Editor’s note: On January 11, 2013, regular Am Law Daily contributor Steven J. Harper weighed in on Case Western Reserve University School of Law dean Lawrence Mitchell’s recent interview with Bloomberg Law. Here, frequent contributor Matt Leichter offers his take on Mitchell’s latest media foray.
In November 2012, The New York Times published an op-ed in which Case Western Reserve University School of Law dean Lawrence Mitchell defended the value of a law degree. The piece was not well received because it disregarded inconvenient, contrary facts. For example, Mitchell cited the Bureau of Labor Statistics’s (BLS) Occupational Outlook Handbook‘s projection that lawyer job growth between 2010 and 2020 would be “about as fast as the average for all occupations,” but omitted the Handbook’s next sentence, which plainly states, “Competition for jobs should continue to be strong because more students are graduating from law school each year than there are jobs available.”
Undaunted and claiming that he’s “working hard in good faith,” Mitchell sat for a 15-minute interview with Bloomberg Law’s Lee Pacchia in early January titled, “Dean: There’s No Oversupply of Lawyers,” which can be found on Bloomberg Law’s YouTube channel. The central exchange in the dialogue, in Bloomberg Law’s opinion, occurs when Pacchia asks Mitchell whether there is an oversupply of lawyers given that the BLS calculates only 74,000 new lawyer jobs will open up between 2010 and 2020. Mitchell says it’s “not clear to me that there’s an oversupply problem at all,” and, in fairness, Pacchia excludes the 138,500 jobs that should open up as a result of lawyers leaving the profession in that time period. With ABA law schools expected to produce roughly 400,000 graduates by then (to say nothing of the thousands of non–ABA bar petitioners), two-to-one odds are better than four-to-one.
But the more urgent issue discussed during the interview is the high cost of law school. Pacchia raises it more than once, but he isn’t able to connect it to how Case Western in particular can afford to pay for its students’ scholarships. How the school funds its grants is important because it illustrates the unsustainability of how legal education is financed.
Pacchia asks (4:35):
When we talk to people about these issues, we keep going back to the fact that tuition growth has outstripped job growth, or wage growth over the past almost two decades at a torrid pace. Why does the cost of law school tuition keep going up?
Mitchell provides a three-part answer, which I’ll summarize:
(1) Twenty percent of Case Western School of Law’s revenue comes from the university’s endowment, which benefits students as a 20 percent discount.
(2) Starting salaries at Wall Street law firms began increasing in the mid-1980s, and law professors could easily qualify for those jobs, hence “You’ve got to pay talented people to be law professors.”
(3) Overhead and demand for smaller, clinical courses taught by highly paid instructors contribute heavily to cost increases as well.
The high overhead (3) makes sense, but the value of the skills courses is dubious if the skills gained aren’t in demand. The endowment argument (1) is a non sequitur. Debt is debt; underemployment is underemployment; and the endowment’s contribution doesn’t change that. But the law-professors-would-become-associates-without-high-pay argument (2) is dubious. Law professors don’t work nearly the number of hours that law firm associates do, their work is often easier, and their jobs are much more secure, certainly once they have tenure, if not before. There are always plenty of people applying for law professor jobs who would gladly work for less pay and teach more classes. This is the weak link in Mitchell’s response to the tuition question: Why does a law school need “talented people” to be professors? Can’t mediocrity get students past a bar exam?
Yes, but it won’t help Case Western maintain its place in the zero-sum U.S. News rankings dog-pile, and Mitchell neglects to point out not only how tuition dollars go to bidding up renowned law professors, but also how the school redirects tuition to scholarships to attract high-caliber applicants. He does, however, acknowledge that the law school spends significant sums of money on scholarships when Pacchia earlier asks (2:30):
That said, the economics of the situation are troubling. Case Western, like many schools charges over $40,000 a year in tuition— think it’s 42—yet six months after graduation, your institution had 38 percent of the class of 2011 that were either unemployed, underemployed—that is in short-term jobs or part-time jobs—or going on to get another degree. Aren’t too many of your graduates finding themselves in a position where they’re leaving school with enormous debts yet no real means to pay them off?
Debt is a problem, high tuition is a problem. I should point out that 90 percent of my class receives financial aid at a mean financial aid offer of $25,000 a year. So, people talk about the sticker prices of law schools, but we discount fairly heavily. Now, that’s not to say there aren’t students paying full freight, or there are students paying most of the way, and it’s very, very expensive. And of course, it’s important that they get jobs that they can ultimately pay that debt back, with the proceeds from, the income from.
Mitchell then abruptly switches to minimizing the underemployment problem. Pacchia doesn’t raise the obvious question: Where does the law school get the money to pay $25,000 on average to 90 percent of the students? What happens to those who pay full freight?
Over the last decade, Case Western has usually enrolled more than 600 students full-time each year, so simple arithmetic tells us that the law school probably spends $13.5 million on scholarships. According to the last 12 years’ worth of Official Guide data, here’s how Case Western’s scholarship structure has transformed since 1999 for full-time students (it only has a few part-timers):
According to Mitchell, the red “No Grant” blob has now contracted to 10 percent, one-third what it was even in 2010-11. Unless the law school received a boost from its endowment, a massive government grant, or an enormous bequest (and it wasn’t blown on a swank new building), all these half-tuition-and-less scholarships had to come from tuition increases:
Note how the median grant is now actually less in both nominal dollars and share of total tuition compared to 1999. The good news for the 15 percent of students who received at least the median grant back then is that their Stafford loans more than covered the shortfall. That’s not possible today, meaning that even those who receive the median grant will have to take out a Grad PLUS loan, a private loan, or get the money from somewhere else. If we look at the glass-half-empty version, i.e., the percentage of full-time Case Western students who receive the median grant or less, we find that they must somehow pay an increasing portion of their educations above the annual Stafford loan limit:
Sixty-five percent of Case Western’s 2010–11 full-time students had to cover 25–50 percent of their tuition with something other than Stafford loans. Thirty percent had to cover half their tuition outside of Staffords when in 1999 they were only down about five percent. I wish the Official Guide were more forthcoming about how many 1Ls receive scholarships out of the total, but common sense tells us that it’s a high proportion, and even those who retain their scholarships after their first year will have to eat the next tuition increase to pay for more scholarships for 1Ls. The system has evolved from one in which a handful of students receive generous scholarships to one in which most students get a few thousand bucks thrown their way, but it’s spread more thinly each year and paid for by future tuition increases. Case Western does not have a tuition guarantee program.
This absurd system, undoubtedly replicated in many ABA law schools nationwide, is only sustainable so long as there are students willing to pay ever increasing amounts of money to entice applicants to their law schools. Mitchell either doesn’t know or didn’t volunteer during the Bloomberg Law interview that the students who pay full freight, near full freight, and every tuition increase in between are Case Western’s bulwark against a rankings slide (not that it’s helped much in recent years), even if there’s a high probability that those graduates won’t be able to repay their loans without Income-Based Repayment, Income-Contingent Repayment, or by miraculously landing high-paying jobs. Full-paying students’ continued access to unlimited federal student loans is the sine qua non of Case Western’s financial model.
That Mitchell does not acknowledge the redistributionism implicit in his law school’s pricing suggests that instead of offering scholarships as a courtesy to reduce the allegedly inescapably high costs of providing legal education, Case Western actually uses a growing share of its tuition revenue to maintain its national reputation. If Congress limited how much law students could borrow, tuition would likely plummet without any loss in education quality, yet Mitchell appears uninterested in seeing that happen. As such, there’s no reason to accept his claims that he’s working in good faith.
Matt Leichter is a writer and attorney licensed in Wisconsin and New York, and he holds a master’s degree in International Affairs from Marquette University. He operates The Law School Tuition Bubble, which archives, chronicles, and analyzes the deteriorating American legal education system. It is also a platform for higher education and student debt reform.