Unload Your Law School Bonds. Now.

Reuters, “Fraud suits against law schools ‘credit negative’: Moody’s

I suppose I have something to gain by opening with that title, even though we all know it’s inevitable that law schools will close anyway. However, real estate bubble oblivious Moody’s thinks that declining enrollments are the harbinger of reduced revenue for standalone law schools.

In January, Moody’s revised its outlook on New York Law School from “stable” to “negative,” reflecting “recent enrollment volatility” — a 25-percent decrease in the size of the 2011 entering class — and uncertainty about the outcome of the pending lawsuit. (The agency affirmed an underlying “A3” rating on New York Law School’s bonds, the lowest grade of “A” bonds with above-average creditworthiness.)

The law schools adamantly maintain that the lawsuits are without merit, although the one against Thomas Jefferson School of Law in California is in discovery and analogous lawsuits against culinary schools have resulted in victories for student plaintiffs. I can’t imagine things going well if standalone schools lose their lawsuits, and I’m guessing applicants won’t flock to a law school that survived a Chapter 11 filing.

Does it surprise anyone that law schools have stronger bankruptcy protections than their students?

One comment

  1. Before viewing the last paragraph, I immediately felt the need to throw up – as I recognized that these filthy, dishonest stink pits and diploma mills have MUCH better bankruptcy protections than student debtors.

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