UV Letters

Feb 20, 2013 BACK

Value So Low, It Should Be Against the Law

UV Letter - Volume III, #4

In last week’s State of the Union address, President Obama said he would ask Congress to change the Higher Education Act “so that affordability and value are included in determining which colleges receive certain types of federal aid.”

It seemed fairly incremental progress from his 2012 speech where the President said he would aim to tie federal aid to value for some minor programs. But in the supplemental document that followed, the Administration revealed that if accreditors are unable or unwilling to build value into the current model, it would push Congress to establish “a new, alternative system of accreditation that would provide pathways for higher education models and colleges to receive federal student aid based on performance and results.”

With a college in every congressional district, the likelihood of such revolutionary action by Congress during the next HEA reauthorization is miniscule. But lawmakers don’t have far to look in order to envision what might compel such action 5-10 years down the road. Like President Obama, most of them went to law school. And law schools are the canary in the coalmine for traditional higher education as it pertains to value.

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When I attended law school in the late 1990s, it already seemed expensive for the value being provided. I remember doing the math at the time. Students took 4 classes a semester and paid nearly $20,000 in annual tuition. The average class had about 50 students. So that’s $250,000 tuition revenue per class. The average faculty member – not heavily burdened – would teach one class each semester. So that’s $500,000 in revenue per average faculty member, who (then) was probably being paid $150,000. The surplus went to administration, admissions, a costly renovation that totally disrupted students’ lives and resulted in removal of the library from New Haven to Bridgeport, and – to try to make it up to us – a weekly Friday cocktail party in the dining hall with a keg of beer and greasy hors d’oeuvres. It also went to the University. Every university views its law school as a profit center, required to contribute a significant portion of surplus back to the university’s general budget.

It’s true that my sense of the value provided by law school may not only have been influenced by the horrific renovation, but also by my decision to only take courses titled “________ and the law,” where the blank was something like “music,” “sports,” “television,” “cyberspace,” and – most useful – “education,” as well as my related decision to refrain from pursuing the practice of law. It’s equally true that I constantly tested the limits of “value.” For example, on every tuition check, I noted in the memo section that the payment was one payment in a “series of bribes for J.D. degree.”

tuition check

Each check was duly cashed without incident.

I also learned early on that the law school would pay the same salary as a summer associate for students interested in pursuing public interest legal work over the summer. The work could be anywhere in the U.S., so I tested the limits and took the law school’s money to spend the summer working for the Legal Aid Society of Hawaii. I learned a lot that summer, but not so much about law.

Finally, it became known that the law school would gladly fund and host just about any student-initiated conference on a legal topic. Myriad posters announcing obscure conferences which perhaps a dozen people might attend littered the hallway walls. So my roommate and I decided we would create the first ever conference on Maple Syrup and the Law, exploring the array of complex legal issues facing the maple syrup industry. We withdrew our proposal when it became clear we were being taken seriously and would be burdened for a weekend hosting a group of Vermont and Quebeçois law faculty and students, all hopped up on maple syrup.

***

Since my time at law school, average tuition at private schools has nearly doubled: from $23,000 to $40,500. It’s nearly tripled at public schools: $8,500 to $23,600. And in the spirit of “if you can’t beat them, join them,” my roommate became a law professor.

When you add the microeconomics of law school to the macroeconomic changes to the legal profession (i.e., the rise of offshoring and online self-help legal services), the headlines over the past few months are entirely predictable: 45% of recent graduates unable to find a job that actually requires a J.D. degree; average debt of private law school graduates of $125,000; unemployed graduates suing their schools over misleading placement data; two successive years of 20% declines in applications; and a sense of crisis among law schools and the bar associations and state courts that oversee them. In 2004, 100,000 students applied to law school. This year, the number will be close to 50,000.

Most of the remedies being proposed – making the third year mostly or entirely clinical, reducing the program from three to two years, as well as new ABA rules that make placement data less misleading – are applying band-aids to a mortal wound. The Washington State Bar Association has come up with the most constructive solution to the crisis facing law schools: a new profession – limited-license legal technicians – for which the requisite program will be at a much lower tuition level. This is a great example of innovating from within higher education: a solution that assumes no change in behavior on the part of law schools, but that addresses a real social and economic need and, in so doing, provides a model and path for change. Nonetheless, Brian Leiter, a faculty member at University of Chicago Law School who blogs about law schools says he expects over half of all law schools to reduce enrollment and faculty over the next decade, and as many as 10 schools to close.

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Law schools may be the canary in the coalmine for traditional higher education. But they are dealing with the same pressures that for-profit universities have been struggling with for the past three years. Quite simply, at current tuition levels, the value proposition provided by non-brand-name institutions makes sense for fewer students with each passing year.

For traditional colleges, next up could be general education. Like law schools, general education (the first two years) is a profit center for four-year institutions. Large class sizes, standardized curricula, high drop-out rates, and relatively low-paid faculty characterize the general education experience at most four-year colleges. The resulting surpluses subsidize the rest of the institution. As more options abound for students to earn their general education credits at community colleges, online, or through “do-it- yourself” sources such as MOOCs, general education programs at non-brand-name institutions will come under increasing pressure.

What is ultimately required is a reduction in the cost of a J.D. degree from non-elite law schools to something closer to a limited-license legal technician program than to the tuition charged by Yale Law School. This will require much greater flexibility on the part of the American Bar Association about what law schools need to do; not every school needs to produce legal scholarship like Yale. Similarly, the cost of lower-level courses at non-elite universities should be closer to what community colleges charge than to Stanford.

But judging from the response of for-profit universities and law schools so far – only a handful of which have opted to reduce tuition – our “Lawyer-in-Chief” is right: It probably will take an Act of Congress to move the mass of colleges and universities from surplus generation to value creation, and to save higher education from itself.

University Ventures (UV) is the premier investment firm focused exclusively on the global higher education sector. UV pursues a differentiated strategy of ‘innovation from within’. By partnering with top-tier universities and colleges, and then strategically directing private capital to develop programs of exceptional quality that address major economic and social needs, UV expects to set new standards for student outcomes and advance the development of the next generation of colleges and universities on a global scale.

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