Month: January 2018

LSAT Tea-Leaf Reading: December 2017 Edition

The number of December LSAT takers rose to 40,096 (+27.9 percent) from 31,340 last year. It is the sixth administration in a row to show positive test-taker growth. Here is what it looks like in perspective.

This is quite the acceleration, one of the fastest ever.

The four-period moving sum, which is identical to the calendar-year total, rose to 126,248 (+7.5 percent). Comparable administrations are September/October 2009 (+6.5 percent), September/October 2001 (+7.9 percent, the record), and December 1988 (+7.0 percent). The last time the four-period moving sum was this high was June 2012 (128,336).

Two months ago I (idly) predicted this surge would diminish over the next year. That doesn’t appear to be where the trend is heading. Disturbingly, two of the aforementioned comparison administrations, fall 2009 and fall 2001, were recession periods, which indicates the kind of moment LSATs are in. I’ll repeat the same points for as long as this phenomenon continues: There is no reason to believe the legal profession will have more jobs compared to the rate of LSAT growth. Most of these potential applicants—let’s call them Sessions’ 0Ls—are badly misguided.

Since we’re on the topic of LSAC data, as of week 3, 2018, the number of applicants for this fall stands at 29,287. Week 3 was roughly the halfway mark for last year, so we may have about 61,000 applicants by August. This final applicant count has been falling in recent weeks, which I think is typical.

More tea leaves to read after February.

2016: Full-Time Students Paying Full Tuition Fell by 2.4 Percentage Points

Discussions of law-school costs are incomplete if they do not include discounts some students receive, usually as merit scholarships paid for by their full-tuition-paying classmates. The topic is salient today because Congress is considering limiting the amount law students can borrow from the federal government. If the PROSPER Act passes, then it’s likely law schools would need to reorganize their cost structures—notably by reducing scholarships and their full price tags. To analyze the phenomenon of discounting, I focus on the ABA’s 509 information reports’ scholarship data. This information lags the academic year by one year, so as of the 2017-18 academic year, we now have data on 2016-17. One new drawback this year is that law schools that closed or stopped accepting new students before 2017 did not provide scholarship data for 2016, so the picture is slightly distorted.

In 2016, the proportion of full-time students paying full tuition fell by 2.4 percentage points from 28.1 percent to 25.7 percent at the average law school not in Puerto Rico. At the median law school less than one-quarter of students pay full tuition.

The proportion of students paying full tuition has fallen considerably over the years. At the turn of the century, more than half of students paid full cost; now about a quarter do.

At the average private law school, which don’t price discriminate in favor of resident students, the number of students receiving grants ranging between half tuition and full tuition now exceeds the number paying full tuition. Many more receive a grant worth less-than-half tuition.

One advantage of knowing how many full-time students pay full tuition is that we can estimate the total revenue they generate for private law schools, except Brigham Young University, which charges LDS students less.

Since 2011, the peak year, inflation-adjusted revenue from full-tuition-paying full-time students has fallen 55 percent. Since 2001, the last year for which data are available, the drop is 35 percent. In 2016, the median private law school’s full-tuition revenue was $3.8 million, down from $12.2 million in 2011. In 2001, the median was $9 million. This is quite a precipitous decline.

So how substantially are private law schools discounting? The best way to answer that question is by treating the sticker price at private law schools as the independent variable, and treating as the dependent variable their tuition after subtracting their median grant (median-discounted tuition “MDT”). First I divide private law schools into full tuition quintiles and give their mean averages. Then I take mean of the MDTs within each quintile.

We find that the MDT at the most expensive law schools is about as much as full tuition at the cheapest private law schools. Meanwhile, schools in the fourth quintile now discount to the level that third quintile law schools do. This indicates pretty fierce competition for students. MDTs at the bottom four-fifths of law schools are converging with one another while diverging from the most expensive schools.

That’s all for now.

Information on this topic from previous years:

It’s 2018. Where’s My ‘Hyperinflationary Great Depression’?

[The following post first appeared on this site on January 1, 2012. What it said then still applies today, mutatis mutandis. Thanks for reading the blog and have a prosperous 2018!]

Behold, the curse of a long memory. Last January [2011], Google Alerts sent me an e-mail informing me that the National Inflation Association (“Preparing Americans for Hyperinflation”) issued a press release predicting that the higher ed bubble was “set to burst beginning in mid-2011. This bursting bubble will have effects that are even more far-reaching than the bursting of the Real Estate bubble in 2006.” The NIA press release then digressed into legal education (I’m guessing they’d just read David Segal’s first NYT piece a few days earlier), how evil lawyers are, how they produce nothing for society, and how 60 percent of the Senate and 37 percent of the House are lawyers who rig the economy to make jobs for lawyers. It editorializes:

“While everybody went to school to become a lawyer [really?], nobody went to school to become a farmer because Americans didn’t see any money in farming. With prices of nearly all agricultural commodities soaring through the roof in 2010 and with NIA expecting this trend to continue throughout 2011, the few new farmers out there are going to become rich while lawyers are standing at street corners with cups begging for money.”

The NIA would’ve been more helpful if it explained how lawyers could be a drain on society yet remain vulnerable to market forces. Also, one would think unemployed lawyers would try to find non-lawyer jobs instead of begging, but I think it’s important to note that agricultural prices weren’t “soaring through the roof” in 2010. They were growing, yes, but although the NIA was right that they continued to do so in 2011, (a) it’s stalled recently, and (b) they’re no worse than they were in the 1980s and early 1990s.

Oh well. The NIA sternly concluded:

“We must work hard to educate America to the truth if our country is going to have the wherewithal to survive the upcoming bursting college bubble and Hyperinflationary Great Depression.”

Whoa.

I can’t say I’m quite as disappointed as the NIA undoubtedly is that we’re not seeing much inflation these days, and in mid-2011 I didn’t see many colleges cutting their tuition, laying off faculty, closing programs, or trying to retrench themselves. I also remain unconvinced that $1 trillion in student debt can be worse than $8 trillion in mortgage debt. True, student debt is not dischargeable (unlike mortgage deficiencies) absent a showing of an undue hardship, and it’s hampering the recovery and ruining lives, but it’s not worse in quantity than the housing bubble. As for the NIA’s paranoid ranting about lawyers, all economic evidence I’ve seen indicates that legal services have all but stagnated for much of the last two decades. Apparently, those 60 percent of lawyer-senators aren’t very good at creating work for themselves. I suppose the NIA should express appreciation.

Anyway, if anything, inflation would be a boon to underwater homeowners and student debtors because it erodes the real value of their debts, which grew significantly in the 2000s. Here’s household debt to GDP:

Importantly, I’m no macroeconomist but I’ve never heard of a “hyperinflationary depression.” The terms contradict each other. Depressions occur when people take on excessive debt and begin paying it down simultaneously instead of spending money on other things. This is deflationary because new credit isn’t being created, even by the government. By contrast, hyperinflation has only occurred in unusual circumstances, like when a government owes debts to foreigners in a different currency. Weimar Germany, for example, owed gold-dominated war reparations to the Allied powers, and to purchase the gold, it printed money, causing hyperinflation. Zimbabwe isn’t a good comparison either because it’s a small, HIV-ridden landlocked state with an undiversified, oligopolistic agrarian economy while the U.S. is a wealthy, continent-spanning super-state.

As for inflation fears generally, maybe it’s the fact that I have no memory of high inflation, but why isn’t there a “National Personal Income Association” (NPIA) that regularly celebrates increases in Americans’ per capita personal income?

“Per capita personal income has quadrupled since 1980! Prices didn’t even triple! Hooray! We’re rich! Fiat currency forever and ever! ‘You shall not crucify mankind upon a cross of gold!'”

I’m sure the NPIA wouldn’t’ve been too thrilled with 2008-09, but personal income is increasing again. The problem has just been that over the decades those gains haven’t been distributed equally. This isn’t a problem of inflation but one of wages and taxation.

Intuition tells me the NIA won’t spend early 2012 carefully discussing why the higher ed bubble didn’t burst in mid-2011 as it predicted, nor will it take the time to explain why Americans—many of whom are net debtors—should be concerned about inflation. Instead it will prophecy even more hyperinflation later. But here’s hoping the National Inflation Association won’t provide me entertainment come January 1, 2013. Such is the curse of a long memory.