mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Law Schools are Hemorrhaging Money


The crisis in law schools has been going on for a while now, but we didn’t realize it was this bad already: one observer estimates that over 80 percent of all law schools are operating at a loss.

After obtaining the budgets from 31 law schools, including a mix of public and private institutions, Law Professor Paul Campos found that average revenue has fallen by 15 percent over the past three years. Given that few schools had surplus revenue anywhere close to 15 percent at that time while costs have continued to rise, this means that few, if any, of these schools are even breaking even. Over at Lawyers, Guns, and Money (h/t ABA Journal) Campos explains how competition for all-important rankings are driving these schools into the red:

[…] law schools tend, even in the best of times, to budget on the assumption that they will spend almost all the revenue they expect to generate. This is a natural consequence of the obsession with law school rankings. It’s important to realize that this obsession provides the key ideological justification for law school budgetary practices. Law schools “must” spend more money in real terms every year because other law schools are spending more money every year. This is the all-purpose justification for hiking nominal tuition in real terms every year: we have to raise tuition because we have to spend more money, because otherwise we’ll fall behind in the competition for a crucial positional good.

Thus tuition goes up because costs go up, although, as Brian Tamanaha argues in Failing Law Schools, it would be more accurate to characterize this pattern from the other direction: law schools spend more every year because they raise tuition every year, and they raise tuition every year because they can, courtesy of the federal government’s impecunious educational loan policies. (Law schools can charge literally whatever they want to whoever they choose to admit, and, subject to trivial exceptions, the federal government will loan that entire amount, including living expenses, to the admitted students).

This system is a sure-fire recipe for creating fiscally reckless institutions, that charge prices for their outputs that bear no relation to the actual economic value of those outputs, which is of course exactly what has happened.

And while law schools raise prices in hot pursuit of prestigious rankings, students routinely graduate with massive debt that is becoming nearly impossible to pay off in the shrinking and oversaturated legal market. Small wonder enrollment is declining.

[Law scales image courtesy of Shutterstock]

Features Icon
show comments
  • Anthony

    “One observer estimates that over 80% of all law schools are operating at a loss.” If true that’s significant – time to review and revamp…

    • free_agent

      “revamp” as in “wave of bankruptcies”?

      • Anthony

        You’re definitely on to something.

  • tarentius

    Henry VI, Part II, act IV, Scene II, Line 73

  • Anthony

    The problem is that there are WAY too many law professors at most schools. And keep in mind, the average law professor makes around 200k per year, even the though average teaching load is quite low.

    Thirty years ago, most schools had way less faculty and administrative staff, and I don’t think many Americans believe that today’s lawyers are so much better trained than in the past. Many of these excess professors are teaching esoteric classes that are in line with their eccentric interests but have little value in the job market.

    • free_agent

      For the time being, I expect that those excess professors lower the faculty-student ratio and so improve the school’s ranking. No educational value, but significant competitive value.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service