Day: 2011/01/30

Will Fewer LSAT-takers Mean Lower Tuition? (All the World Wonders)

James B. Levy, “December LSAT test-takers drop 16.5% from last year; first time test-takers down 22%,” in Legal Skills Prof Blog

J-Dog, “LSAT, Law School Applications Down 10+% Year-over-Year” in Restoring Dignity to the Law

Knut, “Are They Finally Paying Attention?” in First Tier Toilet !

In the light of this disturbing picture, one might expect that law schools are facing an imminent market collapse – declining applications, few students willing to take on financial risk, the need for significant internal cost savings, price cutting, and other similar measures. Surprise, surprise, surprise! The demand for legal education has remained strong throughout the economic downturn. Applications at many schools are at record levels. Enrollment has been solid, with many schools recording historically high yields of new students. –Dean Richard Matasar, New York Law School, October 2010

Surprise, surprise, surprise! Despite the profoundly countercyclical nature of legal education, demand at the LSAT boundary is dropping. First-time test-takers we would expect to be signing up to take the exam are opting out. In October 2010, 54,345 people (-10.5% from 2009) took the exam, and in December 2010, 42,096 (-16.5% from ‘09) took it. LSAC even reports applications are down 12% for Fall 2011.

Although the number of test-takers has only dropped to 2008ish levels (whatever that means for the market), the question is: Will tuition drop already?

If the number of new test-takers has dropped and the number of repeat takers is up, then the overall number of people in the game has dropped from the previous year or two, shrinking the applicant pool. The only comparison I have is from Astronomy (wha??), the eliminationist Drake equation to test the possibility of extraterrestrial life (that’s similar to terrestrial life).

N (new law school students) = College Degree-Holders * Proportion of Test-Takers * Proportion of Subsequent Applicants * Proportion of Accepted Applicants * Proportion of Subsequent Enrollments

Obviously over-stylized, we really need only look at enrollments, but those data aren’t available yet. So the question we can ask is: assuming decreased Test-Takers leads to decreased Enrollments, will that lower tuition?

Hmm. Not across the board. Bear in mind that the “Proportion of Test-Takers” includes repeat takers who want a better score. This suggests that the distribution of scores for Fall 2011 applicants will shift rightwards towards 180, assuming that anyone who did badly twice in a row is less likely to apply at all than anyone who did badly in the past but did better in a retake—a fair assumption.

This phenomenon occurs every year, but it’ll be more pronounced in the future.

From this I believe that U.S. News’s top-tier schools will see more applicants and better overall incoming classes than they have in even the recent past. On that level, law schools that have been able to collect high LSAT scorers will cement their positions and end up competing with schools receiving similar applicants. Schools accepting lower-scoring applicants will have to make do with what they get. Incidentally, one hopes that the smaller, stronger applicant pool will diminish claims by legal professionals that under-motivated applicants are pursuing law degrees for the “wrong reasons.” (Not that I was ever persuaded by them to begin with, but…)

For the near future, I predict a three-tier law school distribution will emerge: law schools will be top-tier, average, or left behind.

Left Behind: These schools will be the most likely to close due to low enrollments, and in the meantime they will see sharp reductions in tuition to function.

Average: These schools will sputter, their tuition increases will plateau and retiring (voluntary or not) tenured faculty will not be replaced. If they are still nonperforming, they’ll also fail.

Top-Tier: Tuition will continue rising as these schools compete with one another provided applicants continue to believe they are good investments.

The real question returns to this blog’s premise: what is the ROI of a law degree? If the investment cost drops, then the return need not be so high. If the return rises, then the investment isn’t so onerous. In our world—a world in which blogs called First Tier Toilet ! warn potential applicants that top-tier schools are a risk—we can tell that many of the Left Behind and Average schools will not survive no matter how much they cut tuition. I also suspect that surprising numbers of graduates from top-tier schools will still find themselves in debt without gainful legal employment. When the return is zero, the degree is still nonperforming. We need only wonder how rotted out the legal education system is.

The Law School Tuition Bubble predicted this back in October, calling it “Scam Blogger Victory”:

0Ls figure out that a large number of law schools are nonperforming, send their applications to either far cheaper alternatives or do-or-die to U.S. News’s top tier schools, and if they’re rejected, they go back to their jobs at Target.  Law schools fail or drop prices.

The perverse problem with “V-SB Day” is that it’s not a solution to the problem (beyond the 0Ls it saves from debt and unemployment) but an interregnum. Worse, since I made those predictions it occurred to me that while reduced law schools is certain and preferable, it doesn’t entail immediate reform. Part of what makes the system so dysfunctional is the large number of nonperforming law schools behaving as Super Law Schools, which I mock as those in landlocked states offering Admiralty Law course streams. As the number of law schools decreases—absent reform—reform becomes more difficult. In other words, obsolete pedagogy becomes further entrenched, course offerings continue to underprepare students for practice, and tuition remains too high. The better law schools absorb the latent success of the failed law schools and as a result they become more powerful and can demand better OCI opportunities from employers. So what we’re seeing isn’t the beginning of the end but the end of the beginning.

It’s like Highlander, but with your tax dollars and students’ futures.

Now if I can only work Zardoz into the LSTB.