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Reasons to Be Cheerful: The Future of Legal Education

This is a time of turmoil in legal education, and, to a large extent, in higher education generally. Enrollment in U.S. law schools has dropped to 1974 levels, yet there are more than fifty additional law schools now. Enrollments have fallen even at highly regarded schools, as illustrated by the announcement from Washington and Lee that it was cutting its entering class size to 100 (which translates into a roughly 25 percent cut from prior norms), increasing the payout from its endowment to 7.5 percent (i.e. drawing down principal – unless the university has some truly amazing investment managers who are getting extraordinary returns; a more usual endowment payout is around 4 percent) to boost revenue, and shrinking its faculty and staff. Poor employment numbers and rising student debt has caused criticism of law schools for running “scams” to spread on line, while Brian Tamanaha’s Failing Law Schools sparked discussion about where law schools were headed. These are all stresses on legal education.

It is not easy to be in such a market, but stresses on markets usually force competition to sharpen and I think there is reason to believe that the stresses legal education and the rest of higher education are under will produce an improvement in quality in the long run. That may be small comfort to some in the short run but the opportunities for improved legal education are significant.

My reasons for being cheerful rest on trends we are experiencing as competition has its way even in markets dominated by non-profit service producers. The three big improvements I think we will see will be:

  • Lower tuition and related costs;
  • More attention to the quality of education students receive; and
  • More diversity in methods of legal education.

In short, legal education will be cheaper, get better, and offer more variety in the types of education offered. To see why, let’s look at 10 of the trends that will push legal education in that direction.

Cheaper

Legal education needs to be cheaper. There are unmet legal needs in our society that will stay unfulfilled if the only means of meeting them is by providers with an education that costs $150,000 or more. There are many ways to address those needs, as Richard Susskind has described in Tomorrow’s Lawyers and his other books and articles. Despite all the innovation Susskind describes, individual lawyers will remain an important part of meeting that need and, as a result, we need to find less expensive ways to educate lawyers if we want broad access to the legal system. Fortunately there are important market forces pushing law schools to cut costs.

  1. Declining applicants due to reduced interest in legal education. Legal education has experienced a significant drop in applicants. Last year there were roughly 180 law students per school – and many schools take more than 180 in their entering class. The decline in demand for law school has spurred serious price competition as schools compete for applicants, significantly dropping the cost of a legal education for many. For example, in 2014 Villanova, a top 100 ranked law school, announced fifty, three-year full scholarships for students with a minimum 157 LSAT and 3.6 undergraduate GPA. A 157 LSAT is about the 70th percentile – a good score, but one that would not have gotten a full scholarship even 5 years ago at a school as good as Villanova. It is hard to get much cheaper than zero tuition, but some schools are offering full tuition plus stipends (usually labeled ‘book allowances’ or something similar). That’s likely not sustainable in the long run, but it vividly illustrates the price competition in the market.

This price pressure is the result of the interaction of the smaller applicant pools and the competition to maintain schools’ rankings by holding the line on entering class statistics: the median LSAT is weighted 15 percent and the UGPA is weighted 12.5 percent in the closely watched U.S. News and World Report ranking. These numbers are of particular concern to law schools since they are among the few parts of the ranking formula that a school can directly affect. (For example, 40 percent of the formula is reputation score determined by U.S. News’ surveys; there is little a school can do to impact those numbers.)

The opportunity cost of attending law school is still positive, but the overall impact on price is going to be drive down the cost of legal education. Not every school will cut the list price, but virtually every school is now discounting heavily. Since student debt loads were (correctly) identified as a major problem by Tamanaha, among many others, this is a good thing overall even if it is a problem for law school deans trying to make their budgets balance.

  1. Declining applicants due to demographic trends. Even if next season’s breakout television series features lawyers with House of Cards–like popularity that increases interest in legal education, the long term trends do not favor a recovery of law student populations. The Bureau of Labor Statistics projects that the 16 to 24 age group (i.e. those most likely to be attending college and then eligible to attend law school) will decline by more than 13 percent between 2012 and 2022. Thus, even if we return to pre-2008 levels of interest in law schools among college graduates, the falling size of the cohort most likely to attend law school probably means a continued drop in the pool of people qualified to get a JD degree in the future.

Not only will this decline reinforce the price pressure law schools already experience, it will put many of their parent colleges and universities under greater revenue pressure. That will limit the parent institutions’ ability to make up law school deficits, reinforcing the pressure to get costs down. To the extent that this long-term trend convinces university officials that their law schools must cut costs to survive, it will reduce the likelihood of short term measures like the endowment raids some schools are using to cover operating deficits.

Faced with lowered revenues, a rational provost or president might wonder: “why continue to fund a law school at all?” Given that there are more than 50 more ABA-accredited law schools today than there were in 1974 when we last had this level of enrolled students, that’s not a bad question, especially in areas where population growth is slow or negative. Perhaps some administrators will bring out the axe.

However, few presidents or provosts want to be known as the heartless administrator who closed a law school. It seems more likely that universities will opt to slim down their law schools rather than closing them, as was just done at Washington and Lee. I think we may see a few law schools close but are more likely to see a large number of schools have smaller JD classes. Those smaller classes might reduce price pressure a bit by reducing capacity but the effort to hold on to U.S. News rank will keep up the pressure for tuition discounts for students with desirable LSATs and GPAs.

  1. The law is not getting less complex; this will increase demand for legal services. Everything from the Affordable Care Act (a.k.a. Obamacare) to the Foreign Account Tax Compliance Act (FATCA) to Dodd-Frank introduce significant added legal complexities. FATCA has spawned “son-of-FATCA” statutes from European countries, which will further complicate the world for many transactions. The expansion of anti-money-laundering compliance requirements for financial institutions and just about any business handling significant amounts of cash will boost demand for legal services. Some demand may be met by new types of service providers, from Elevate to Legal Zoom, but some will be met by lawyers or by people who are not members of the bar but who are trained at law schools.

It seems safe to predict that increasing legal complexity will increase demand for service providers trained in law. But many of these people will be demanding legal training to address specific career needs, not generic law. They will be looking for cost-effective opportunities to get the specialized training needed, so law schools will compete in that market and must be price sensitive.

Better

What is “better” legal education? There are probably as many answers as there are law students and law professors. I define “better” as more effective teaching of students to improve their development of critical analytical skills and other tools that make them more capable lawyers.

What does this involve? It doesn’t mean a one-size-fits-all solution like making everyone enroll in a law clinic in the third year or write more seminar papers. It might mean those things for some students. As former Vanderbilt dean Edward Rubin has noted, there are at least three types of lawyering that law schools ought to be teaching: dispute resolution, transactional lawyering, and regulatory lawyering. As he said in a talk to my law school this past fall, legal education is really good at the dispute resolution part (especially at “thinking like a litigator”) but we’re not quite as good at the other parts. Fortunately, it doesn’t take a revolution to make us much better at them.

For example, making Contracts a transactional lawyering course is a relatively easy thing to do, at least compared to changing the entire first year curriculum. Similarly, a number of law schools (including Texas A&M) already offer a first year legislation/regulation course that can introduce students to “thinking like a regulatory lawyer.” In legal education we claim we teach our students to “think like a lawyer” – if we define “better” to improving on our ability to do that, getting “better” will be a good thing for students and the legal profession.

  1. Accreditation standards require us to pay closer attention to useful metrics. University accreditors, not just the ABA in its role as law school accreditor, are paying closer attention to whether universities are undertaking efforts to monitor student progress and intervene where students are not showing adequate progress toward acquiring the skills needed to succeed in their chosen professions.

Some of this will result in more red tape demands on administrators, but some universities are using this as a means of actually improving the quality of the education delivered. Dean Frank Wu at Hastings recently spoke at the ABA Deans’ meeting about the impressive curricular mapping and cost accounting exercise his law school has done. As he noted, developing sophisticated cost and quality data is surprising only in higher education; in the rest of the economy, it is treated as simply common sense. Having such information enables schools to better document that they are adding value – which helps persuade people to pay money to attend them. Moving from competing on price to competing on quality is essential for legal education if it is to survive. Getting better data on what we do will enable us to do it better.

  1. Reduced demand will force legal education to make the case that it is valuable. As noted, the first reaction to the decline in demand has been to compete on price and to compete the price down to close to zero in many cases. That’s not sustainable in the long run.

The alternative is to compete on quality. What might that competition look like? One way law schools can compete is to explain the economic case for a law degree to law students. Data collected by the State Bar of Texas shows that the median income for lawyers in private practice in non-metropolitan (and low cost of living) areas of Texas is $113,000. As a back of the envelope analysis, consider that the net present value of that (assuming a 5 percent discount rate) over a forty-year career would be $1.4 million. If tuition for law school was $15,000 per year, that would be a good payoff. If we get better data on the value of legal training (which my colleague Milan Markovic is about to begin gathering in conjunction with the State Bar of Texas), potential students can assess the value of the investment they make. Some may not come to law school as a result – and if the data say the investment is not worth it, they should not – but some will. Making the case on economic grounds will improve legal education since it will incentivize law schools to do things that add expected value.

  1. Reforms that increase pressure to improve the quality of legal education will occur. Here’s one example: NYU Professor Sam Estreicher has proposed the “Roosevelt-Cardozo way” – allowing law students to take the bar exam after two years of law school study, without a requirement that they ever complete a J.D. degree. Such a change would, to say the least, put some pressure on law schools to articulate the value of the third year of law schools. The New York Court of Appeals appears to be interested in considering such a change.

Another example is the ABA’s decision to allow William Mitchell Law School (which is planning to combine with Hamline University’s law school into Mitchell|Hamline) to experiment with a hybrid online JD degree that includes a substantial asynchronous online component. William Mitchell’s dean reports that the initial demand for the program was substantial.

Are these good ideas? We cannot tell yet but both are part of the forces of competition that make at least some law schools articulate the case for the traditional model of a three-year, classroom-based legal education. I strongly suspect that in the process of doing so, we will improve what we do.

  1. Bursting of the LLM bubble. For years, some law schools treated masters of law programs as cash cows. Increasing numbers of foreign students were recruited to pay for a degree whose value was not always obvious. These days are waning: non-American lawyers are less interested in generic LLMs, more countries’ law schools are offering graduate legal education, and legal education is developing within some of the larger markets. As a result the demand for U.S. law schools’ LLM degrees is not what it once was. LLM programs increasingly have to compete on quality and so are unlikely to be the source of revenue to bail out law schools short of cash from their JD programs. This should have been expected. Years ago Peter Drucker questioned the wisdom of taking revenues from the successful part of an organization to underwrite losing parts of the organization.

There is an important role for programs aimed at foreign lawyers, but it is a role that uses their presence in a law school to globalize the education of the U.S. students while also delivering an education to the foreign lawyers that goes beyond simply exposing them to traditional U.S. law classes. For such programs to thrive will require law schools to invest in developing a broader portfolio of educational experiences for the foreign law graduates, which should yield benefits for the U.S. students as well. It will also mean using the U.S. students to enhance the foreign law graduates’ experiences and vice versa. This will make U.S. law students’ better equipped to practice law in an environment where their clients – large or small – are more likely to have trans-boundary legal problems than in the past.

More diverse

As part of an ongoing larger project on trends in legal scholarship, Olufunmilayo Arewa, Bill Henderson and I classify U.S. law schools over time into elite and non-elite strata. (Our five page methodological section became a stand-alone article.) The data show that the positional competition that has characterized the US News rankings-era of legal education has been around for a long, long time.

Law schools have primarily tried to follow the same model. Even schools explicitly founded to not follow the model (for example, New York Law School, founded by Columbia faculty who did not approve of Columbia’s adoption of the case method) have migrated to the standard model over time. Some of the homogenization was driven by the ABA accreditation standards but much of it resulted from law schools’ desire to succeed in the competition for status by imitating the top schools. (See George Shepherd, No African American Lawyers Allowed: The Inefficient Racism of the ABA’s Accreditation of Law Schools.)

To the ABA’s credit, the newest iteration of the ABA standards now encourage more experimentation. The ABA’s allowance of William Mitchell’s experiment with the hybrid online JD is an example of how accreditation is becoming less of a bar to developing new models. Greater diversity in how we educate lawyers seems almost certain to lead to good ideas (and some bad ones, but that is the nature of competition—we cannot know in advance what will work). After almost 100 years of moving toward a single model, my economics background leads me to believe that the first steps toward diversity are likely to yield large marginal benefits. There are reasons to believe more diversity is on its way.

  1. Unbundling the JD degree will spur innovation. State law schools, like the rest of their universities, get less and less general support from the legislature. They must find resources from people willing to pay for education. As law schools compete for resources, they are increasingly looking to non-JD revenue sources. These include post-JD degrees for lawyers but also non-JD degrees for non-lawyers. Some of these will also produce new ideas about how to educate lawyers. For example, in the U.K., the BPP Law School provides custom legal professional courses for those qualifying to practice in England and Wales. Some of the law school’s students attend courses custom designed for a specific firm. (Some U.S. business schools are offering custom content to businesses, unbundling the MBA in a similar manner.) Of course, there are differences between the British and American approaches to legal education and licensing (as well as to how to spell various words or appropriate breakfast foods), but BPP’s approach to legal education offers an interesting alternative model.
  1. Integrating more deeply with universities will spur innovation. As law schools affiliated with universities turn to their parent institutions for new sources of tuition revenue, a reasonable quid pro quo will be for law schools to find ways to enhance undergraduate, professional, and graduate education elsewhere in universities. This may take the form of providing legal content for other colleges, creating undergraduate programs in law, or collaborating across disciplinary boundaries on joint teaching and research projects. (Working with colleagues outside the law school when I have had joint appointments helped me be a more innovative teacher.)
  1. Barriers to competition in legal services are falling. When new law graduates went off to work at big law firms on long partnership tracks and clients obediently paid bills that included the time for those new associates to learn the ropes, law firms could take years to develop a new associate into a productive partner. (Of course, many lawyers have always worked in other environments, in which they did not participate in the “Cravath System” of training.) As new models of law firms gain footholds in the legal services market, new forms of training will emerge to meet the needs of those firms for a wider variety of skills, such as project management. Law schools that figure out how to teach those skills – and prove that their graduates have acquired them – will have an advantage in placing their graduates in such jobs and thereby attract better students. That success will spur innovation in legal education.

What does the future look like?

For the reasons discussed here, I think we can be optimistic about legal education in the long run. That is not to dismiss as insignificant the considerable turmoil in the short run. Change is hard. Some law schools may close or merge. Some may shrink faster than attrition allows; others may gradually reduce or replace their faculty and staff to accommodate new approaches or smaller student bodies.

If things are going to be different in law schools, how different will we be? Let me suggest a possible future, in which there will be four kinds of law schools that look quite different from one another. I may be wrong about the particular types of schools that emerge but I am confident that the organizational structure, approach to education, and target markets for law schools will be more diverse in the future than they are today.

Academic model law schools. These schools will look like most law schools today: large faculties, many of whom spend considerable time on scholarship as well as teaching. High test scores and undergraduate grades will be needed to get into these schools and tuition will be relatively high, as this model is expensive to operate. The top 20 schools will almost certainly all be in this group and law schools affiliated with large research universities may also be able to follow this model. This is a pretty straightforward prediction: I doubt it is controversial to predict that good students will continue to be willing to pay for a Harvard degree.

Mass-market schools. If you review 1930s AALS directories, you will find a number of law schools had quite small full-time faculties, filling their schedule instead with practitioners who taught a class or two as adjuncts. There is a market for lawyers able to handle the legal matters of people of modest means; that can be met by training lawyers in a cost effective way to handle the relatively routine types of legal disputes in this market segment. Yet these disputes are often not susceptible to commoditization because the facts of the cases differ substantially even if the legal framework for resolving them is straightforward.

One of my most financially successful former students got middling grades in law school but made himself into the self-described “Polish-Ukrainian Bankruptcy King of Chicago.” He was so successful that he managed to retire from the practice of law in his mid-40s. His skills (beyond the ability to speak Polish and Ukrainian) lay in his ability as a negotiator rather than his legal brief writing or courtroom skills. There is a significant market for schools training people like him to fulfill important niches in the legal marketplace. My former student needed skills and knowledge to succeed; much of what he needed he learned from other lawyers.

Bringing some of that learning into law schools by returning to smaller full-time faculties and relying heavily on skilled adjunct faculty, some schools will be able to deliver a legal education that equips graduates to practice law effectively. At the same time, they will be able to cut costs sufficiently to address this market if the ABA standards continue to evolve in ways that facilitate experimentation. If, and it is a huge “if,” the ABA allows it, we likely will see some schools adopt a model along these lines.

Specialty schools. Some schools will find markets in which to specialize and compete effectively. Faculties at these schools will become like faculty in universities generally: some will be “service” faculty, teaching the equivalent of general education requirements (like an English professor at an engineering school), while others will be specialists in the type of law on which the school is focused. These schools will deliver narrow but deep educations in complex areas of the law.

This education may be a JD with a specialty focus or it may be a different degree. It is likely to include a significant lifetime education component. Keeping up with health care regulation takes more than a single degree and has little to do with much of the traditional law curriculum. By providing a continuing stream of education, these schools will be able to spread the cost of the education over a lifetime of practice.

I am not aware of any schools following this model at present, but this seems to be a natural extension of trends in business education and the increasing complexity of some areas of the law to legal education. The faculty in these schools will likely continue to engage in both research and teaching to maintain the school’s reputation in the specialty, although their research may be more integrated with people engaged in what might be thought of as interdisciplinary law, such as patents and engineering, than is common today; the “service” area faculty may look more like teaching-only contract faculty do today.

Alternative legal services schools. Most of the rest of the world treats legal education as an undergraduate degree. Few legal systems rely on anything like the heavily watered-down version of the Socratic method in use in most U.S. law schools today. Alternative legal service providers need people with some legal training but also with a wide range of non-legal skills. Law schools can partner with their affiliated colleges of business, engineering, medicine, and so on to create professionals with the mix of skills and knowledge needed to address some growing needs.

For example, the ever-growing market for compliance officers to cope with regulatory regimes like FATCA or the ACA requires people with knowledge of law, accounting, and some substantive financial (FATCA) or medical (ACA) knowledge. Part of the growing category of “JD advantage” jobs may evolve into a category of “something besides a JD required” jobs in such areas. Similarly, there are likely to be firms that need project managers who understand evidence but do not need constitutional law. Focusing on training professionals for such jobs is a likely niche. It may not be filled by any current market participants, however, as this is a major shift in emphasis.

What I have described should not surprise anyone looking at higher education outside legal education. We have top research universities (such as the Ivies) that fit the first model; non-Tier 1, large universities that fit the second; and niche market colleges that fit the third. The last category is somewhat analogous to some of the for-profit schools that focus on training people for specific careers. Predicting that legal education will look more like higher education generally seems like a reasonable approach to me. Just as universities appeal to different sectors of the higher education market, many law schools are likely to be forced to evolve into legal education service providers that no longer imitate the top tier schools. Schools with modest reputations are unlikely to thrive by pretending to be Harvard.

Competition and its attendant evolution mean changes in all industries, including legal education. We will be better for it.

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