Legal Education ROI

Steel Links

Haven’t done a links post in a while, but there are a few things worth writing about in brief.

Allison Schrager, “Becoming a Doctor or Lawyer Is Still Worth It,” Quartz, July 14, 2015.

Of course, that doesn’t mean going to law school is still worth it because, of course, the article carefully points out that not all law school graduates work in high-paying professional jobs and lawyers have a notably high attrition rate.

Wait, it didn’t point that out? Oops. Then maybe we shouldn’t be saying that the return to law school is so high. (I should add that the underlying paper at least discusses this.)

Molly Hensley-Clancy, “LegalZoom Wants to Be ‘The Good Guys’ in the Shady World of Student Debt Relief,” BuzzFeed, July 6, 2015.

Fun fact: BuzzFeed does investigative reporting. I’m happy to serve it a compliment. What it found is that everyone’s favorite legal disruptive innovator is making money by … charging federal student loan debtors $700 to sign them on to income-sensitive repayment plans. Which they can do for free on their own. LegalZoom swears it’s informing borrowers of that fact, but that’s not what happened when BuzzFeed‘s reporter called in posing as a debtor. (Yes, really. This is what journalists are supposed to do.)

Did I mention that a couple weeks ago New York’s Student Protection Unit shut down a financial services company for charging student debtors money for signing them onto IBR plans without telling them they could do so for free? Did I also mention it paid a $10,000 fine? Does anyone call these companies legal disruptive innovators?

Now, to editorialize: If you couldn’t tell, I think LegalZoom’s impact is hyped, UPL or not. It’s quite possible that it makes money by (a) offering services lawyers wouldn’t charge for, as in the above case, or (b) serving clients for legal issues they might not bother going to a lawyer for anyway, e.g. a no-income, no-asset, few creditors, chapter 7 bankruptcy filing. Neither of these activities takes business from traditional lawyers.

In fact, in 2014 30 percent of LegalZoom’s revenue came from subscription fees, meaning it wasn’t selling actual legal services. Also, one of its biggest sources of revenue appears to be incorporation documents for California businesses. Perhaps it offers needed services, but consumer regulators need to catch up with it.

Gainful Employment Rule Post

Yeah, this link is for me. Because readers forwarded around my post applying the Gainful Employment rule to all law schools, I went back and updated it so that the table showed only the results from the total income test. I figure in case researchers want to cite it or replicate my results, they’ll have an easier time understanding what I was doing. I realized that the results of both tests produce the equivalent number, so even if a law schools’ graduates’ discretionary incomes are lower, the table now shows the equivalent income graduates would need to be making. I didn’t update the post’s text, so bear that in mind.

Expert Institute’s Best Legal Blog Contest

A generous reader has nominated the LSTB for the Expert Institute’s Best Legal Blog Contest. You can read about it here. As ever, I am grateful to you, my readers, for your support.

What If The Gainful Employment Rule Were Applied to All Law Schools?

[UPDATE 2015-07-17: Because this post received so much traffic since I first ran it, I’ve updated the Gainful Employment Rule table to only show the total incomes law schools’ graduates would need to earn for their schools to pass (or not pass) under the rule. It occurred to me that even if the discretionary income result is lower than the total income number, the results the formulas produce are still equivalent. This means I can show you like-by-like comparisons, which are more informative. I’m not editing the rest of the text, so consider this update mutatis mutandis.]

The first draft of my latest article on The American Lawyer about the gainful employment rule asked that question, but I realized that reporting on the for-profits alone was more important. The broader question is much more appropriate for a blog post, and since another federal court upheld the rule, it appears it’ll stick around. So, here you go.

To recap, the Department of Education’s gainful employment rule applies two debt-to-earnings tests to a college’s debtors: one based on their total annual incomes and the other their annual discretionary incomes. The tests create three results: passing, falling “in the zone,” or failing. Passing either test gives the school an overall passing grade for that year, not passing either test but not failing puts them “in the zone,” but failing is failing. Sorry if there’s some equivocation among these terms; I blame the rule.

Failing in a given year won’t kill a school’s access to federal loans, but certainly four years of failing or being in the zone will do the trick.

So:

  • Passing either debt-to-earnings test means debt payments are less than or equal to
    • 8 percent of total annual income, or
    • 20 percent of annual discretionary income.
  • The “zone” means debt payments are greater than
    • 8 percent of total annual income but less than or equal to 12 percent of annual income, or
    • 20 percent of annual discretionary income but less than or equal to 30 percent of discretionary income.
  • Failing occurs when debt payments are greater than
    • 12 percent of total annual income, or
    • 30 percent of annual discretionary income.

Got it? Good. If not, reread the article. I hate explaining this rule.

Rather than giving the numbers for both tests, I’m going to display the class of 2014’s mean debt (weighted with non-debtors (because I’m fair)), the minimum income (discretionary or total) needed to pass either test or at least stay in the zone, and the unemployment rate (“seeking” and “not seeking” employment, but excluding “deferred start dates”). The numbers will differ slightly from what I published in the article last week.

As for which test you’re seeing, since it’s somewhat important, the annual income test is the lesser test until about $43,000. After that, you are seeing the minimum discretionary income graduates need to be earning for the school to pass the test. That means they need to be earning even more money than what’s stated.

CLASS OF 2014 GAINFUL EMPLOYMENT INCOME RULE REQUIREMENTS
SCHOOL WTD AVG DEBT MIN PASS MIN ZONE TOT UNEMP
Howard $23,060 $20,178 $13,452 12.4%
Brigham Young $39,026 $34,148 $22,765 7.2%
Hawaii $39,949 $34,955 $23,304 15.5%
Alabama $45,830 $40,102 $26,734 3.5%
Lewis and Clark $47,014 $41,137 $27,425 15.4%
Arkansas (Fayetteville) $48,927 $42,811 $28,540 7.0%
Nebraska $49,758 $43,538 $29,026 6.0%
North Carolina Central $49,932 $43,691 $29,127 14.1%
District of Columbia $51,954 $45,460 $30,307 25.2%
Tennessee $52,961 $46,341 $30,894 14.6%
Wyoming $52,999 $46,374 $30,916 23.9%
North Dakota $55,743 $48,776 $32,517 13.2%
Connecticut $56,813 $49,711 $33,141 9.1%
Arkansas (Little Rock) $58,407 $51,106 $34,071 12.8%
Missouri (Columbia) $58,541 $51,224 $34,149 8.9%
Georgia State $58,650 $51,319 $34,213 5.6%
Mississippi $59,132 $51,741 $34,494 12.3%
Kentucky $60,629 $53,051 $35,367 5.6%
Wisconsin $61,117 $53,478 $35,652 7.6%
Kansas $61,410 $53,734 $35,822 8.4%
SUNY Buffalo $61,568 $53,872 $35,915 9.9%
New Mexico $61,795 $54,071 $36,047 3.6%
Liberty $63,917 $55,927 $37,285 25.0%
Georgia $63,954 $55,960 $37,307 13.6%
Texas Tech $64,047 $56,041 $37,361 18.8%
Northern Illinois $64,061 $56,053 $37,369 9.1%
Montana $64,094 $56,083 $37,388 11.3%
City University $64,284 $56,248 $37,499 20.7%
Oklahoma $64,613 $56,537 $37,691 7.7%
Florida $65,104 $56,966 $37,977 9.4%
Memphis $66,326 $58,035 $38,690 18.3%
Akron $66,681 $58,346 $38,897 8.7%
Cincinnati $66,697 $58,360 $38,906 10.4%
South Carolina $66,826 $58,473 $38,982 7.4%
Northern Kentucky $67,221 $58,818 $39,212 9.6%
Arizona State $67,227 $58,824 $39,216 1.5%
Florida State $68,319 $59,779 $39,853 6.0%
Wayne State $68,698 $60,110 $40,074 11.2%
Michigan State $69,711 $60,997 $40,665 1.2%
Houston $70,931 $62,065 $41,377 7.4%
South Dakota $71,067 $62,183 $41,456 6.2%
Boston University $71,181 $62,283 $41,522 6.5%
California-Davis $71,993 $62,994 $41,996 10.1%
Temple $72,019 $63,017 $42,011 9.1%
Washburn $72,555 $63,485 $42,323 8.9%
Indiana (Bloomington) $72,726 $63,635 $42,423 6.8%
Southern University $73,214 $64,062 $42,708 23.0%
Louisiana State $73,366 $64,195 $42,797 3.1%
Texas A&M [Wesleyan] $73,485 $64,299 $42,866 18.5%
West Virginia $73,712 $64,498 $42,999 8.5%
Utah $74,002 $64,751 $43,168 8.1%
Duquesne $74,172 $64,901 $43,267 13.5%
Arizona $74,516 $65,201 $43,468 4.9%
Texas $74,642 $65,312 $43,541 6.8%
Boston College $74,695 $65,358 $43,572 6.6%
North Carolina $74,905 $65,542 $43,694 11.9%
Maryland $75,615 $66,163 $44,109 8.8%
Illinois $76,374 $66,827 $44,552 5.9%
Campbell $76,555 $66,986 $44,657 13.6%
Iowa $76,670 $67,086 $44,724 2.3%
Washington University $76,828 $67,225 $44,816 1.2%
Drexel $77,209 $67,558 $45,038 11.3%
William and Mary $77,805 $68,079 $45,386 8.4%
Indiana (Indianapolis) $78,287 $68,501 $45,668 7.9%
Florida International $79,037 $69,158 $46,105 6.5%
Villanova $79,097 $69,209 $46,140 9.5%
Nevada $79,742 $69,775 $46,516 10.1%
Ohio State $80,527 $70,462 $46,974 1.4%
Pittsburgh $80,700 $70,612 $47,075 12.7%
Cleveland State $80,891 $70,780 $47,186 13.9%
Rutgers-Newark $81,451 $71,270 $47,513 8.4%
Idaho $81,604 $71,404 $47,602 8.1%
Louisville $82,077 $71,818 $47,879 7.1%
Baylor $82,833 $72,479 $48,319 11.8%
California-Irvine $83,342 $72,924 $48,616 10.8%
Tulsa $83,416 $72,989 $48,659 5.1%
Washington $83,732 $73,266 $48,844 14.0%
Maine $84,452 $73,895 $49,263 14.7%
Minnesota $84,834 $74,230 $49,486 6.9%
Cardozo, Yeshiva $85,151 $74,507 $49,671 15.3%
Toledo $87,232 $76,328 $50,885 17.9%
St. Thomas (MN) $87,349 $76,430 $50,954 8.4%
Washington and Lee $87,538 $76,595 $51,064 12.6%
Richmond $88,304 $77,266 $51,511 7.4%
Detroit Mercy $88,604 $77,529 $51,686 16.9%
St. John’s $89,567 $78,371 $52,248 8.9%
Yale $90,162 $78,891 $52,594 3.9%
Brooklyn $90,813 $79,461 $52,974 9.9%
Notre Dame $91,274 $79,865 $53,243 3.9%
Oregon $92,133 $80,616 $53,744 14.1%
Chicago-Kent, IIT $92,311 $80,772 $53,848 8.9%
Vanderbilt $92,969 $81,347 $54,232 2.6%
California-Los Angeles $93,221 $81,568 $54,379 6.3%
Emory $93,473 $81,789 $54,526 2.6%
Massachusetts — Dartmouth $93,819 $82,092 $54,728 16.0%
Fordham $94,187 $82,413 $54,942 9.8%
Baltimore $95,222 $83,319 $55,546 11.5%
Wake Forest $95,703 $83,741 $55,827 7.0%
St. Mary’s $95,761 $83,791 $55,861 17.9%
Southern Methodist $95,955 $83,961 $55,974 6.7%
Seton Hall $96,075 $84,066 $56,044 6.3%
Case Western Reserve $96,159 $84,139 $56,092 9.5%
Pennsylvania $96,201 $84,176 $56,118 0.4%
South Texas $96,686 $84,600 $56,400 9.2%
Dayton $97,598 $85,398 $56,932 11.4%
Colorado $97,675 $85,466 $56,977 4.2%
Quinnipiac $99,563 $87,118 $58,079 14.2%
Stanford $99,947 $87,454 $58,302 2.7%
Duke $100,325 $87,784 $58,523 2.8%
Samford $100,526 $87,960 $58,640 13.2%
Oklahoma City $100,825 $88,222 $58,815 5.6%
Mississippi College $101,946 $89,203 $59,469 21.1%
Syracuse $102,107 $89,343 $59,562 11.4%
Drake $102,326 $89,535 $59,690 9.2%
Suffolk $102,844 $89,989 $59,992 14.4%
Southern California $102,872 $90,013 $60,009 5.1%
William Mitchell $102,986 $90,113 $60,075 7.3%
Virginia $103,102 $90,214 $60,143 2.3%
Ohio Northern $104,531 $91,465 $60,976 18.1%
Loyola (LA) $104,924 $91,808 $61,206 19.3%
Pace $105,075 $91,940 $61,294 14.3%
San Diego $105,351 $92,182 $61,455 18.3%
Harvard $105,951 $92,707 $61,805 2.4%
Michigan $105,978 $92,731 $61,821 2.6%
Mercer $106,506 $93,193 $62,128 13.3%
Capital $106,628 $93,299 $62,200 31.3%
Tulane $107,133 $93,742 $62,494 9.7%
Hamline $107,514 $94,075 $62,717 8.7%
George Mason $107,715 $94,250 $62,833 2.7%
Gonzaga $107,940 $94,448 $62,965 16.0%
Chicago $108,521 $94,956 $63,304 1.9%
Penn State (Dickinson) $108,981 $95,358 $63,572 14.8%
New Hampshire $109,322 $95,657 $63,771 10.3%
New York University $109,331 $95,664 $63,776 1.3%
Western State $109,519 $95,829 $63,886 11.6%
DePaul $109,529 $95,838 $63,892 18.9%
George Washington $110,250 $96,469 $64,312 5.3%
Roger Williams $110,547 $96,729 $64,486 17.9%
Pepperdine $110,599 $96,774 $64,516 18.2%
Albany $110,656 $96,824 $64,550 14.2%
St. Louis $110,737 $96,895 $64,597 10.1%
Miami $110,761 $96,916 $64,610 7.7%
California-Berkeley $111,966 $97,970 $65,313 2.4%
Cornell $112,050 $98,044 $65,363 1.0%
Loyola (IL) $113,373 $99,201 $66,134 8.0%
Santa Clara $113,702 $99,489 $66,326 33.0%
Elon $113,902 $99,664 $66,443 27.9%
Denver $114,912 $100,548 $67,032 8.3%
Hofstra $114,917 $100,552 $67,035 7.9%
Ave Maria $115,045 $100,665 $67,110 33.6%
California-Hastings $116,260 $101,728 $67,818 22.1%
Regent $116,397 $101,847 $67,898 12.3%
Creighton $116,459 $101,902 $67,934 9.0%
Columbia $117,098 $102,461 $68,307 2.1%
Chapman $117,259 $102,602 $68,401 19.6%
Nova Southeastern $117,347 $102,679 $68,452 11.1%
Northeastern $117,379 $102,706 $68,471 14.4%
Marquette $118,389 $103,590 $69,060 9.8%
Georgetown $118,918 $104,053 $69,369 5.0%
Western New England $119,714 $104,750 $69,833 20.4%
John Marshall (Chicago) $121,990 $106,742 $71,161 8.8%
Valparaiso $122,769 $107,423 $71,615 20.9%
Catholic $123,026 $107,648 $71,765 13.4%
Stetson $123,167 $107,771 $71,847 7.2%
Widener $123,914 $108,425 $72,283 8.1%
Charleston $124,976 $109,354 $72,903 24.0%
Pacific, McGeorge $125,060 $109,428 $72,952 22.5%
Loyola (CA) $125,546 $109,853 $73,235 17.9%
Seattle $126,157 $110,388 $73,592 18.0%
Willamette $126,572 $110,751 $73,834 13.9%
St. Thomas (FL) $128,135 $112,118 $74,746 17.6%
Golden Gate $128,733 $112,642 $75,095 33.3%
Northwestern $130,452 $114,146 $76,097 7.2%
Touro $131,627 $115,173 $76,782 19.9%
Vermont $131,639 $115,184 $76,789 16.9%
American $132,232 $115,703 $77,135 15.2%
San Francisco $135,802 $118,827 $79,218 32.5%
California Western $137,589 $120,391 $80,260 23.7%
Whittier $137,958 $120,713 $80,475 24.2%
New York Law School $138,296 $121,009 $80,673 13.3%
Barry $141,716 $124,002 $82,668 17.7%
Florida Coastal $151,390 $132,466 $88,311 14.9%
Thomas Jefferson $156,925 $137,309 $91,540 29.0%

Note: Howard almost certainly published its graduates’ annual debt and not their total debts as it was asked, and this table excludes law schools that reported debt levels but not the percent of their graduates with debt.

I reckon that any law school whose graduates would need make $50,000 in discretionary annual income would probably fail the gainful employment rule in short order unless they were elite law schools with low unemployment rates. That’s about $100,000 in mean weighted debt, coincidentally—before interest. That’s at least 50 schools.

Kicking these law schools out of the federal loan program would be in keeping with the Department of Education’s stated goals for crafting the rule—accountability for student outcomes—but Congress won’t let it, which is why I found the comments to the department so galling. Some people claimed that graduate programs should be excluded from the rule because they didn’t face the same “employment challenges and return-on-investment considerations” compared to lower levels of higher education.

Looking at the above table … Right.

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Site Update 2015-06-01: Law School Cost Data Page

If you want to know why I haven’t been posting so often, it’s that I’ve been procrastinating! Woo!

I did, however, find time to update the comprehensive Law School Cost Data (1996-) page. Most of the effort is just revisiting law schools’ Web sites to ensure I have their full names correctly. As usual I forgot that law schools have a tendency to place images of attractive women on their main pages, so that wasn’t a total exercise in tediousness.

One thing to note that readers might not know is that even though Lincoln Memorial was accredited after the data submission deadline for 2014, it does have a 509 Information Report (pdf). However, its data are not included in the ABA’s required disclosures Web site, so if you’re into law school data, you’ll need to get that file separately and incorporate it into your spreadsheets.

Peace.

CLASS OF 2014 EMPLOYMENT REPORT (Updated)

The ABA released the class of 2014’s employment information last week, and there are enough differences to warrant an update to this post, namely that I’d forgotten that the ABA accredited Lincoln Memorial University late last fall. Most of the figures remain the same, but to keep Web traffic to one post, I’m retaining the original “leaked” version at the bottom but striking it out. I’ve also changed the title.

We have 43,195 people who graduated from an ABA-accredited law school outside of Puerto Rico between September 1, 2013, and August 31, 2014. The employment information is good as of March 15, 2015. Readers likely know that the ABA now collects data as of ten months from the typical graduation date rather than nine. I don’t think there’s too much of an impact by the change except to applicants this year who might have wanted to rely on the data.

The tables are below the fold to conserve blog space.

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Law School Diversity Improves at Schools With Worst Job Outcomes

…Is available for your reading on The American Lawyer.

As a side note, irrespective of what you think of Aaron Taylor’s research, please realize that his or those like will not be possible in the future if the ABA Section of Legal Education and Admissions to the Bar’s Data Policy and Collection Committee changes law schools’ entering credentials reporting requirements (pdf). The committee wants to replace matriculants’ 75th, 50th, and 25th percentile LSAT and GPA data with large tables. This change will make the new data incompatible with the years of previous information that was presented in the Official Guide. I’m in favor of backwards compatibility for data, and I sent the committee a comment saying as much, but if the committee decides to make the changes anyway, much will be lost.

GUEST POST—Smokin’ Bucketful of Awesome (Flow Chart Edition)

(Connecticut attorney Samuel Browning, a friend of The Law School Tuition Bubble, obtained permission from law professor Bernie Burk to create a flow chart version of a series of posts Burk wrote on The Faculty Lounge in June 2014 that characterized law school outcomes as between either “A Smokin’ Bucketful of Awesome” or “A Smoking Pile of Scrap.” Mr. Browning’s chart appears here with only minor proofreading on my part, so any unclear points, variances from Burk’s posts, or errors are his own. Actual hyperlinks to Burk’s articles are included at the bottom. Click on the flow chart to enlarge it in your browser.)

Smokin' Bucketful of Awesome (Flow Chart)

********************

http://www.thefacultylounge.org/2014/06/more-thoughts-on-self-delusion-in-the-legal-academy-and-an-effort-to-engage-the-aals.html

http://www.thefacultylounge.org/2014/06/self-delusion-spreads-from-professional-to-graduate-education-consternation-curiously-absent.html

http://www.thefacultylounge.org/2014/06/still-more-thoughts-on-self-delusion-in-the-legal-academy-or-accepting-the-difference-between-a-smok.html