The Law School Tuition Bubble. Has Logical Reasoning Abandoned Our Law Schools?

You know, I lived through the 90s when credit card companies thought they could loan all the money available to anybody regardless of the ability to pay, get the public entrapped, then raise interest rates through the roof, get the Congress to make it harder for families to escape the debt in bankruptcy, and that there would no end to the madness.  In short, they thought that could fashion some sort of diabolical plan to make tons of money that could not be harmed by something as trivial as the American public's ability to pay back the money at loan shark type interest rates.

I lived through the tech bubble of the late 90s and early part of the century in which seemingly smart people thought they could raise many billions of dollars from people based upon nothing but a story, a cool name, a logo, and pay for everything with worthless stock, despite the fact that the companies had no product, no market and no earnings.  The hubris was that the story of future unseen riches were so unbelievable that people would continue to throw billions at them forever regardless of results.

And, I lived through housing and derivatives bubble of this century, that almost plunged the World into a depression.  It was based, again, on the greed for larger and larger amounts of money from ordinary people, that anybody with a high school education new could not be met, and that seemed to defy all logic about how these money grabs would later be made whole.

Lost in all of this greed, we might be witnessing the law school bubble.  This is where law schools promise students the moon for enrolling, only to increase tuition and fees (the cost of the education) through the stratosphere in the process.

Law school tuition has been increasing at an alarming rate.  And, nothing seems to justify the amount of the increases, except that, at least in the past, law students have had an endless supply of debt made available to them.  Sure there has been some inflation, but between rankings, prestige and a culmination of greed, there is no real basis for the money if the goal was to just provide a solid legal education.

There is little difference here than credit card companies pandering to college students with no jobs and uncertain futures.  Law schools would not be increasing tuition and fees as they are if students could not find a way to pay for it, and I doubt then that the quality of education would much change.  So, they pile the students up with increasingly higher interest debt and lead them to believe that Big Law will bail them out when they graduate.  But, that is not going to happen except for a highly gifted few (which means not most of the graduating law students).

Here is an example of the problem faced:

Law school tuition has skyrocketed over the past 15 years, while federal loan limits have remained stagnant.  This has resulted in the need for students to take out higher-cost private loans.

In 1994, students were limited to $18,500 in low-interest loans from the federal government. Fifteen years later, that limit has only increased to $20,500 though the $18,500 available to students in 1994 is worth $26,959.69 in today's inflation adjusted dollars.

At the same time, tuition and fees have tripled for in-state students at public law schools, and more than doubled for out-of-state students at public schools and those at private schools.

In the 1994-95 school year, low-interest federal Stafford Loans covered full tuition for in-state students at every public university law school in the country. In the '07-08 school year, Stafford loans covered full tuition at 80 percent of public schools, according to a report by the Government Accountability Office.

Stafford loans used to cover full tuition for out-of-state students at 97 percent of public university law schools and 80 percent of private law schools. In the 2007-08 school year, those loans covered only 22 and 11 percent, respectively.

The effect has been calamitous for students. The average law school graduate in 2008 left school with more than $71,000 in debt, the GAO reports.

"The rising debt burden of law graduates and other graduates has a negative impact on the ability of highly qualified individuals to pursue careers in public service," the American Bar Association reports. The ABA has been calling for Congress to raise the borrowing limit under the Stafford loan program.

The U.S. House of Representatives recently passed a bill calling for reform in the loan program. It's now in the Senate.

The answer, in the long run, is not so much about the need for cheaper money, although that would be welcomed.  The problem is the amount of money, the amount of borrowed money, that is needed to achieve a law school education.  Then, in this world of freelance work, some honest advice needs to be given to law student prospects about the type of work they will likely be engaged in after graduation.

The question is, when is the law school tuition bubble going to burst?

Read more at: http://www.huffingtonpost.com/2009/10/26/while-law-school-tuition_n_334328.html

Comments

[Malcolm Ruthven]

University of California Hastings College of the Law (my alma mater) has raised their total tuition and fees for 2010-2011 to $39,085 (resident) and $50,310 (non-resident). The tuition alone has increased from a 1988 level of $1,343 (resident) and $5,633 (non-resident) to the 2010-2011 amounts of $36,000 and $47,225.

Hastings explains the increase from 1900 to today by "In 1990, 80% of our academic budget was provided by the state. Today 27% of our budget is comprised of state support. The drastic cuts in state support have hurt us, and increases in tuition have been absolutely essential."

http://tinyurl.com/yfr3gpd
http://tinyurl.com/ac3799

[Chuck Newton]

As always, I appreciate you reading my blog, your comments and for participating in the discussion.

I will agree with Hastings that the recent economic crises in California and the loss of nearing all of its state funding this year have contributed to the increase in tuition. However, I think the remaining argument is flawed. This argument prevails in Texas as well. However, if you will look at the state's funding of its public law schools (again, except for this year), its funding of the universities in questions have increased in dollar amounts, at least to the cost of inflation. The problem is that law school tuition (again, except for this year) has more than outstripped the additional money being provided to it. So, when Hastings, and others, state that in 1990 80% of its budget was provided by the state and only 27% is provided now, that is the fault of the law school allowing its budget to balloon for no obvious reason in these years, and not as a result of a lack of increased funding by the state.

Now, some of this might also be the allocation of dollars by the university to the law school. But, I think it is fair to say that with the exception of this year in California, the issue is not that state funding is not keeping up as much as it is that law school budgets have become increasingly irresponsible.

[ms]

Anytime the state "subsidizes", or over regulates, this will be the result. The free market no longer controls the price, therefore the price has nothing to do with reality.

Just like Mr. Newton likes it.

[Chuck Newton]

I do not know how much I like regulation, but that statement just does not comport with the facts. First, the tuition at private law schools, which have increased in number, has been increasing steadily as well. Second, the state law schools started increasing when the states acted to deregulate them and the tuition they could charge. That is certainly true for Texas. Just like the deregulation of insurance, derivatives, electricity, water, and other markets have led not to better prices and competition but to manipulation an irresponsible conduct. Fiscal responsibility is all about reasonable regulation. It is the process of some adults making sure people do not spend money in vain and in irresponsible ways. As we can see with the consumer markets that are unregulated. Bad decisions are continuously made in terms of credit card spending, for example. All companies, law schools, and those that deal with the government all want a lack of regulation because they want to manipulate you and me and the market (not comply with true free market) so as to get the most money from us, and not save us money. They do not want anybody looking over their shoulder occasionally to make sure they are being fiscally responsible. And, the same is true for the public law schools. So, they have pushed the legislatures not to do this. It is fine to say the state should not subsidize education and that anybody that cannot afford it will just have to let their children be ignorant and impoverished the rest of their lives. But, then why am I subsidizing the roads you drive on, or the police to keep you safe, or the emergency rooms for when you might have a catastrophic injury. I guess if you do not have the money on you when you arrive in the emergency room, then care should be denied and the trauma not treated. Government ultimately is only about making our lives better -- as a group -- and to help us remain a civil society. If not that, then some propose anarchy. I don't. I do believe in fiscal responsibility. And, in that the government has a legitimate job to make sure its institutions are not wasting money and passing it on its bad decisions to those that cannot afford it.