Legal Education ROI

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:


2017: Full-Time Private Law School Tuition Up 3.2 Percent

Full-time tuition costs at private law schools rose an average 3.2 percent before adjusting for inflation. The rate is about half a point higher than last year’s increase, but it’s still well below the typical 5 percent rate before the Great Recession. For comparison, 2012 and 2013 saw increases of 3.7 percent and 3.6 percent, respectively. I focus on private law-school tuition because public law schools receive varying degrees of state subsidies, so they do not reflect the already distorted legal-education market’s prices.

Here’s what the dispersion of full-time private and full-time public (residential) tuition looks like going back to 1996:

Last year I pondered whether the public law school at the 25th percentile would begin charging more than the Stafford Loan limit of $20,500. It’s still one thousand dollars shy of it—in fact, it fell by $200 after adjusting for inflation. As of now, 10 percent of private law schools (12) charge more than $60,000, with the maximum at $67,564 (Columbia). It was only back in 2012 that the top 10 percent charged over $50,000 in nominal dollars, +$10,000 in five years.

In 2017, the median private law school charged $47,071 (between Pace and Suffolk); the mean was $46,843.

Unusually, costs grew consistently among private law schools. If we separate the law schools into quintiles, here’re the increases at the mean of each quintile.

From 2014-16, the tuition increases were stacked towards the high end, which was consistent with the prediction that the cheaper law schools were so fiscally crunched that they couldn’t afford to raise their costs any more. 2017 clearly breaks that trend, and along with its moderate mean increase the growth is distributed fairly evenly among private law schools.

The following private law schools raised their tuition charges by more than 5 percent:

  • Widener (Delaware) (+12.0%)
  • Liberty (+10.8%)
  • La Verne (+10.2%)
  • Elon (+10.0%)
  • Brooklyn (+9.8%)
  • Belmont (+8.9%)
  • John Marshall (Atlanta) (+5.9%)
  • Mississippi College (+5.6%)
  • Mitchell|Hamline (+5.5%)
  • Capital (+5.4%)

I would be cruel to ignore private law schools that cut their full tuition, so here’s that meager list:

  • University of Tulsa (-33.6%)
  • Howard University (-10.4%)
  • Santa Clara University (-3.4%)
  • Whittier Law School (-2.2%)
  • Arizona Summit (-0.3%)

Yes, Tulsa’s one-third slash is the largest nominal tuition cut I can find going back to 1996. It beat Indiana Tech’s (-31.1 percent) last year (fat lot of good that did) and Ohio Northern’s (-26.4 percent) in 2014. Howard’s is fairly significant as well, particularly because in 2016 it raised tuition by 10.9 percent. Big raspberries go to Elon University which extended its students a -12.1 percent cut in 2015 only to mostly reverse it with a 10 percent hike this year.

Nine private law schools kept their full-tuition tags flat (Golden Gate, University of the Pacific, Western State, Ave Maria, St. Thomas (FL), Mercer, Illinois Institute of Technology, Western New England, and Vermont). Barry increased its costs by … $1.

Here are public law schools that cut their costs to resident students:

  • University of Illinois (-7.8%)
  • University of D.C. (-5.6%)
  • University of New Mexico (-5.3%)
  • Texas Tech University (-1.1%)

I note that D.C. and New Mexico both increased their costs last year by more than these decreases.

Overall, the size and character of the increases at private law schools was the same as last year, they were just distributed more evenly among law schools. The phenomenon of nominal tuition cuts is still marginal, and some schools appear to reverse their cuts shortly after instituting them.

Going forward, the thing to look out for is if Congress passes the PROSPER Act, which would cap federal loans to law students at $28,500 and fix a lifetime cap of $150,000 per student. If it does, then I predict that law schools will respond by serious restructuring: eliminating merit scholarships, slashing tuition to $28,500 plus whatever private lenders are willing to lend out, and getting rid of many faculty and their perks. I’m also sure many central universities will use the PROSPER Act as an opportunity to shut down their money-losing law schools.

Of course, this all assumes that the Bennett hypothesis is true, but AccessLex-funded research falsified it, so we all know law schools will raise their prices forever.

Full-time tuition costs don’t necessarily indicate what students are actually charged, but they do show how much rent law schools can extract from the government’s loan programs.

Information on this topic from prior years:

What Recovery? Legal Services Industry Grows 0.2 Percent in 2016

Last year I celebrated a full 2.0 percent growth in the legal-services industry, according to Bureau of Economic Analysis reports. Alas, this year it’s all been dashed away and revised. Instead of 2.0 percent growth, we have 0.2 percent growth, and the figure for 2015 has been revised downward to 0.4 percent. Sad trombone.

The whole economy grew 1.5 percent to the legal sector’s 0.4 percent.

(Source: Bureau of Economic Analysis (BEA))

Since 2008, the legal sector has contracted by a cumulative 23 percent. It is about the same size as in 1995.

As for the composition of the legal sector’s value added, it’s mostly attributable to … taxes (+0.4 percent). The gross operating surplus, i.e. what goes to firm owners, was down 0.1 percent, and total compensation has been flat two years in a row. Since 2008, compensation of employees has contributed -7.5 percent to the legal sector. The gross operating surplus added -15.5 percent, and taxes contributed nothing.

Finally, consistent with flat growth in the legal sector, household consumption of legal services fell by 1 percent, but it at least grew by 2 percent in 2015. Since its peak year, 2003, spending on legal services has dropped by 12.5 percent.

Households consume about as much in legal services of their total consumption as they did in 1982.

Last year I wrote that the legal-services sector can’t shrink forever, but sustained growth is still nowhere to be found. Looking at how much it’s fallen behind the rest of the economy, it’s surreal to think about how much growth would be needed for it to catch up.

How to Falsify the Bennett Hypothesis

The Bennett hypothesis asserts that colleges and universities absorb increases in federal student aid and pass them back onto students as higher tuition charges. Put differently, the hypothesis states that the quantity of higher education is inelastic (insensitive) to its price, so higher-education institutions collect subsidies to students as rents instead of expanding enrollments. Importantly, the hypothesis does not in itself explain why colleges and universities absorb federal student aid (contrary to what its namesake might have believed); it merely offers the mechanism. I regularly cite the hypothesis as a guide to understanding the relationship between the federal-student-loan program and law school costs and debt.

As stated, the Bennett hypothesis is easy to falsify: Find examples where increases in federal student aid did not correspond to higher tuition charges, or show that those subsequent higher charges were due not to the government’s intervention but other factors. Time sequence, correlation, and non-spuriousness. There is a contentious literature on this topic.

Via TaxProf, I see that a research paper, “An Empirical Examination of the Bennett Hypothesis in Law School Prices” (“Empirical Examination”), attempts to test the Bennett hypothesis on private law-school tuition costs. The paper’s author, Robert Kelchen of Seton Hall University (not the law school), argues that he finds no empirical evidence of the Bennett hypothesis’ effects. I believe “Empirical Examination” arrives at unsound conclusions because it mischaracterizes the Bennett hypothesis, and it insufficiently addresses the dynamic history of legal-education financing since 2005.

(I note that “Empirical Examination” is published via AccessLex, which is related to Access Group, the erstwhile private student-lending organization that financed many law students’ legal educations before the advent of Grad PLUS loans.)

Mischaracterizing the Bennett Hypothesis

“Empirical Examination” poses two research questions that mischaracterize the Bennett hypothesis:

(1) Did tuition/fees or living expenses for law school students increase at a faster rate following the creation of the Grad PLUS program in 2006 and the expansion of income-driven repayment in 2007?

(2) Did the student debt burden of law school graduates increase at a faster rate following the creation of the Grad PLUS program in 2006 and the expansion of income-driven repayment in 2007?

These questions appear to assume that the Bennett hypothesis is disproven by discovering a lower rate of increase in law-school costs and student borrowing, as though law-school cost growth can go on indefinitely. This is unscientific. “Empirical Examination” cites no formulation of the Bennett hypothesis discussing growth rates in costs and borrowing, I know of none, and I don’t think any would be correct.

Rather, the way to test the hypothesis empirically is to take away Grad PLUS loans from students at some law schools and not others. If costs and borrowing stay the same at the Grad PLUS-less law schools, then that tends to discredit the hypothesis. In fact, “Empirical Examination” cites a study that conducted a similar test of for-profit colleges and found “some support” for the Bennett hypothesis. For law schools, the closest test case is Charlotte Law School, which lost its access to federal loans earlier this year. There is no Charlotte Law School anymore, and while this may or may not be related to federal loans, it is congruent with the Bennett Hypothesis.

The History of Law-School Lending Is Consistent With the Bennett Hypothesis

“Empirical Examination” understands correctly that around 2004, law students could borrow money from the federal government and private lenders. However, thanks to a rapid series of changes, law students could borrow all of their cost of attendance plus living expenses from the government without any private lenders (whose loans became mostly nondischargeable).

A theoretical examination of Grad PLUS loans with regard to the Bennett hypothesis would compare these changes to a hypothetical baseline without them. For example, one could try to find similar situations today in which a lender would offer an unsecured consumer loan of around $100,000 at 7 percent interest for three years. I lack the finance background to perform such an estimate, but intuition suggests the answer is not good for skeptics of the Bennett hypothesis.

To illustrate, in 2005, Seton Hall University School of Law charged $32,620 for full tuition to full-time students, and law students could borrow only up to $18,500 in federal loans, leaving them to generate the extra $14,120 (43 percent of the cost). Last year, Seton Hall charged $52,022 to full-time students. Under the pre-Grad PLUS loan system, law students would need to cover $33,522 (64 percent of the cost). I doubt private lenders would be so willing to cover more than $100,000 in unsecured loans after three years of legal education, especially given law students’ repayment prospects.

Other Weaknesses in ‘Empirical Evidence’

There are other problems with how “Empirical Examination” explores the Bennett hypothesis and legal education. For one, its focus on the increase in the rate of charging and lending ignores the fact that demand in legal education has plummeted. Last year, Seton Hall received only 1,387 full-time applications, about half as many as in 2007 (2,638). The Bennett hypothesis addresses the supply-side of education, assuming demand is constant, but when demand falls on its own, then you have law schools teetering financially. As a result, assuming demand for legal education had been constant for the last decade, it’s possible that the rate of increase in cost and debt would have continued at their pre-Grad PLUS loan pace nonetheless.

“Empirical Evidence” also discusses how many law schools funnel their revenue to parent universities. This phenomenon, certainly greatly diminished today, is also consistent with the Bennett hypothesis. If law schools were not absorbing tuition as rents, then these transfers would be unsustainable—again, assuming demand is constant. Similar arguments can be made for zero-sum tuition discounting and the dysfunctions in the law-student transfer market.


To conclude, “Empirical Examination” does not challenge the Bennett hypothesis as it applies to law schools. It mischaracterizes the hypothesis as predicting an increased growth rate in costs and borrowing, which implicitly assumes that growth in those measures is natural when they should reach a limit at some point. “Empirical Examination” does not address facts in the history of legal-education finance tending to show the Bennett hypothesis is correct.

LSAT Tea-Leaf Reading: September/October 2017 Edition

37,146 people sat for the September/October 2017 administration of the LSAT, up 10.7 percent from last year (27,606). Here’s what it looks like in perspective.

The four-period moving sum of LSATs rose by 3.1 percent to 117,492, a full percentage point down from the June administration (these kinds of comparisons are where the four-period moving sum is useful). The last time it was this high was December 2012 (115,348).

As before the renewed interest in law is almost certainly due to 0Ls’ belief that they can fight the good fight against CSA Attorney General Jefferson Beauregard Sessions III’s cruelties to minorities. Maybe, though, this blip will diminish into next year, depending on where the politics go. It’ll be interesting to see where these 0Ls ultimately apply. Presumably, the more idealistic they are, the more likely they are to apply to unheralded law schools. With any luck, they’ll be more pragmatic given that Indiana Tech and Charlotte are gone, Whittier no longer accepts applicants, and who knows how many are going to be destroyed by category 5 hurricanes?

I hope these 0Ls realize what kind of legal profession they’ll get into a few years from now. There’s quite a lag between taking the LSAT and being sworn in. The politics of today might not be the same as tomorrow (please don’t let them get worse). I’m just saying, fighting vile executive orders sounds a whole lot more exciting than processing people’s immigration forms. Not everyone gets to practice law as they like.

BLS: 74,800 New Lawyer Jobs by 2026, Turnover of 22 Percent

On October 24th, the Bureau of Labor Statistics released its employment projections for the next cycle, 2016-26.

For 2016, the BLS Employment Projections program (EPP) estimates that there were 792,500 lawyer positions (as opposed to discrete lawyers) in the United States. This figure includes self-employed lawyers. In 2014, the EPP found 778,700 lawyer positions, so there has been some growth between the two years. According to the BLS’s Current Population Survey (CPS), in 2016, 1.133 million people worked as lawyers in the United States. The discrepancy between the CPS and the EPP has existed for some time. In their respective contexts, both figures are correct.

The BLS projects future employment trends in part to help job seekers evaluate career choices, and the projections play a significant role in the BLS’s Occupational Outlook Handbook. Here is an illustration, from various sources, of law-school graduate and lawyer growth since the 1980s.

Click here to read more:


Class of 2016 NALP Data

Happy post-Labor Day. Now back to work, Peasants!

Or, read on.

A few weeks ago, the National Association for Law Placement (NALP) published the national summary report for its Employment Report and Salary Survey (ERSS) (pdf). As with the last two years, I comb the data for more information that the NALP may not have commented on. Much of the NALP report focuses on year-over-year changes to percentages of employed graduates that aren’t very illuminating, especially when the resulting percentages of employed graduates are barely budging. Here’s what they look like.

I’m aware that we now have three consecutive years of data showing graduate employment outcomes ten months after graduation rather than nine, but I really don’t think that makes much of a difference.

It appears that the percentage of graduates not working fell a whopping 0.8 percent. Whoa.

Here’s also the number of graduates employed by status.

We’re seeing a pretty steep fall in total graduates, but the number and proportion of them not working is still higher than the peak employment year of 2007. A lot of this is elevated bar failure rates, but even so the JD-advantage category is still elevated. The NALP says 40 percent of grads in these jobs are seeking other work, which tells me these positions aren’t worth much. In fact, much of their growth (not shown) is visible in business-and-industry positions, further suggesting the definition of JD-advantage is overbroad. They also strongly correlate negatively with bar-passage-required jobs and positively with grads not working.

Here’s the contribution to the percent change in law grads by employment status since 2007 and going back to 2001. We can see that despite falling total grads, a greater proportion of them are either not working or in JD-advantage positions (which are probably not legal jobs themselves).

Meanwhile, with bar-passage-required jobs contributing -15.7 percent to the -14.6 percent change in law-grad outcomes, here’s how private-practice positions have fared (-9.2 percent to all 2007 grads).

The class of 2016 is the first one to be wholly below the 2007 line, meaning that even tiny firms aren’t hiring grads like they did in the peak year. Supply of law grads does not create demand for legal services, strongly indicating that grads in past years who found these jobs only worked in them transiently until they left the legal labor market.

The NALP’s selected findings (pdf) discuss “tightness” in the job market now or at least compared to the pre-recession market. The large fall in bar-passage-required jobs and private-practice jobs argues otherwise. A tighter market would see more grads working in bigger firms and smaller firms raising wages, something the NALP’s own data don’t depict.


Prior reporting on this topic: