The end of the law school tuition bubble?

Northwestern dean Dan Rodriguez sent an email to the law school this morning, announcing a 3% tuition hike for the coming academic year.  Interestingly, he framed this as an aggressive cost control measure, in response to the dire employment situation:

As we all know, the legal market is in the midst of extraordinary change and the present challenges facing our students – as with all law students – are considerable.  Since 2008, the supply of law-related jobs has declined sharply and the speed of recovery remains slow and uncertain.  To be sure, Northwestern provides a first-rate legal education and our graduates are much in demand; we remain a worthwhile investment by any credible measure.  Yet, we need to be mindful of the ways in which the current legal economy affects our current and prospective students.

For decades, tuition has increased steadily at a rate higher than inflation at our law school and at nearly every top law school. Although our rates of increase have been similar to those of our private law school peers, and a good deal lower than the top public law schools, much attention appropriately is being given to the rising cost of legal education and the growing student debt levels of law school graduates nationally.

In order to begin to address this situation in a meaningful way, I am writing to let you know that we are limiting our tuition increase for the 2012-13 academic year to 3%, our smallest percentage tuition increase in at least the past 40 years, if not our entire history. This rate also coincides closely with current and recent measures of inflation.

This is no panacea, of course.  We are well aware that this first step makes only incremental changes on the significant historical increases in law school tuition at Northwestern and elsewhere.  I am committed to address in manifest and meaningful ways the rising cost of legal education and corresponding burdens of student indebtedness.  Limiting tuition increases is one step; controlling law school costs is another; and looking to our Northwestern friends in the private sector to support the Law School, even in the midst of current economic difficulties will need to be at the center of this strategy. Northwestern Law School has been a leader in so many respects.  The time has come for us to be an innovative leader in addressing the challenges of the new legal economy.

According to the CPI inflation was 3.16% last year, so it's fair to call a three per cent increase a freeze in real terms.  It's worth noting that inflation had been below three per cent in 14 of the previous 19 years. Given that as Dean Rodriguez points out, a three per cent tuition hike is in historical terms an act of unprecedented restraint on the part of the school, this merely emphasizes to what extent the assumption that the cost of law school will go up each and every year in real terms has become almost universal.  Therefore any recognition at all by legal administrators that this is not an inevitable state of affairs is a real step forward.

It's also heartening to see a law school dean state that he's committed to getting costs under control. In one of the first posts on his new blog a few months ago, Rodriguez stated that since the cost of a first-rate legal education was going to continue to rise, it was important to find sources of revenue other than increasing student tuition to fund that rise.  Here, he is at least implying that it's not necessary to continue to increase the real cost of legal education.  It's true he doesn't come right out and say that, and there's no hint here that real costs might actually be decreased significantly with little or no loss of educational quality, but still . . . baby steps.

Similarly, while it's true all this is framed in the context of the assumption that everything was fine, at least at Northwestern, until the downturn in a big law hiring in 2008, one can hardly expect law school deans to come out and say that in retrospect raising tuition at above the inflation rate pretty much every year for several decades in a row might have been a bad idea.  If the narrative needs to be "the world suddenly turned upside down, and we must adjust to an unanticipated new reality" that's better than yet more denial.

Speaking of which, Matt Leichter has compiled tuition data for 2011-2012, and discovered that tuition at private law schools grew by less than one per cent in real terms this academic year, and that 29 schools actually cut tuition in real terms.  He also notes that lower-ranked schools raised tuition quite a bit less than high-ranked ones, which, perversely enough, has not been the historical pattern.  (I would add that there's some evidence that lower-ranked schools are becoming even more aggressive about using "merit," i.e., cross-subsidized, scholarships, which of course are functional tuition cuts.  The number of schools that brought in less tuition in real terms this year than last year may in fact be quite a bit larger than 29)

Leichter goes on to analyze what appears to be something of a collapse in law school applications this year, and predicts very hard times ahead for low-ranked schools in particular:

The number of applicants per law school is projected to reach a record low, and given the structure of tuition increases (and decreases) in 2011, law schools will continue to diversify based on the interest people are showing in their programs. Also note that contrary to popular belief, the number of applicants did not grow nearly as much due to the financial meltdown as in previous recessions, and more profoundly, the 2011 and 2012 application years break the countercyclical trend of law school applications. People who normally would've applied to law school are either choosing other graduate-level programs or none at all instead of law school. This is an unprecedented event facing the legal academy, and it is very likely to continue.
The real question is at what point law programs will start retrenching by excusing staff, cutting salaries, and reducing tuition, or when universities begin shutting them down.