Thursday, November 17, 2011

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.


Do you think law schools do not know this?

That sounded harsh. What I really mean is what, if anything, can be done about this in the short term? I have a feeling schools know this, and will be making adjustments accordingly.


The most telling sign is the third one--and I doubt any law school was aware of it--because it shows a long term weakening of demand that kicked in before the legal recession and all the bad news about law schools.

As for what to do, every law school must do what its own particular position allows for. Some schools (HYS) won't be affected very much beyond a bit of tightening, while other schools will be hammered no matter what they do.

At the very least, any law school that is planning or engaged in an expansion of the faculty (several have announced this in recent years) would be wise to put it on hold. More generally, faculty expenses must be trimmed because that is the largest budget item aside from scholarships--but the latter will likely rise out of necessity (to fill the class).

Okay, that makes sense. The measures will depend upon each school and its particular profile.

This is very interesting, but another explanation for Illinois' move to give everyone a tuition break would be to gain some sort of competitive recruitment advantage -- not because they cannot fill their seats without it, but because it helps them compete with their peer schools for the students with high GPA/LSAT/other impressive credentials.

I find it hard to believe that Illinois truly has trouble filling its seats at any price [or, any price within current general norms], given that the vast majority of law school applicants are going to schools less prestigious than Illinois, and many of them are paying the same tuition or higher -- given those facts, I would guess that some non-trivial subset of all law school applicants would probably be thrilled to go to Illinois instead of where they are going. Thus, the problem for Illinois is probably not filling seats, but filling them with the students they want.

And that brings me to the question I have about this post, and which schools will be subject to these pressures. You point out that the factors you identify will affect different schools in different ways, and that the schools at the very top of the pecking order won't be affected much. But won't it be rather more stratified than that? It seems to me that the crunch you describe would be likely to affect the schools lowest in the pecking order in a much more dramatic way than it affects any other law schools. After all, any school with a couple of other lower-ranked law schools in its market, which charge similar tuition, ought to be able to respond to the pressures you describe, whenever they occur, by admitting more students who would otherwise have gone to those other, lower-ranked schools. I would think it is really only those schools, the ones at the bottom of their local pecking order, who might actually have trouble filling seats. Am I missing something?

I have a great idea for a blog dedicated to warning potential law students about the dangers of going to law school. It would be called "Admission Against Interest."

I'm inclined to agree with Joey's comment. I should add, though, that Indiana Tech is creating a new law school due to open in 2013. So at least somebody thinks that the market is good.

The trade school business has its ups and downs like any other business.


I agree with much of what you say, except for your suggestion that higher ranked schools will be free to take in more students. They too are competing, though not in the local market, but in the national market. And these schools cannot take the risk that their ranking cohorts will pull ahead of them by taking fewer students. We are all in a different niche (local factors matter a lot), but we are all competing intensely at our own level.

Was Joey suggesting that these schools would take in more students overall, or would fill any potential loss of students with students from lower ranked schools?

Headline should be "Good News for the Economy, Potential Lawyers opt for more Productive Fields!

Great another post!!, I follow this blog with RSS and its great!

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What do you think this means for class of 2013-2014 graduates? Will a significant decline in law students in the next couple of years encourage firms to hire while the getting is good? Or is this just wishful thinking...

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