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Monday, May 23, 2011

"Will Legal Education Remain Affordable, By Whom, And How?"

Brian Tamanaha

In 1987, John Kramer, the Dean of Tulane Law School, published an article raising concerns about the adverse consequences of ever-increasing tuition. The article begins:
Law schools for the last twenty years have been testing the elasticity of demand for their product. As tuition has increased each year, outpacing even the rate of inflation, law schools have been pressing toward the point where significant numbers of college graduates may decide that it makes good economic sense to seek less expensive forms of graduate education or forgo additional credentials altogether....

This apparent elasticity is of course good news to administrators who have budgets that are heavily tuition-dependent. A more careful analysis, however, reveals ample reason for serious concern. The seats may be full in most law schools today. They may remain full tomorrow. They may even remain full until the year 2000 or beyond. But those seats may be filled almost exclusively by the sons and daughters of rich and upper-middle class white families and and handful of black and brown students from relatively impoverished backgrounds who receive substantial grants.
When Kramer wrote this article, median tuition at private law schools was "only" $8,690 [$17,204 in 2011 dollars], and $2,124 (resident) at public law schools [$4,205 inflation adjusted]. Tuition has increased above the rate of inflation every year since his article. In 2009, median tuition at private law schools was $36,000, and $16,546 at public law schools (adjust both figures upward by at least $2,000 for approximate 2011 tuition numbers).

Kramer recognized at the time that "Without the intervention of federal government in the 1970's [though the Guaranteed Student Loan Program], legal education as we know it wouldn't exist." Although he advocated raising the level of the loan limits, Kramer expressed concern that "a heavy debt burden may result in either unbearable pressure to seek out a job in one of the highest paying law firms, failure to save, or outright default."

The average debt of law students upon graduation in 1983 was estimated at $15,676 [$31,035 inflation adjusted]. Today the average debt of law graduates is around $100,000, and for many it is much higher (Cal Western law grads rank #1 in average indebtedness at $145,621).

In closing, Kramer considered and rejected various possible solutions as inadequate or infeasible. He was right. Twenty-five years later, his question "Will legal education remain affordable?" can be answered with a resounding "No!" Soon, law school seats will be filled with people in three basic categories: students from wealthy families, scholarship students who enjoy a sizable tuition discount, and students who take on an enormous debt. When--if--the third pool of prospective students shrinks, a number of law schools--expensive private schools with many graduates who secure low paying legal positions, if they get legal jobs at all--will close their doors.

Comments:

Mike Konczal with the Roosevelt Institute had a great post a month ago about the funding of public education generally. His analysis likely has some relevance as far as the cost escalation at Law Schools goes.

http://rortybomb.wordpress.com/2011/04/20/on-public-funding-of-colleges-and-towards-a-general-theory-of-public-options/

The short version is that student loan programs are likely part of the problem (he also looks at this issue from the angle of grants). Part of the issue is related to the price elasticity question. He doesn't go into the second question in the same detail, but another side of the equation is that student loans help to insulate state legislators from the consequences of cut-backs in higher education funding. The increases in tuition at the state level don't tend to generate an uproar or backlash (especially if the cuts are done incrementally), in part because students are still able to gain access to higher ed by incurring debts. Those debts don't become an issue until after graduation when students need to start paying off the loans (the issue about earning potential is still abstract for many students -- at least I know it was for me).

Koczal's solution -- which he pulls from another post by another Econ blogger JW Mason -- is that instead of federal loan guarantees, or grants, what might work better are direct subsidies to public universities designed to lower tuition costs.

The reasoning in this approach is that as public universities become more competitive on tuition costs, and more students opt to take advantage of the lower costs, this puts downward pressure on tuition costs at private institutions.
 

JPRS2010,

Thanks for the link. The analysis in the post (and the one he links to) is persuasive.

I agree that the federal loan program is a part of the problem. It must be capped at lower levels, and it must come with an assessment of likelihood of repayment.

Some will object that this will make law school out reach for lower income people, but we have already reached that point thanks to tuition increases by law schools. Additional restrictions on federal loan guarantees will impose discipline on law schools--limiting tuition increases--and will save prospective students from debt servitude that cannot be repaid.

Brian
 

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