The crash

Last Friday Cooley sent around a letter to its 3700 or so JD candidates. I'll quote the first part:

"From: President LeDuc
To: Cooley Students
Re: Tuition for 2012-13
Date: June 29, 2012

Cooley’s Board of Directors just approved the 2012-13 budget, which includes an increase in tuition, as is usual. Tuition for the next year for both incoming and returning students will increase $100 per credit hour. For returning students this is an 8.5% increase, about 1% more than was the case last year. The new hourly tuition for returning students will be $1,275 and for new students it will be $1,325. Tuition in the LL.M. program will increase to $650 per credit hour.

Applications to law school have turned abruptly down across the nation. And as is usual, the schools that tend to tout their exclusiveness and high standards in good times are now taking students they would not take because of the downturn in applications. This lowering of standards exacerbates the challenge we face in filling our classes at Cooley when applications decline. This year’s three incoming classes declined in enrollment by about 28%, leading to an 8% decline in total enrollment.

That lower enrollment carries forward into next year, where we anticipate additional, substantial declines in the total enrollment. In putting together the budget for the coming year, we assumed that we would have new student enrollment at the same levels as last year. In reality, we anticipate further declines in new student enrollment in 2012-13, based on applications and deposits to date. So, we face a serious challenge for the coming year.

Per ABA data Cooley had 1,583 matriculants in 2010, so a 28% decrease would mean 445 fewer students enrolled at the school this past academic year (Cooley has three different academic terms each year, and new students can enroll in any of them. The school's decline in 1L enrollment is larger than the entire 1L classes of all but a handful of schools).

The letter goes on to whinge quite a bit about how Cooley is still a bargain at $37,140 per year -- 33rd lowest among 117 private law schools per the letter's calculation -- and to explain why it's becoming increasingly difficult to maintain a tuition level in the bottom quartile of private schools, despite the commitment in the school's Strategic Plan to do so.

I'm sure Cooley students find all this quite fascinating, but for them of course the bottom line is that Cooley is raising tuition by a startling 8.5%, in a year in which most schools seem to have tried to keep nominal tuition increases to inflation or less.

And that's nominal tuition.  There's a lot of evidence that this year's 1L class, nationwide, may actually pay a lower average tuition than their 2L and 3L classmates.  Although systematic data is not yet available, it's clear that many schools, including a lot of high-ranked schools, are going to have significantly smaller (as in 10% to 30% smaller) entering classes than normal. Furthermore, in at least one case a high ranked school is combining a significant cut in class size with the same total cross-subsidized tuition "scholarship" outlay as in the previous year.  In other words, this school's true average tuition per capita is going to go down for its first year class. And, since that class will be smaller, the gross tuition yield from the class will go down sharply relative to what will be collected from what is now the rising 2L class.

That a high-ranked school is willing to combine lower real tuition per capita with a smaller entering class is a symptom of how desperate schools are to prop up their LSAT/GPA numbers, to avoid the dreaded death spiral in which lower admission standards lead to a reputational hit, which leads to a lower ranking, which leads to fewer applications from people with good numbers, which leads to having to spend even more on buying good numbers, etc.

This is not all: at least one top five school is now offering significant "scholarships" (discounted tuition) to potential transfer students from lower-ranked schools.  The theory seems to be that if the incoming first year class is going to yield less revenue, then some of this can be made up by taking more transfers than ever before, even if some of them have to be purchased with cut-rate tuition.

It all adds up to a nice little social struggle all along the Great Chain of Being or the law school equivalent of the food chain, depending on what metaphysical metaphor seems most apt to the rapt observer.  Despite having in the course of just a few years doubled and tripled and quadrupled tuition in real terms, law schools spent every penny of all that increased revenue, in part because the alternative was to have it taken from us by rapacious central administrations, and in part because we're participants in a consumer culture in which that's just what people do. So now that the lean times are upon us there's nothing to fall back on.

The bright side of all this is that now that it's not just our graduates who are feeling the pain of an economic model that doesn't make any sense, we'll actually have to start to do something to fix it.