Wednesday, December 12, 2012

How much should law school cost?

Consider the following radical thought experiment: How much would law school cost if that cost were determined by what a law degree is currently worth?  To answer that question, I'm going to make the following assumptions, both of which flow from conventional analyses of what constitutes a reasonable relationship between cost and benefit when investing in educational credentials:

(1)  The  median educational debt acquired by law students should not exceed their median starting salaries.

(2)  The relationship between advertised tuition and loans taken out is highly predictable.

The median starting salary of graduates in the class of 2011 was, optimistically speaking, around $45,000 (NALP lists a median of $60,000, but this is based on salaries for just 42% of the class, and given that there's a tight correlation between higher salaries and the likelihood they're reported, and that nearly 15% of the class had no salary at all, an estimate of $45,000 is if anything generous).

But let's give law schools every benefit of the doubt and assume it was $50,000. Let's go further, and not take any other educational debt into account when estimating law graduate debt.  What would tuition have to be to generate a median law school debt at repayment of $50,000?

Note that every single law school in the country that accurately reported mean amounts borrowed during law school by its class of 2011 reported a higher total than this.  (Drexel, Southern, Texas Southern, and Georgia State initially reported lower numbers to the ABA, but their reports are obviously for one year of debt rather than three.  I don't know whether they've corrected these figures with the ABA, but they remain uncorrected on USNWR's webpage, which is the only public source for this information).

Note too that borrowing $14,600 per year will, because of accruing interest, result in a debt level of $50,000 in law school debt alone at repayment.

For the mean law school debt -- the median would of course be higher -- of a graduating class to be in the $50,000 range, tuition should be no higher than $10,000 per year.  This can be deduced by comparing historical tuition levels to amounts borrowed (This assumption is generous to schools located in expensive cities.  In such cities, a student who debt-finances a $10,000 per year tuition bill would have to pay cash for almost all of his or her living expenses during three years of law school to avoid incurring debt at graduation of more than $50,000. Even in areas with a modest cost of living the large majority of a student's living expenses can't be debt financed if the student paying a $10,000 tuition bill is going to graduate with not much more than $50,000 in law school debt).

Now it's a sign of how warped the economics of law school have become that at almost all law schools the idea of charging $10,000 per year in tuition has come to seem almost inconceivable.  But in fact there's absolutely no reason why law schools couldn't be operated perfectly well while charging that amount.

Here's CU's annual resident tuition IN 2011 DOLLARS:

1981:  $2,700

1991:  $6,000

2001:  $8,300

Naturally these tuition levels were made possible in part by tax subsidies.  But note that even if tuition in 1981 had been 100% tax-subsidized (in fact it was nowhere close to that) the actual cost of educating each graduate was still hardly more than $10,000 per year.  By 2001 the law school was getting less than a third of its operating budget from the state, so the actual per-student cost of operation was still not much more than $10,000 (since all non-resident CU students get resident tuition after their first year, out of state tuition has very little effect on this analysis).   In fact, Harvard Law School was charging only $15,862 per year in 1981 in 2011 dollars, and even as late as 1985, i.e., several years after the beginning of the big tuition run-up, median tuition at private ABA law schools was still only about $15,000 (resident tuition at public law schools was under $4,000).

And none of this takes into account the many ways in which technology should be reducing the cost of education.  Adjusted for inflation, I paid more for a Honda Accord in 1995 than I would pay for the -- much superior -- 2012 version of that car.  The computer I'm typing this on couldn't be sold for $100 (it's four years old), but it still has more computing power than machines that cost several million dollars thirty years ago.  Why should education be different?

One answer people sometimes trot out is the Baumol effect.  But the very example Baumol and Bowen use to illustrate their theory actually illustrates its inadequacies when it's deployed to explain why tuition is so high:

Baumol and Bowen pointed out that the same number of musicians is needed to play a Beethoven string quartet today as was needed in the 19th century; that is, the productivity of classical music performance has not increased.
This line of analysis fails to take into account that the cost to consumers of a performance of a Beethoven string quartet has declined by a factor of close to infinity since Beethoven's time.  The relevance of that insight to the consumption of higher education, in a world where the cost of transmitting knowledge is hurtling toward zero, should be obvious.

The only reason law schools charge $30,000 and $40,000, and $55,000 per year in tuition is because they can.  Those prices bear absolutely no relationship to either what a law degree ought to cost to acquire, or to what it will be worth to those who acquire it.

99 comments:

  1. FIRST!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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  2. I wonder what kind of momentum there is in Congress for capping Grad Plus / Stafford loans at a certain amount, say $25,000 per year.

    Whatever the capped amount was would automatically turn into the price of tuition for almost every law school in the country.

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    1. Yes! This. ^^^

      I'm told daily in the practice of law that I must "make due." Budgets are for adults. They are not for law schools.

      After many of the law profs leave for Cravath, there will be plenty who would willingly work for sub-six figures. Hell, if I could have a cushy law prof life, I would do it for $75k.

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  3. "The only reason law schools charge . . . is because they can."

    And that, ladies and gentlemen, is why PAYE and IBR must be repealed.

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    1. Understand and agree with your logic but an even better way to do it is to cap yearly student loans in simple (hard cap based on lawprof's post) and creative (limit % of tuition hikes if you want access to federal coffers, reduce available funds by number of students each school has on IBR, etc etc) ways while also reintroducing bankruptcy protection. Not that any of this will happen. Just dreamin'

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    2. An even BETTER way is to get the government completely out of the student loan market and make Banksters look solely to borrowers for repayment.

      Then, a student won't be able to borrow more than he can show the bankster he will be able to repay upon graduation.

      That will be the end of 90% of law schools for a LONG LONG time...

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    3. No that is not an "even BETTER way" because low income students, for the most part, wouldn't be able to get these loans. A completely free market with no govt loans is better than the current system but far from ideal. True access to all forms of higher ed for most of the population benefits all of society but creating debt serfs to achieve that outcome is not.

      But yeah, Randian libertarians always prefer to cut off the nose to spite the face...

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    4. Disagree. Low income students could get the loans IF they had a good chance of repaying them.

      You need to start thinking for yourself instead of just buying all the pablum laid out for you by TPTB...

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    5. "...low income students, for the most part, wouldn't be able to get these loans. "


      So?

      I don't think you're taking into account that if what the 10:19 poster proposes comes into effect, the tuitions will plummet at the bulk of the schools.

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    6. I don't even know what TPTB is, so yeah. Sounds liek you need to start thinking for yourself instead of repeating the same old garbage teenage Randians have been spouting for a few decades. If it was up to simpletons like you there wouldn't even be a federal highway system.

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    7. Just looked it up..."The powers that be"...ha. You mean the ones who benefit from the current system or the Tea Party simpletons who cry simplistic drivel about market solutions? I'm in neither of those camps....but you are.

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    8. "Simplistic drivel" with no analysis at all. That's helpful. Again, wake up, smell the coffee and stop the name calling and repeating catch phrases you've heard somewhere with no analysis.

      You've still not replied to two criticisms of your position ("loans will be made to worth borrowers" and "tuition will come down making it MORE affordable") despite continuing to post ad nauseum.

      The drivel is coming from your end but you are so determined to insult anyone who disagrees with you that you can't see it...

      All you're trying to do is club anyone who has a different opinion. Glibness does not equal intelligence or wisdom. You'll never learn anything if you kill everyone who disagrees with you.

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    9. "with no analysis at all."

      And how do you know what Ive analyzed and what I haven't. You want me to type up a 5 page essay here in the comments section? Tons of economists of debunked the childish self-dealing economics you espouse. I do not want to live in a world where market forces determine my helath care, education or utlities. There are endless examples of why thats a really really bad idea. But it sounds like you're quite invested in bad ideas...

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    10. ^^^^^^^^^ Irrelevant much?

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    11. Yes you are. I too can randomly hit my keyboard when I feel stupid.

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    12. ^^^^^^^^^^^^ I'm guessing you're poor keyboard is about smashed to splinters, then.

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  4. Although the enrollment at law schools is dropping, there will be no significant market pressure to reduce prices until unlimited loans from the federal government are curbed.

    Just like the rule that water takes the shape of its container, subsidized good or services will rise to the cost of the subsidy.

    The desire to make education "more affordable" has, in typical government fashion, made that education even more expensive. Of course, this further reduces "access to justice" because new lawyers can't afford to keep fees low... and now of course the situation is even further distorted by IBR.

    Government needs to end education loans all together. There's enough innovation out there to make the cost of education drop tremendously, but there's no incentive as long as government subsidizes bloat and stagnation.

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    1. This^^^ Write your Congressman.

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    2. And, I would add, based on the history of political economy, that there will be no significant curbing of government subsidy until it is forced by major budget constraints at the federal level. Congress and the president cannot, and will not, reduce the subsidy until they're forced by simple economics.

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  5. The contention, recently advanced by Dean Chemerinsky re:UCI has always been that you can't run a "quality" law school for less than 30K per year in tuition. What quality means is some combination of USNEWS and the natural result of free-flowing federal loans that allows lavish spending to make the lives of professors ever more comfortable. For schools that are not "quality," you have Philip Schrag, who argues basically that it would be unfair to have a two-tiered system of well-funded elite schools and less well-funded "trade schools." At least it would be unfair for the profession to "officially" sanction this by allowing what is essentially already a two or three tiered system.

    What would a law school run on 10K per year look like? What would professors make, how many classes would they teach? What would be the number and size of administrative departments like admissions, OCS, registrar, alumni? What classes would be offered, what perks would students get like funding for clubs and speakers? Would scholarships be offered and how much?

    I have some theories. Any CUNY students (tuition 13K per year) or pre-2000 graduates want to weigh in on how their school operated on 10K per year?

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    1. The biggest difference in the past ten (especially the past five) years has been the proliferation of clinics, which are really, really expensive, but are a particularly frustrating part of the analysis, because they actually do live up to the hype and provide students with excellent practical experience. They stick out like a sore thumb in a cost analysis but it's hard to consider them "wasteful" when compared to standard law school curricula.

      I liked Campos's suggestion in his recent article to cut clinics and instead revamp the third year to heavily favor externships. Even if law schools still took tuition for the time the student was away, elimination of clinics would save a ton of money.

      The degree to which this money saved would find its way back into tuition is of course an open question, but that's neither here nor there.

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    2. The elimination of clinics would cut costs, but I have to think there has been a dramatic run up in both the number and real cost of tenured faculty and administrators.

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    3. There has been, but not nearly enough to account for how quickly tuition's gone up in such a short amount of time.

      When I was applying to law school in 2003, $25k a year was really expensive. I went to a public out-of-state for like 15. Law professors were still making $150k then. It may have been too expensive back then for all I know or care, but since then a lot of schools have straight-up doubled their revenue and not all (I would hesitate to even say most) of that cheese has gone into personnel.

      A lot of it has been construction, but 1) that's a sunk cost for the schools that have done it at this point, and 2) not every school has built a new plant in the past five years. The other big culprit is scholarships, and though I'd rather keep them more than clinics or construction the practice of over-committing scholarships to 0Ls has seriously got to stop, and would actually be very much to the benefit of the worse schools that really need the scholarships to fill seats by reducing transfer risk, since now more than ever transferring basically anywhere short of HYSCCN makes zero sense if you're throwing away a scholarship to do it.

      At any rate, of these three (I'm going to hope most deans are freezing planned construction for the foreseeable future), clinics are really the easiest to jettison.

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    4. Er, left a bit out on the scholly tip: I'd say reduce them globally but lock them in for three years for those students that qualify (provided they maintain good academic standing). This would, again, be a huge benefit not just to the students but those lower-ranked schools for whom their better students are flight risks.

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    5. Well I would assume in our hypothetical law school we're shut out of the USNWR game, so there is no reason to buy higher #s. There would be a much smaller difference between sticker and the real average tuition price, and less subsidization of half the class by the other half.

      I wonder how much building construction is funded by large donations in return for naming rights, so that donations would fall if you asked a rich alum to endow a professorship or a scholarship in lieu of getting his name on a building. Bigger and better facilities, of course, mean higher upkeep costs.

      If we would see substantial savings in other areas, such as having fewer tenured profs and paying them 100K instead of 150K, perhaps clinics could be saved.

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    6. I think you're right, but I'd add one thing...

      "Well I would assume in our hypothetical law school we're shut out of the USNWR game, so there is no reason to buy higher #s."

      Unless the faculty and administration are kinda morons (or are under pressure from university admins who are morons), a school below 100 or so isn't dumping millions of dollars in scholarships to pump its US News ranking, at least in some sense other than "how do we spend all this money????" They're doing it to buy alumni they can be reasonably assured will finish, pass the bar, and set up careers successful enough to crow about. To the extent that the US News rankings are relevant, they're relevant nationally; a third/fourth tier school with a lick of sense is going to concentrate on regional placement.

      The hope at, say, Barry is that they can convince a Florida resident wants to work in Florida and has a pretty decent shot at being successful to go to their school and be successful, rather than FSU or U of F. Ideally, that student will go on to a modest practice in Miami, where they will one day be empowered to hire other Barry grads. If that guy improves the US News rankings, great, but they'd have to be completely delusional to think any amount of money spent in the short term could turn that ranking into a positive.

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    7. Although a school is regional, its high-level administrators and tenured professors are national in both background and ambition. They are largely drawn from top national law schools, and they are angling to distinguish themselves by moving up the chain to these law schools. The last thing these people want is to admit openly that their school is "regional" and the last thing an enterprising dean wants is a drop in the rankings. It may be the reality of the thing, but as the recent responses to Tamahana indicate faculty are very concerned specifically with being seen to endorse the two tiered model of regional and national schools.

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    8. "Although a school is regional, its high-level administrators and tenured professors are national in both background and ambition. They are largely drawn from top national law schools, and they are angling to distinguish themselves by moving up the chain to these law schools."

      Huh?

      This is wrong for a bunch of reasons, but they mostly come down to the fact that law professors/administrators are far more risk averse than they are ambitious, and the reason why nobody is too interested in Tamanaha's two-tiered model is that they aren't entirely sure it would work.*

      I have not seen anything to suggest that law professors try to trade up after they get tenure more often than anybody other variety of professor; feel free to point me to the evidence that they do. In the meantime, I will continue with the assumption that a tenured member of the faculty of Bad Law School realizes he has a pretty goddamn good thing going, or else we must once again call the term "scam" into question.

      *or rather, they aren't entirely sure how, exactly, it would work, and they don't want to be the ones holding the short straw when it turns out their Journeyman School of Law is the one that didn't work out.

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    9. My school consistently poached professors, sometimes from other schools in the range but also from schools a tier below. Deans are also not only moving from law school to law school but also from law school to the parent UG. My law school's former dean now heads the university at a significantly higher salary. A dean who can't keep his rankings up is not going to be put in charge of anything.

      No, I don't think all faculty members at Barry Law School think they have a good thing going, especially when their peers who clerked for the same judges and were in their classes outside HYS are being paid more with better perks at higher ranked schools. These are highly ambitious people we are talking about.

      The reason they don't think the two-tiered model will work is because it won't work- for them. Assuming the school could be accredited and its graduates eligible to sit for the bar, the school would find enough students willing to pay a significantly reduced sticker price to attend a two-year school and still keep the lights on. But the lives of tenured law professors are going to be monumentally different in a school with 1/3 of the revenue (at least). They will have to teach more, write less, and all for less money and perks. Fewer admin staff to take nasty tasks like admissions and career counseling off their hands. They absolutely know how it would work, they just don't like the answer.

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    10. Not my school's former dean, but the former dean of another law school, who lateraled to become the president of my school's parent UG, but the point still stands.

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    11. Yeah, Lee Bollinger has done pretty well for himself -- Columbia pays him nearly two million per year.

      Mildly amusing anecdote: When I was a law student at Michigan, another student published an amazingly strident and frankly unhinged-sounding letter in the law school newspaper attacking Bollinger for some hate speech censorship issue or the other -- I remember it referred to him as "our beach boy dean."

      That was the first time I had ever heard Ann Coulter's name.

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    12. "My school consistently poached professors, sometimes from other schools in the range but also from schools a tier below."

      Money, not prestige.

      "Deans are also not only moving from law school to law school but also from law school to the parent UG."

      Again, primarily money, though I'd grant that this, a name-in-lights government appointment, or a Circuit appointment would all count as prestige bumps significant enough to entice the sufficiently narcissistic. Sacrificing tenure at School #150 to transfer to School #90 without a pay bump seems pretty incredible unless there is better weather/hotter co-eds involved.

      "My law school's former dean now heads the university at a significantly higher salary. A dean who can't keep his rankings up is not going to be put in charge of anything."

      If this were actually the case, any school in the third or fourth tier would be a merry-go-round of deans until they were ultimately shut down. This is pretty clearly not the case!

      This might blow your mind, but there are a lot of schools out there with pretty terrible US News rankings that manage to lead small classes of low-profile students to totally competitive bar passage rates and, in better times, pretty reliable regional placement. St. Mary's in San Antonio is the one that immediately springs to mind; they're fourth tier because of low student profiles and really low publishing reqs for faculty, but I think I remember their Texas bar passage at around the low 80s for first-time takers?

      Money talks, and a school is perfectly capable of giving the rankings the finger if they can keep up those kind of numbers. St. Mary's has (or, until recently, had; they're probably getting hit hard) enough regional cache to fill seats, so what kind of idiot dean or university admin is going to screw with a working formula?

      Honestly, the biggest tragedy of the law school bubble bursting is that a lot of people are still hung up on prestige the way you are, will continue to look to the rankings as a measure of quality, and will double down on the wasteful shit that got us here in the first place.

      "No, I don't think all faculty members at Barry Law School think they have a good thing going, especially when their peers who clerked for the same judges and were in their classes outside HYS are being paid more with better perks at higher ranked schools. These are highly ambitious people we are talking about."

      Oh, come on, man. If you get tenure at a law school, you won. Nobody's going to be able to offer you a better deal than that; all they can do is pay you more. If you're just going to assume that every single law professor is a complete and hopeless megalomaniac, I don't really know where we can go with this.

      "The reason they don't think the two-tiered model will work is because it won't work- for them. Assuming the school could be accredited and its graduates eligible to sit for the bar, the school would find enough students willing to pay a significantly reduced sticker price to attend a two-year school and still keep the lights on."

      But that's the whole thing I was talking about to begin with. Law professors were getting paid at pretty much the same rates they are right now 10 years ago, when tuition was like half as much. A qualified (and whether Stereotypical Law Professor is actually qualified to teach at Tamanaha's 2nd tier is another matter entirely) LP could still easily pull down six figures at a $10k a year Journeyman School; they'd just have to teach more sections and be selected out of a pool of fly-by-night adjuncts (which are the key to making this work, of course).

      Law schools are insanely cheap to run, WITHOUT CLINICS, CONSTRUCTION, OR AGGRESSIVE SCHOLARSHIPS. Now, clearly you'd want a ton of clinics at Journeyman School, but we aren't necessarily talking about that.

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    13. Money and prestige go hand in hand. Harvard offers more than Texas. NYU will give you a 2 million condo in the Village, and so on down the line. Prestige goes hand in hand with working environment. Penn professors teach fewer classes than Temple professors. You're naive to think that all law professors stop being ambitious when they get tenure, or you've never actually known any law professors. Some may be just fine with tenure, others want to climb the ladder (how do you explain Liz Warren?).

      No, fourth tier schools are not merry go rounds because they pay their deans extraordinary sums of money to retain them even by law school standards. They are outliers. But other schools pay less, and as a result their deans jump around. David Van Zandt went to the New School. The dean of University of Utah Law just took a job as President of Claremont-McKenna. And don't forget Erwin Chemerinsky and his band of faculty members.

      Tamahana has shown law professors are being paid more, with more perks, and there are more of them. The same applies to administrators and support staff. Their salaries and benefits make up the vast majority of a law school's budget. If you'd like to rebut his book, then let's see some evidence. But if you think you need high-paid tenured faculty and 20 career services officers to get students their JD and take the bar, then come out and say it.

      Your focus on clinics is misguided. How much does a clinic cost anyway? Some office supplies and a clinical professor, assuming the clinic brings in no revenue, with shared space and admin staff. Now think of the expenses incurred when hiring a new tenured faculty member, and think about the number of new hires versus the number of clinics. Clinics are not the problem.

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    14. "Money and prestige go hand in hand. Harvard offers more than Texas. NYU will give you a 2 million condo in the Village, and so on down the line. Prestige goes hand in hand with working environment. Penn professors teach fewer classes than Temple professors. You're naive to think that all law professors stop being ambitious when they get tenure, or you've never actually known any law professors. Some may be just fine with tenure, others want to climb the ladder (how do you explain Liz Warren?)."

      Here you go again, assuming lower tier schools have the same motivations as upper tier ones. You aren't going to find very many prestige whores on a faculty that consistently votes to keep its publishing requirements below even the extremely low amount typical across law schools. This is not to say professors at regional schools don't publish, but they more typically write tiny, practical stuff for bar journals once those publishing reqs are met.

      I just swung over to St. Mary's faculty bio page; a bunch of Baylor and UT grads, with a smattering of stuff like W&M and Vanderbilt. Got about halfway through with no HYSCCN in sight.

      Why in the hell is Successful UT Grad With Tenure At St. Mary's going to truck off to Columbia? What more does he need to do to demonstrate to you that he is quite happy in Texas, thanks very much?

      This is, in my experience, pretty typical of a regional fourth tier: load up on area practitioners you can pay less and get with no competition. The students, destined for small or maybe midlaw and local and state gov't work in the best of times, probably benefit greatly from this.



      I want to continue, but I'm actually running out of time here; I would leave you with the point that you're seriously underestimating the difference in culture between schools with incentive to worry about USNWR and those without it. I'm not giving 3/4 tier schools a pass, mind you; if anything, they're worse, because they could have completely headed off this bullshit and saved the world by just continuing what they were doing so well and holding the line on tuition, but they raised it anyway. But it IS different, and projecting Top 50 Prestige Whoring on the rest of the AALS doesn't help the analysis.

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  6. "Write your congressman"

    LOL!!!

    You think the Congress care? The Congressmen just want to be paid by special interests groups including Academia.

    The only way to out, is a BOYCOTT

    By getting people to not take the LSAT or enroll in Law School, we are engaging in BOYCOTT, a useful historical strategy. Obviously there are subtle differences now, but the premise is to starve the beast.

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    1. Problem is that starry-eyed special snowflakes will never boycott. And there is an endless supply of them.

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    2. Hot dog diggity doggerel drivelDecember 12, 2012 at 10:54 AM

      A Never Ending Supply;
      Of Starry-Eyed Snowflakes;
      "Oh How Many?" You Cry?
      Why - As Many As Are;
      The Stars In The Sky!

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  7. Students will push $50,000 in debt just from having to pay for their living expenses for 3 years. Add in tuition, books, bar prep courses, living money while studying for the bar/waiting for results, and keeping the tab under $100k is nigh impossible at most schools.

    Gone are the days of paying 1L summer work, and for many paying 2L summer work is a myth. There are very few ways to offset the costs of going to law school while in law school. Going part-time is an option for some people, but there are other financial consequences to doing so (a 25% increase in tuition & fees being the first).

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    1. this does not take into account that student loans are also being used to drive up the living costs of students. student loans fully fund any cost of living that a school puts forth. this drives up the the costs of apartments (especially at those schools that are in college towns) when students have more money to spend on them. I go to michigan, and the apartments in ann arbor are roughly as expensive as what one would expect to pay in lincoln park in Chicago. How ann arbor could be as expensive as a trendy neighborhood in chicago is anyone's guess, without having an unlimited source of money propping up the prices.

      Of course student's also shoulder the blame for this. they dont share bedrooms, and go out to eat too often. but if the overall amount of loans were capped, and people didn't have money to spend on expensive housing, one would imagine that the market would produce cheaper housing too meet the demands of poor students. Thus, while obviously not as significant as tuition, loans are also causing living conditions to balloon. It also wouldn't surprise me if it also drove up the costs of books and other expenses.

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  8. LawProf, is your header a trick question? How much should a student pay to be conned? I don't know, a street hustler can take $20 from a pedestrian in a three card monte game. $20 to learn that you can't beat a street hustler seems too much, even for law school.

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  9. Great analysis. My initial, immediate response to the topic heading was that law school tuition should not exceed $10K per year, at ANY school ranked outside the top 30 schools. Who gives a damn if the commode is private or "public"? Of course, the ABA pigs have ensured that full "professors" work only 4-6 hours per week at six figure salaries.

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  10. PAYE and IBR are treating the symptoms and ignoring (no, more like exacerbating) the disease. The dramatic distortion in the credit markets caused by federal intervention in the student loan system causes a huge mismatch between borrowers and lenders, resulting in billions of dollars of loans that should never be made, nor guaranteed, by any rational lender.

    Our colleges and universities are the new Countrywide, originating loans that are guaranteed by a government sponsored enterprise (GSE) and have virtually no chance of timely repayment. Instead of solving the idiotic origination of nonsensical loans, which would require cracking down on issuing blank-check loans, the government has decided to continually tackle the "virtually no chance of repayment" problem by creating IBR and PAYE to paper over the fact that its borrowers are de-facto defaulting on the terms of the loans. There's a REASON that owner of your home mortgage does not allow you to pay 10% of your discretionary income for X years in order to release you from your mortgage. It's because that won't pay off the loan.

    The difference between the systems is that instead of mortgage loans being bundled into an investment grade residential mortgage-backed securities, and then parsed into collateralized debt obligations, they are owned (for the most part) outright by Uncle Sam. Thus, the huge future losses will not be shouldered by investors, they'll be shouldered by the government with no one else to blame.

    Publius Lex

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    1. Your last paragraph also explains why this isn't a true bubble like the housing debacle. It can go on forever with the backing of the full faith and credit of the federal govt. And who are the beneficiaries of redistribution of future wealth? We all know...

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  11. I think what you have actually identified, Law Prof, is not what law school should cost but what a prudent lender should lend someone to attend: roughly the same amount as the median starting salary a graduate of a particular school. And it is just possible, not likely anytime soon but possible, that a cash strapped, default plagued federal government may actually be forced to become halfway prudent with student loans.

    RPL

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  12. I am reminded of the escort service that ensnared Eliot Spitzer. The Tier one girls were super expensive; the Tier two girls a little less expensive. The hoot was that the girls were exactly the same. They just assumed one phony persona when a Tier one and another phony persona when a Tier two.

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  13. Should the analysis start with the absolute salary of a new lawyer or should the analysis begin with the DIFFERENCE between a lawyer's salary and an average undergraduate? In other words, the law degree doesn't generate $50k/year, it only generates $50k minus, say, $25k. And that's being generous because many people can make more than $25k soon after graduation.

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    1. Point taken but the speculative nature might throw you off...

      Unless you just punt on the variability and decide to use the average polysci UG salary (i.e., Starbucks coffee monger salary) as your reference.

      Delete
  14. There is actually a much easier way to keep debt at or below 50k. Cut law school to 2 years. It can easily be done, and the school can then charge 15k tuition per year, with the student incurring even less debt based on saving one year of living expenses while in law school.

    This can also happen without Congress. Someone just has to start the school from scratch, do it right, and charge 15k per year. If the ABA will make a few rule changes (as it seems to be contemplating), this is clearly achievable, and the school could even make a nice little profit while providing a first rate legal education.

    In short, I'd bet on the market to fix this before Congress even knows what day it is. The only question is whether the ABA will let it happen.

    ReplyDelete
    Replies
    1. The market? You can't bring in market arguments without ending federal subsidies that grossly distort that particular market.

      Delete
  15. Orin Kerr has a post at Volokh taking a position on the side of good. Unlike the others on that site, Kerr appears to have at least mild concern for the scam victims.

    However, I still remember when he was pushing the lie that 2007 was a "boom" period for law school graduates (one that might return, no less). For that, he still deserves to lose his job.

    ReplyDelete
    Replies
    1. His post today is excellent.

      I'll even take Johnny-come-latelys to the reform movement, so long as it delivers actual reform and so long as they are denied seats at the reform drawing board.

      Delete
    2. I wouldn't categorize his post today as excellent. He basically just says Silver's point is lacking.

      I also wouldn't characterize Kerr as a Johnny-come-lately. He's posted any number of times about how the status quo is not optimal.

      Delete
    3. He's just very savvy.

      Delete
    4. Isn't Orin Kerr the dude whose response to a critique of law professor salaries was that first-year associates at big firms are paid $$$, so law professors should be, too?

      Delete
  16. But see Jay Silver, Prof @ St. Thomas SOL, "The Case Against Tamanaha’s Motel 6 Model of Legal Education," 60 UCLA L. REV. DISC. 50 (2012)

    discussed and criticized in:
    http://www.volokh.com/2012/12/12/law-professors-and-the-public-interest/

    Lawprof, we want to hear your commentary on this latest piece

    ReplyDelete
    Replies
    1. You really should be respectful enough* to post the Professor's full name:

      Jay Sterling Silver.


      ** Respectful enough of us here in the peanut gallery, that is - so we can get a chuckle...

      Delete
    2. This article is so poorly reasoned it doesn't even require comment. The real question is how many professors read it and nod their heads sagely without engaging in the kind of critical thinking skills and analysis of both points they demand on 1L exams.

      Delete
    3. ^^^^ Law Prof's being (amazingly to me) as susceptible to confirmation bias as the most uneducated red necks I know.

      It's frankly amazing when you read through all the comments at (e.g.) prawfsblawg - they all just uncritically pile on, follow-the-leader style, with whichever poster or commenter said the thing that made them feel good.

      Delete
  17. Apart from Dean Chemerinsky, all would answer the question:

    "Far less than it now costs."

    The problem lies in getting from here to there.

    ReplyDelete
    Replies
    1. Mitchell disagrees.

      Lerman disagrees.

      (Dish)Schrag disagrees.

      Hutchinson disagrees.


      I don't have a handle on how many fall into the Chemerinsky group (just those above off the top of my head who've written about how LS is "worth it" etc.) vs. how many would agree that it should cost less. But I do know that many are frankly uncaring about the costs and imagine that their students all either make biglaw bucks all their lives, or get PSLF forgiveness in 10 years, or become general managers of major league sports teams.

      Delete
  18. "This line of analysis fails to take into account that the cost to consumers of a performance of a Beethoven string quartet has declined by a factor of close to infinity since Beethoven's time."

    And, that line of analysis also fails to ask how much the cost of training the musicians has changed since Beethoven's time. I mean, that is the issue, right? The cost to train the performers (lawyers)?

    ReplyDelete
    Replies
    1. If you want to why law school, and college in general, costs so much there was a comment at the end of the previous post which was enlightening. I'm not sure if it was serious or not, but it was supposedly from a student at Barry:

      "Palm trees line the entryway, and there is a gorgeous fountain. We recently had a massive three story building constructed with state of the art equipment and more than five mock court rooms for trial preparation."

      This speaks for itself. You could easily provide legal education for 10k a year if you used barebones facilities. But how many students would be willing to go to a spartan, barebones campus when they could go to something like this? Perhaps if they were spending their own money they might....

      Delete
  19. This is a great post and analysis. 9:59 AM has a possible solution by decreasing law school down to two years. I would also suggest that the 19th century Socratic model be discarded for a new method desirable by employers as opposed to graduating and then have to perform free internships/clerkships to learn the legal profession because it wasn't taught in law school. The present law school model is expensive, obsolete and obviously poorly functioning in this present economy. Keep in mind that cars don't have fins anymore either.

    ReplyDelete
    Replies
    1. not really, so long as their is unlimited money a two year system would likely make no difference. given that this would lower the opportunity costs, and assuming their is some total barrier that even special snowflakes would refuse to borrow in student loans plus opportunity cost, this might result in law school costing even more in total tuition. Currently Northwestern charges the exact same amount of tuition and fees for their two year as they do their three year. One could easily imagine them charging even more on the basis that there is one year fewer of opportunity costs, and one year fewer of living expenses. It seems to me that the real problem is an unlimited student loan system. It is difficult for me to imagine, that if students could only borrow 25k a year, and it was what was required to become a lawyer, that law schools would go out of buisness. It seems more likely that the market would figure out a solution on how to educate students for the amount of money that is available to them.

      It seems unlikely to me that this would result in a drop in the quality of the graduate, unless one is claiming that people graduating today are of a much higher quality than they were 20 years ago. And it seems almost impossible to imagine that law firms would stop hiring these graduates even if it did. after all, they still need people to work for them, and this is the only place they can get new lawyers.

      Delete
    2. Yes, reduce the time to 2 years colleges would increase their tuition to 75k a year very quickly. Perhaps colleges would justify the cost by putting in more fountains and fully appointed mock courtrooms (like in my earlier comment)? And since it seems a lot of law students are pretty dumb, no matter what their LSAT scores, they would happily pay (with borrowed money of course).

      Delete
  20. Law school should cost what the consumer is willing to pay.

    Right now, some schools are too expensive (Whittier) and others are too cheap (Stanford).

    Any other conclusion is garbage and worthy only of Soviet Russia.

    ReplyDelete
    Replies
    1. This assumes a market in education. Loans have eroded the market.

      Schools are unwilling to return to the province of the rich, and for good reason, but the current "government enables all comers at any price" model is even worse.

      Delete
  21. Im sure tuition could be brought down by eliminating unnecessary or duplicative administrative employees. In the information age, with everyone having access to online job postings, is a career services office really necessary anyway? Mostly they seem to just co ordinate interviews, and provide listings of available jobs. Can't the students just do that work themselves?

    When I was in law school (late 90's/early 00's) the CSO said over and over again "we are NOT a placement office." They really were of no help to me in getting a job, as I wasn't what Biglaw firms were looking for, nor did I want to be.

    ReplyDelete
    Replies
    1. The CDO at my school says the very same goddamn thing, and also "We're not here to help you to find a job". Well, then, what exactly are they there to do? Jesus.

      Delete
  22. Meh, just more numbers twisted and approximated to the point where they mean nothing and say exactly what the author wants them to say. The only accurate and important part was the last paragraph: schools are expensive because they can charge that much. And that we already know.

    Come on Campos. We need this blog to be All Killer, No Filler. Get back to exposing the scam. And give us more of what makes you important to this movement - shit from ***inside*** the scam. From ***inside*** the faculty meetings. From ***inside*** the dean's office. The shit we can't access because we're not faculty. We don't need a law professor to feed us milquetoast analysis and speculation that we can do (and have done) - better too - on our own.

    Where's the dirt?

    ReplyDelete
  23. @2:02 I agree. Time for action. What are you doing about it at CU lawprof?

    ReplyDelete
    Replies
    1. Yes, bring your faculty lounge to life here. Names, comments, positions, commonroom politics, follow the money, expose the bullshit research, expose those who don't research.

      Make waves. Right now you're merely floating in the swimming pool. Your status as a non-target law professor in this student-led movement comes with a price. We don't need you for your leadership abilities or your opinions or DJMs stale and outdated posts. You must be the insider, shipping insider information out. The leaker. The deep throat. The mole. Not just someone who thinks that he can safely lie back and keep the scam at bay by throwing bones once in a while.

      Your school should be the most exposed, but public, most leaked school in the nation. You should be kicking holes in the walls of bullshit every day. You should be making trouble, making waves, arguing with the deans, the careers office people, firing the waste, trying to change from within.

      Where is the fire! You need to find it and pour on a can of gasoline. Get that fire in your belly ramped up to crazy-mad-at-this-scam levels.

      Delete
    2. There is much more work to be done in exposing the law school scam. There is a huge problem of experienced lawyers who once had jobs not being able to find full-time permanent jobs as lawyers.

      There are 900,000 people with law degrees who are not employed as lawyers. Most of those law grads are unemployed, underemployed as lawyers, or working in jobs that do not require a JD.

      The scam movement needs to expose how a first year legal job ends up in long-term unemployment for the majority of lawyers. The movement needs to expose how few jobs there are for even grads of top schools, how legal jobs end because employers can end them and always find 10 replacements at the drop of a hat, how many experienced lawyers are unemployed or underemployed and looking for work, how up or out policies of law firms create oversupply in the legal profession and how low the salaries of many experienced grads outside of BigLaw really are even from the top law schools.

      Finally, the scam movement needs to expose how long or short the careers of most lawyers are. Hint: It is no where near 40 years.

      Only when all the information is just as public as the first year employment statistics, will law school enrollment drop precipitously in a start to a much needed market correction of fewer lawyers being pumped out each year.

      Delete
    3. @2:07 & 2:42 It's wonderful how militant and eloquent one can be when exhorting someone else to do more work and take more risks for one's own benefit.

      Delete
    4. Oh Albert Ross, how you miss the point!

      This blog is called "Inside the Law School Scam", and people have been drawn to it by the idea that their complaints about law school would be legitimized by having a professor spill the beans, confirming from the inside that their claims were true.

      And defenders of Campos - defenders against claims of hypocricy and scammilking - routinely state that he is important because he's our inside man, and that we could not get the scam exposed without the kind of info he brings to the table.

      Yet the opposite is true. He has no insider information. He has no juicy details from behind the oak doors to the dean's office. He has routinely presented analysis based on public data (which we already have), routinely relied on standard arguments against law school and high tuition (which were developed by the scamblogs well before his time), and his posts are derivative and unoriginal.

      This blog has lost its way. And in doing so, in hogging the attention, it destroyed the heart of the scamblogging movement - Nando, etc. The core of the movement, the passion behind the movemement, was hijacked by a professor looking for job security and an "angle" for some research.

      When was the last time this blog went inside the law school scam? Beyond a point where we, as law students, applicants, grads, attorneys, and unemployeds observers could go?

      Not for many months. Perhaps not at all.

      I ask Campos not to do more work, but to do what we expected him to do when he carpetbagged the scam movement over here instead of its rightful place on the passionate scamblogs.

      Show us the filth from inside the law school scam - which would be your law school. (Which is another of my issues - your law school seems to be rather immune from your analysis, when it should be the main subject if you were doing your job right.)

      But that's the thing. I see this blog as nothing more than an insurance policy for your job. "We can't fire Campos - it will look like revenge. Let's fire the chick who writes about international animal law instead."

      This concentration of blog power in one place, run by someone who benefits from the scam (and yes you do, Campos, no matter what a few supporters say), is ruining the movement. It blocks out the legitimate real voices. Fuck, it's even blocking out LST and piggybacking off their work.

      This blog has stood on the shoulders of some giants. But instead of taking the movement further, it has got itself to safety, then kicked the heads of those who helped it up.

      Either expose the scam or go home. Don't feed us regurgitated shit that we fed you two years ago.

      Delete
  24. @ 2:02: "Currently Northwestern charges the exact same amount of tuition and fees for their two year as they do their three year."

    Northwestern doesn't have a true two-year program, it is just a three-year program stuffed into two by adding summer coursework.

    Agree with your main point, student loan reform is the key, but just thought this should be pointe out.

    ReplyDelete
  25. The weakness I see in this analysis is that it does not address in any detail the basic valuation question - what is a JD worth - although it asks it at the end?

    The only really objective way to look at the value of law school is what impact does it have on the potential lifetime earnings of a law graduate. I would argue for most law schools the answer today is between not much and none. To understand this issue it is necessary to recognise that even now most law schools are selective - they take for the most part college graduates who graduated in 4 years (less common than it used to be) had a fairly high class rank or GPA, a good personal history and who performed reasonably highly on an aptitude test - the LSAT. The higher ranked the law school the better the credentials of the incoming student, so while one might argue that a T14 graduate makes more money, and a T5 usually more still, their credentials on entry to law school were generally higher too.

    The result is that law schools are taking as JD candidates a cohort of graduates who over their careers probably would have better than average employment prospects and over time substantially better than average career prospects and earnings. These are not for the most part median college graduates, they are substantially above the median graduates.

    Thus the question becomes, will they as lawyers earn more (taking into account the cost of law school both in terms of tuition and lost earnings) than they would have made had they stayed in the workforce for the 3 years they spend in law school. So if the tuition and ancillary expenses (but not cost of living), plus 3 years earnings is more than any gain in life earnings law school had no net value - if the net earnings would be more, law school had value. So what law school should cost must be related to the net gain in lifetime earnings.

    Note that this raises a problem for all law schools, even say HYS, because the high selectivity of the top schools means that their intake needs to do a lot better in terms of lifetime earnings to be ahead of where they would have been than say a student going to Cooley. I don't know what the answer is, but it would be a mistake to assume that a highly selective law school is worth more to its students than one much lower down the ladder.

    My own sense of the situation is that for many graduates of law schools, and indeed most top 20 law school graduates of the last 10-15 years, they are no better off in terms of earnings than they would have been had they not gone to law school - and many are worse off.

    To work this out it would be interesting to see data that correlates the criteria that form the selection factors for law school with earnings.

    ReplyDelete
    Replies
    1. You hit the nail on the head. For many lawyers from the top schools, especially women, a law degree is a financial dead end in terms of what the woman can earn. There are not huge numbers of jobs for the Harvard, Yale, Columbia women in the last third of their careers. The demand is not there for their services. The legal profession is bottom heavy in terms of more high paying jobs for young lawyers than old ones.

      The real data would scare a lot of 0Ls away because there is simply not a sustained career path for most women. If Harvard, Yale or Columbia lands one a 30% chance of being a solo, unemployed or in some other eat what you kill capacity or not making any money once one hits age 53, not a good career choice is it? That is unless the woman hits the jackpot and marries, and stays married to, a man who is financially successful.

      Delete
    2. You miss the point of an insider. An insider gives credibility to the data. The sad fact is that grads of lower tier schools who can't get jobs are not compelling to most 0Ls or almost anyone else for that matter. They get blamed for going to bad schools or are simply considered losers. It was easy for applicants to dismiss their claims.

      Delete
    3. Sorry - this was meant to be a comment on the post complaining that Campos and DJM aren't feeding us juicy details of inside the scam.

      Delete
    4. To reply to the above: I think must 21 year olds would take a 30 year career. The idea of not getting work at 53 would not dissuade them. I think they would assume that they would have 30 years to basically be set for life compared to the other career options they currently face.

      It is more relevant for them to understand that at least half of them are never going to practice law.

      Delete
  26. Thanks to the tuition support the federal government provides people with Disabilities (and SSI) I personally only paid $22,000 for my law school education, which is about what I think it's worth. However, as a public policy question I'm not sure the Vocational Rehab agencies and the VA should just keep paying ever-skyrocketing tuition, but for my own selfish reasons I'm glad they did.

    ReplyDelete
  27. The average hourly wage in America is around $19 an hour, benefits add around $8 an hour, which means that your average American is earning around $27 per hour. The average document reviewer earns around that. So basically, after 3 years of school and hundreds of thousands dollars of debt, you are earning what a typical American earns. And document review tends to pay better than most sh-tlaw.

    ReplyDelete
    Replies
    1. Sad, isn't it?

      Delete
    2. OMG all these unemployed law grads went to law school expecting to become rich!!!

      Delete
  28. I say that you shouldn't pay more than $20-30 thousand max for a law degree.

    ReplyDelete
  29. Prof. Campos, don't you think that I could hire law professors as private tutors for less than $10k per year, rather than attending law school?

    ReplyDelete
  30. Applicants are down 22+% YOY according to LSAC. Projects to 52-53k applicants this cycle, 6-7k fewer than earlier estimates. Huge.

    WG

    ReplyDelete
  31. http://www.lsac.org/lsacresources/data/three-year-volume.asp

    The link. Schools are closing folks.

    - WG

    ReplyDelete
  32. Re the Baumol effect: a few days ago, unrelated to this but wanting some classical music to play on a long drive, I bought the complete set of Beethoven symphonies played by the London Symphony Orchestra for $7.99 on iTunes.
    It took less than 5 minutes to download to my phone.

    ReplyDelete
    Replies
    1. Also Amazon has many choices of classical music recordings for free to prime members (free for a year as a student and cheap to renew for one year)

      Delete
  33. Just checked on itunes for fun: Beethoven's string quartets, the late quartets, 27 songs performed by the Emerson String quartet (highly rated) for $19.99 an album or .99 a song

    ReplyDelete
  34. I view the problem from a different perspective. Instead of tying tuition to earnings, why not tie it to necessary costs. We have plenty of comparisons.

    For example, taxpayers pay approximately $5,000 per student per year at most high schools.

    As a general rule, high schools have better facilities than the typical law school. High schools usually have at least one gymnasium, exercise equipment, band rooms, musical instruments, stages, cafeterias, language labs, media centers, and computers.

    In contrast, the most expensive facility in any law school is its library. Law libraries are being rendered obsolete by the internet, to the extent that most local courts in Colorado no longer have a law library.

    Many high school teachers have equivalent, if not superior academic credentials than most law professors. It is not at all uncommon to see a high school teacher with a Ph.D.

    Plus we are told that high school teachers are in short supply, while there is a vast oversupply of people with J.D.s -- the academic qualifier for teaching in law school. Supply and demand would seem to dictate that law school professors should not be paid more than high school teachers.

    In fact, it seems absolutely crazy that a law professor at the University of Colorado is paid more than a District Court Judge, a Supreme Court Justice or the Governor of the State of Colorado. The surplus of people with the academic qualifications makes law professor salaries even more unreasonable.

    If we took an honest look at what it would cost to provide a minimally adequate legal education, it would be apparent, that the current tuition is excessive, by a factor of ten.

    High Plains Lawyer

    ReplyDelete
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