juris doctor is decreasing according to the market.  That alone is a serious problem.  We can only hope that the unemployment the legal profession faces is wholly cyclical and that the J.D.’s value in a good economy hasn’t been compromised.  I fear it has.

[Update]: Elie Mystal is far less forgiving about LL.Ms than I am.

(2) Billy Gunn, “Next up for Louisiana College: Serious Financing,” in The Town Talk

Remember Louisiana College of Law in Shreveport, LA?  It’s still moving forward.  If you ever wanted to know the process law schools go through to find their funding, this article has it all.  Starting a law school requires an estimated $50 million investment, and that’s just for operational costs, excluding the facility, renovations, and the library.  Gunn then enlightens us:

Unlike other higher-education endeavors, [Dean J. Michael] Johnson said, a law school becomes profitable or at least self-sustaining after a few years.

Too bad the tuition bubble is unsustainable for a few more years.

The next step is to ensure that the enrolled students are smart enough to pass the bar exam.

[A] law school is better off taking on a small, qualified group of first-year students, who will enroll on faith that the institution will pass one of the first ABA hurdles — provisional accreditation — which will allow them to take the bar exam. Those students’ bar exam passage rate is key to full accreditation by the ABA down the road.

My modest research yields only two law schools that failed to obtain ABA accreditation. One was the for-profit American Justice School of Law/Alben W. Barkley School of Law in Paducah, KY, which closed in 2008.  The other is the Massachusetts School of Law, aka “ABA’s Bane,” still accredited in Massachusetts and Connecticut.  Unless Louisiana College is a mismanaged for-profit school or a renegade flaunting ABA dictates, it’s pretty unlikely LC wouldn’t be accredited.  Additionally, neither school failed for want of bar passage.  Nevertheless, Liberty University School of Law dean Matthew Staver surprised me when he said:

“It’s a very rigorous process” that most nascent law schools never get through.

I think the swarms routinely overwhelming Above the Law’s servers would beg to differ.  I’d like Dean Staver to name the other nascent law schools that failed to gain ABA accreditation.  Wilkes Law School, for example, didn’t have the funding, so accreditation was never an issue.  That law school’s still on the table, though.

The article loses me when it discusses how LC will recruit students.

There is no law school for 200 miles in any direction and plenty of geography from which to draw qualified students with tuition money.  Johnson waves away the naysayers. “From a pure feasibility standpoint,” Johnson said, “I’m not sure how this can fail because … it looks like the perfect storm for our law school.” [Possibly ironically misused metaphor original]

Law schools are not hospitals; we do not need them evenly spaced throughout the country.  Even so, Louisiana is already the 11th highest jurisdiction in lawyers per capita.  Yes, there are plenty of qualified students, and they finance their educations with non-dischargeable student loans.[i] Indeed, LC may not fail, but from a pure feasibility standpoint we’ve seen no evidence that its graduates will succeed.  Nor do we even know its tuition rates yet.

Phillip McIntosh, associate dean of [Mississippi College School of Law], said students choose law schools for many reasons, including “location, costs and potential job prospects.”  Said McIntosh… “Recruiting law students is a very competitive enterprise that promises to only get tougher.”

This blog does not exist to sing praises of Jerome Kowalski’s essay, “What If They Built a Law School and Nobody Came?” but you have to be impressed that he can handily naysay deans Johnson and McIntosh before getting to his byline.  Despite negligible indications the economy is improving (and plenty of reasons I think it won’t, absent sustained government intervention), the American public still believes that a juris doctor is a worthwhile investment at current tuition prices.  Consequently, I’d be astonished if law student recruitment became a “competitive enterprise.”  It’d probably be a good thing.

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[i] It occurs to me that a particularly unscrupulous law school could in theory admit large 1L classes and deliberately fail the multitudes who wouldn’t’ve passed the bar to begin with—just to take their money and maintain a high bar passage rate.  Hmm…

The Links by Numbers—Bankruptcy, ROI-Based Rankings, the Tuition Bubble, and the Uniform Bar Exam

Four late summer links:

(1) Leigh Anne Faugust, “Changes on the Horizon for Student Loans in Bankruptcy?” in Leesburg Bankruptcy (Law Office of Robert Weed)

A lot of investors saw student loans as a sure bet because the students would not be able to get relief under any but the most extreme circumstances.

Of interest is the graph at the top of her post:

Given that we know student debt is now at $850 billion and rising, I suspect this chart is the volume of loans issued per year and not total volume.

Although the Dept. of Education should’ve put more year markers along the X-axis, the upward bend begins roughly in the late 1990s—when Congress first inserted the undue hardship exception into the bankruptcy code for federal student loans.

The House bill is slowly moving through committee.  Too bad Congress doesn’t realize the moral hazard the undue hardship exception created still imperils all public student loans, which are the majority of those in the system.

(2) Debra Cassens Weiss, “Forbes Will Rank Law Schools Based on Job Results, Northwestern Reveals,” in the ABA Journal

Citing TaxProf Blog on Forbes’ college rankings, Forbes will look at law grads’ salaries one year and five years after graduation to generate a set of law school rankings based on return-on-investment.  Looking over its college rankings (and its “objective” methodology), I get the impression that Forbes is looking at salaries, and not at interest on debt, nor at whatever the discount rate is (very high these days).  In other words, Forbes’ definition of ROI is heavy on the R but light on the OI, unless we’re talking about a national military academy.[i] It also fails to test whether higher education between $150,000-$200,000 over at least four years plus interest is preferable to moving up the management chain at the local department store.

It’s now within the realm of possibility that a 17-year-old planning to go to a private college and then law school can expect to “responsibly” accumulate a quarter million dollars of non-dischargeable student debt.  And that’s just the principal!  Given that Herwig Schlunk calculated the break-even annual starting salary for most private law schools at well over $150,000 (excluding prior student debt), it’s hard for me to believe that Forbes’ rankings will tell us anything practical.  It certainly won’t be very helpful to rank law schools based on employment statistics during a period of mass unemployment.

Remember: Any higher education ranking must include the other option: Not going at all.

(3) Elie Mystal, “Citi Sells Student Loan Division: Can’t You Hear the Bubble Bursting?” in Above the Law

Contrasting to Faugust’s investors seeing student loans as a “sure bet” and Forbes’ novel definition of ROI:

Tuition is out of control.  Lenders lend without considering whether these kids will be able to pay the money back, and the American job market is in the tank.  Is this really the time you want to be in the business of originating student loans?

Apparently Citi has elected not to be in that business anymore.

(4) Martha Neil, “ABA Group Backs Uniform Bar Exam,” in ABA Journal

Yes, the UBE is a good idea.  Telecommunications and the ease of research mean state boundaries hinder legal professionals, and the costs of the testing complex are ultimately borne by clients.  If one of the commenters is right, that is, the UBE merely includes the Multistate Bar Exam, the Multistate Essay Exam, and the Multistate Performance Test, then the issue is the exam’s contents.  Bear in mind that the MBE tests generic common law where state laws often differ, especially criminal law.  Federal law beyond constitutional law doesn’t appear at all, especially bankruptcy.  Law schools are often criticized for their archaic curricula, but the easiest way for a law school to measure its performance is by teaching the local bar exam.  Of course, licensing authorities need only care about their definition of “competence,” and they have no incentive to worry about rising tuition, over-supply, or skill-sets.  The tuition bubble broadly exists because decision-making power has been diffused to multiple institutions with minimal cause to worry about the overall state of the profession.  Harmonizing these institutions would hopefully resolve the problems.

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[i] Clearly the flaw in the methodology is that it studies salaries longitudinally, assuming current graduates will have the same earning potential of those thirty years ago.  The 30% of the score assigned to “Postgraduate Success” relies on three factors: alumni salaries on Payscale.com, alumni listings in Who’s Who in America, and amusingly “Alumni in Forbes/CCAP Corporate Officers List” (only 5% though).  Undoubtedly, late boomers and early gen-Xers, if they’re still employed, went to college when it was a no-brainer investment.  The longitudinal prospects of 2011 graduates and beyond are not good given that tuitions have risen faster than inflation.