Memo to the faculty

A very interesting document has come my way, authored by a faculty member and former interim dean of Tulane Law School.  It was apparently drafted for a law school committee, and it features a fairly straightforward, although understated, description of the employment and salary crisis facing law school graduates in general and Tulane graduates in particular.  Here is the most notable passage: 

A rule of thumb in assessing student loan debt is that debt should not exceed starting salary.  This means that an average student graduating from TLS needs a job paying around $117,000 to manage their debt load.  Of graduates reporting their salaries for the 2010 class, one-third had such jobs, two-thirds did not. [Elsewhere the memo notes that salaries were reported for only 38% of the class, so in fact barely more than 10% of TLS graduates obtained salaries equal to the putative average student debt load, which as we have seen is understated by about 15%].  A loan calculator available online from FinAid spells out that to repay a loan of $117,000 and avoid financial difficulty means that our graduates need a job that pays around $161,000.  That is above the top salary paid in the nation by law firms to entry level hires. Consider also that the top salary available for law graduates in Nola is roughly $100,000.

Thus, the sort of job needed to comfortably pay off our average loan is currently out of reach of most of our graduates. [Emphasis added]  The highest starting salaries are offered by the top 250 firms in the U.S. as measured by the National Law Journal – the “NLJ 250.”  As Brian Tamanaha comments in a soon to be published book, Failing Law Schools:  “To offer a few examples, Tulane University Law School, Temple University James E. Beasley School of Law, North Carolina, University of Minnesota Law School, Ohio State University Michael E. Moritz College of Law—all well regarded law schools—placed 10-12 percent of their graduates in NLJ 250 firms in 2010.”  This is obviously not a large percentage of the class, yet these jobs are the only ones that offer the security of loan repayment without financial hardship.

Again, while understated, this is at least a fairly straightforward admission of the fact that a Tulane law degree -- like almost all law degrees these days -- doesn't come close to being worth what it costs to acquire. Now on one level there's every reason for recent grads, current students, and incoming students at TLS to be upset about the fact that it would be completely impossible to deduce this rather significant piece of information from anything the school has to say about itself.  And they should get upset about the extent (i.e., total) of the denial in which the law school engages as a matter of institutional self-presentation and -- just as significant -- policy.

In other words it's not just that Tulane gives no hint to the outside world that it has any awareness that its cost structure makes no sense -- it's that there's no real evidence that it's doing anything about this, besides indulging in the usual hand-waving about trying to make its graduates more "practice-ready" (How many times does it have to be pointed out that making people marginally more prepared for jobs that don't exist doesn't actually help matters?).

Still, it's a sign of progress that someone at Tulane in a position of some administrative responsibility is actually grappling with the real problem, even if only at the level of acknowledging it exists.  Indeed none of this should be taken as a criticism of Tulane in particular -- it's not as if Tulane is offering a worse return on investment than the typical law school.  If anything, it's offering a better one -- it doesn't cost more than the average law school to attend, and around  13% of its graduates are currently getting jobs that at least arguably justify the cost of attendance, which is a higher percentage than at the majority of law schools.

At this moment, as law school faculties gather for their beginning of the year meetings to discuss strategic planning in a hyper-networked kinetic professional environment or what have you, it's especially important for people to stay focused on the fact that (Yale, Stanford, and Harvard, please leave the room) law degrees cost more than they're worth, instead of wandering off into pointless arguments about the purported value of legal scholarship and its relation to good teaching (as somebody at JDU pointed out law professors could stand on their heads while reading Fifty Shades of Gray and that would be fine with everyone as long as their students actually got jobs), or curricular reform, or whether we should have Starbucks or Peaberry in the faculty lounge, etc. etc.

Entire memo posted below the fold:

Accountability Problems for Law Schools

General employment/financial situation facing legal profession and law schools, 2012

·         Legal field lost 50,000 jobs from January 2008 to Sept. 2011 (including paralegals and other legal professionals) according to BLS

·         Law schools graduate around 44,000 new lawyers every year

·         BLS projects roughly 25,000 new attorney positions per year for next ten years, a gap of roughly 20,000 extra lawyers per year

·         Hiring by large firms still down as of January 2012 relative prior to the financial crisis

·         Law school applications dropped 11% in 2010-11 and a further 15% in  2011-12

·         Median salary in 2010 was $63,000 according to NALP, although salary distribution is bi-modal, with clusters around $160,000 and $40,000 to $65,000

·         Average debt load of a law graduate was $98,500 in 2010; at 29 schools, that amount exceeded $120,000

·         In 2010, 68% of graduates had a job that required a JD nine months after graduation; less than 51% found work in private firms, the jobs that pay the best

·         Most student loans funded through DOE direct lending program

Tulane Law School situation

o   Drop in applications for 2011-12 is 20% so far, was down 2% for 2010-11

o   For class of 2011, 84% were employed nine months after graduation, 77% of total class employed in legal professional jobs (but only 42.9% employed at graduation in 2010 according to US News)

o   Average law school debt load of TLS graduates who borrowed is $117,000 (82% of 2011 graduates borrowed)

o   Median salary is $71,000 and mean is $81,000 for 2010 graduating class (38% of class reporting)

§  Top salary range is between $92,000 and $160,000

§  Top salary in Nola is $100,000

§  Salaries of TLS graduates have same bi-modal distribution as national (US News 25-50-75 percentile figures are $75,000, $92,000 and $145,000 medians for private employment, $45,500 for public)

o   LSAT medians for entering class were 158-163 for class of 2014 as compared to 160-164 for class of 2013

o   Increase in tuition is substantial, from $29,810 in 2003 to $43,684 in 2012

o   GPA of entering classes is at 3.4 – 3.75 for 2011, 3.31-3.68 for 2012 US News

o   US News rank for 2011 was 47, for 2012 is 51 (tied with Baylor, Florida State, Loyola-LA, SMU)

Legal education has arguably entered a period of transition.  The significance of this transition for individual law schools will become more apparent in the next 10 years.  Law schools are being affected by a variety of changing circumstances.  Even prior to the 2008 financial collapse, there was evidence of an imbalance between the number of jobs available each year and the number of students graduating.  One recent report cited by the New York Times, March 15, 2012 stated: “’Since it is unlikely, based on overall economic conditions, that the demand for legal services will grow robustly for the foreseeable future, the legal industry will be forced to live with uncertainty for some time to come,’ said the report, from Citi Private Bank and the Hildebrandt Institute.”

There may be a long-term drop in the number of students wanting to go to law school given greater awareness of the more limited legal market.  This is indicated by the recent drop in the number of LSAT tests taken for this year.  In addition, consistent tuition increases funded by student loans combined with more limited job prospects at the salaries necessary to pay back the loans may lead to a generation permanently hobbled by excessive debt.  This last phenomenon could produce a variety of unexpected consequences.

A rule of thumb in assessing student loan debt is that debt should not exceed starting salary.  This means that an average student graduating from TLS needs a job paying around $117,000 to manage their debt load.  Of graduates reporting their salaries for the 2010 class, one-third had such jobs, two-thirds did not.  A loan calculator available online from FinAid spells out that to repay a loan of $117,000 and avoid financial difficulty means that our graduates need a job that pays around $161,000.  That is above the top salary paid in the nation by law firms to entry level hires. Consider also that the top salary available for law graduates in Nola is roughly $100,000.

Thus, the sort of job needed to comfortably pay off our average loan is currently out of reach of most of our graduates.  The highest starting salaries are offered by the top 250 firms in the U.S. as measured by the National Law Journal – the “NLJ 250.”  As Brian Tamanaha comments in a soon to be published book, Failing Law Schools:  “To offer a few examples, Tulane University Law School, Temple University James E. Beasley School of Law, North Carolina, University of Minnesota Law School, Ohio State University Michael E. Moritz College of Law—all well regarded law schools—placed 10-12 percent of their graduates in NLJ 250 firms in 2010.”  This is obviously not a large percentage of the class, yet these jobs are the only ones that offer the security of loan repayment without financial hardship.

There are other ways to cope with large loans other than well-paying jobs, but they have downsides.  The financial hardship can be mitigated by extended loan repayment plans.  These plans involve paying off a loan over 30 years, which reduces the monthly payment at the cost of greatly increasing the total money paid over the life of the loan.  There is also the government’s “IBR” or Income-Based Repayment plan.  These plans reduce monthly loan payments and forgive the loan after a set period.  It is possible that IBR plans may become more controversial if most law students start using them due to hardship and the government loses money it was counting on as a result.  Students can also have their loans forgiven if they work in a public service job, such as a public defender, for ten years.

Because the period of transition has just begun, outcomes for TLS are difficult to foresee. TLS has slipped in the US News rankings from 47 to 51.  Factors which may help explain this drop are decreases in the quality of the entering class, placement rates, and bar passage rates.  The quality of the entering class may be the most important factor.  This is affected by the size of the pool.  To maintain quality and especially if we want to increase our ranking, it may become necessary to reduce the size of the entering class.  This would have significant budget implications.  Depending on the effect of our ranking on applications and acceptances, however, we may be forced into this position.