Law School Applications Are Collapsing (As They Should Be)

The Atlantic

It appears that law schools are about to experience a bit of economic justice. 

As the New York Times reports today, applications from aspiring JDs are on pace to hit a thirty year low. About 30,000 prospective students have applied for a spot this fall's law school class, down 20 percent from this time last year, and 38 percent from 2010, as shown in the graph below from the Law School Admissions Council.  When all is said and done, about 40,000 students are projected to enroll, which would cap off a 24 percent free-fall in just three years. 

This is a desperately needed adjustment, for which the academy largely has itself to blame.  The legal economy is a shambles, and law schools have done virtually nothing to react.

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For the last decade and a half, universities treated legal education as a cash cow. Tuition rose beyond all reason, so that the average private law school grad in the class of 2011 borrowed $125,000 for their degree, according to the American Bar Association. Public school grads were a little better off, borrowing around $75,700. With students forking over ungodly sums of cash to learn the fine arts of torts and contracts, new institutions opened rapidly. These schools often catered to relatively marginal students, who they lured with egregiously over-optimistic jobs stats. Today, there are about 201 ABA-approved law schools, 19 more than there were in 2000, and seven more than in 2007, when the legal industry suffered a recession-induced aneurysm from which it hasn't recovered. 

Just how crippled is the legal job market? Utterly. Here's the graph of total employment in legal services since 1990. It includes everyone from attorneys to paralegals to secretaries, but it gives you a sense of the industry's much deteriorated health. There are 50,000 fewer jobs today than five years ago. In meantime, schools have been graduating more than 40,000 students a year. 

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Many of them been eaten alive on the job market. According to the National Association of Legal Placement, just 85 percent of the class of 2011 had a job 9 months after graduation, down about 6 percentage points, according to the National Association of Legal Placement. But fewer than two-thirds had a full-time job that required a law degree, and not even half were at law firms. At the largest law school in the country, Thomas M. Cooley, only 37 percent of new graduates are getting full-time jobs that require their JD. 

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With jobs few and far between, salaries have tumbled. Median pay for new grads in private practice has fallen 18 percent since since 2010 to $85,000. The only reason the combination of debt and falling pay isn't a bigger disaster is the federal government's income based repayment program, which caps student loan payments at 15 percent of income and forgives the balance after 25 years. 

The upshot of all this is that unless you're graduating from a truly top program, going to law school has turned into professional Russian Roulette. If it works out, you survive to pay off a truly enormous debt burden -- one that dwarfs the sort of tab undergraduates accumulate. If you don't make it on the job market, you've just spent three valuable years of your life sweating through deadening lectures and high-stakes finals for nothing, consigning yourself to a quarter-century debt payments in the process. 

And yet, the response from law schools has amounted to not much more than some extremely belated soul searching. In June, the Wall Street Journal found 10 schools that are considering cutting their enrollment -- a positive development, but only an incremental one. And still, some members of the professoriate don't to understand the problems they're facing. Take this gem from the Times story:

Some argue that the drop is an indictment of the legal training itself -- a failure to keep up with the profession's needs. "

We have a significant mismatch between demand and supply," said Gillian K. Hadfield, professor of law and economics at the University of Southern California. "It's not a problem of producing too many lawyers. Actually, we have an exploding demand for both ordinary folk lawyers and big corporate ones."

In a word, no. Legal education could do a better job teaching students actual practice skills, and maybe that would help a few students find gainful employment. But the difference would be on the margins, and there's simply no sign of "exploding demand" anywhere in the market. As Citi Private Bank -- the pre-eminent lender for major law firms -- noted in a recent report, demand for high-end corporate legal services has fallen at a 0.4 percent annual rate since every year since 2008. Revenue at big firms has grown slower than inflation. And while firms have tried to raise their official rates to make up the difference, the reality is they're handing out discounts left and right, particularly to big clients.  

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And things aren't looking up any time soon. On the bottom of the market, companies like LegalZoom that provide basic legal documents online are taking work from solo-practice attorneys and small firms. On the higher end, the rate of major firm collapses has doubled since 2007, and Citi has a watch list of others it believes are at risk, especially as their old business models come under attack from new sources of competition. The rise of legal outsourcing firms that can competently handle bread-and-butter corporate legal work in bulk will continue cutting into firms' profits. Computer programs capable of searching through vast troves of legal documents will continue to shrink on the number of lawyers needed for litigation. The industry is looking at a period of consolidation. 

Changing what law students are taught won't help. The only answer is to graduate fewer lawyers, and cut the price of an education that is swiftly becoming a less valuable asset. That means fewer law schools, with fewer dollars flowing into them. 

Things are about to get really ugly for the legal academy. As they should. 





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