More Ominous Signs of the Coming Crunch for Law Schools

Brian Tamanaha

In June I wrote a post about the coming crunch for law schools, which asserted that law schools should anticipate a significant decline in the number of applicants in coming years. This will be especially problematic because law schools have substantially increased the size of their faculties in the past decade, making it hard to trim expenses to meet a decline in revenues. As the number of applicants falls, a significant proportion of law schools will experience a drop in the quality of students or a fall in revenue, and many will suffer both simultaneously.

Three recent signs indicate that this will happen more quickly and to a greater degree than I suggested in the post. The first indication is the disclosure that every student in the 2011 entering class of Illinois law school, including students admitted off the wait list, received tuition discounts. When everyone gets a scholarship, that constitutes a de facto tuition reduction, an indication that a law school is having trouble filling its seats at the list price. Given that Illinois is an excellent law school, it is likely that other schools are in the same position.

The second sign is more serious. The October 2011 LSAT, which is the highest volume test for people considering law school, had 16.9% fewer takers than the previous year. It was the lowest number of people to sit for the October exam in a decade. And it was the fifth straight LSAT administered to show a substantial decline from the same test the year before. The two most recent exams—June and October—had the largest year-to-year declines, 18.7% and 16.9%, for those respective months as far back as the LSAC chart goes (1988-89).

The third sign is perhaps the most alarming for law schools: the yield of applicants to test takers has been falling steadily in recent years. At least since 1995 (earlier statistics are not available), between 75% and 80% of the people who take the LSAT have gone on to apply to law school. It makes sense that a high proportion of people who take the test would apply because preparing for and taking the test involves a substantial commitment of time and money. Beginning in 2000-01, however, when 80% of the people who took the test applied to law school, the yield of applicants to test-takers has declined every year but one (2003-04). In 2010 and 2011, only around 63% of the people who took the test applied to law school.

This sustained decline in yield suggests that applicants to law school are rationally responding to the extraordinary emphasis law schools place on LSAT scores—which determine the range of law schools a prospective student will be admitted to as well as the price a student will pay. Apparently, more and more prospective students who don’t achieve their target LSAT score are passing on law school. This decline in yield is perhaps also an indication that the yearly increase in law school tuition has been suppressing demand, although it was not visible on the surface. What's telling about this decline is that it began long before the current legal recession and all the bad news about law schools.

Law schools are caught in the grip of two separate, reinforcing declines that portend a severe contraction in the immediate future: fewer people are taking the LSAT test, and fewer people who take the test go on to apply to law school. (It is possible that a sharp decline in the former will lead to a rise in the latter, but that has not happened so far.) A painful dose of economic discipline for law schools is just around the corner.
Posted 9:59 PM by Brian Tamanaha [link]