The New Math of Legal Education
Andrew P. Morriss and William D. Henderson
Andrew P. Morriss is the H. Ross & Helen Workman Professor of Law and Professor of Business at the University of Illinois and can be contacted at morriss@law.uiuc.edu. William D. Henderson is an associate professor of law at Indiana University-Bloomington and can be contacted at wihender@indiana.edu.
Part Two of a Two-Part Series on the State of the Profession.

To understand today’s market for law students and lawyers, start with five numbers: 20, 448, 224, 431, and 110,000. Collectively, those five numbers tell a disturbing story that is rapidly approaching a tipping point.

The Council and the Accreditation Committee of the ABA Section of Legal Education and Admissions to the Bar have accredited 20 additional law schools since 1990. The expansion of legal education shows no sign of slowing, with several schools currently seeking accreditation and a booming market in non-ABA accredited schools in states such as California. Want further proof that the market for legal education is growing? Since 1987, law school tuition rose 448 percent for in-state residents at public institutions and 224 percent at private institutions. Law school tuition increases far outpaced inflation generally, as the overall cost of living increased only 77 percent in that same period.

Despite these hefty price increases, legal education today is virtually identical to the legal education of 1987. Most law students spend most of their time in classrooms, discussing cases with professors and their classmates. Beyond the innovations in computers since 1987, there are no new technologies, no new expensive laboratories, and no exotic equipment needed to operate a law school. Today’s students may take notes on laptops instead of yellow legal pads, but otherwise a law classroom today with its chalk, blackboards, and books looks almost identical to one in 1987 or, for that matter, 1957.

How are students paying for today’s higher tuition bills? Many of them are borrowing a great deal of money. The average amount of law school debt owed at graduation soared 431 percent between 1987 and 2005, from $16,000 to $85,000.

Law school is an investment in what economists call human capital and is one increasingly financed with debt. Is it a good investment? For some students, law school pays handsome dividends. With starting salaries at $160,000 and above at large New York City firms, even students who borrow $100,000 or more to attend law school reap substantial economic rewards. But most lawyers do not start at $160,000; the median starting salary at a two- to 10-lawyer firm is a whopping $110,000 less than at a Wall Street powerhouse. Moreover, on average, this gap between large and small firm pay tends to widen during the first eight years of legal practice.

The new math of legal education is grim reading for the large numbers of today’s law students and new lawyers earning less than they need to meet their loan payments. Getting the numbers right in the future depends on three reforms.

First, prospective law students need better information about the legal marketplace. Law school brochures are filled with glossy pictures of alumni at large law firms. Many law schools fail to provide the complete picture of what their graduates do and how much they earn. People contemplating a $100,000 or more investment in their careers need accurate information and to be able to compare how graduates with similar credentials at different schools fare in the job market. In their role as the accreditation agency for law schools, the Council and the Accreditation Committee of the ABA Section of Legal Education and Admissions to the Bar are in a position to insist that law schools provide such data to prospective students.

Second, law schools need to demonstrate that they add value. There is little reason for legal education to look the same everywhere, yet the differences in methods among ABA-accredited schools are minute at best. Law schools need to earn their hefty tuition price tags by offering teaching methods that are proven to increase students’ human capital and employability. MBA programs have a long history of evaluating the value they add and persuading both employers and prospective students that they are a reasonable investment. In an era with more institutions competing for fewer students, law schools that adopt this approach are more likely to survive. Indeed, because value-added is such a foreign concept for law schools, first movers will reap substantial rewards.

Finally, some corporate law firms need to rethink their elitist business model. Current $160,000 starting salaries have all the hallmarks of a frothy bubble. Students in the top 33 percent of their classes (sometimes 25 or 10 percent, depending upon the school) start at $160,000 per year, while students right below that cutoff struggle to find jobs that start at $60,000 to $100,000. (Skeptical on this point? See www.elsblog.org.) Surely, legal talent does not have this cliff-like quality. Starting salaries of $160,000 provide strong disincentives to train and mentor young lawyers. Law firms willing to break the mold have the opportunity to hire some terrific young lawyers right below the traditional grade cutoff and to train and bill them out at a much lower rate. When clients recognize the value in this business model, the rest of the market will follow.

The current trends in tuition and starting salaries at large firms are unsustainable in the long term. In the short term, these trends are leaving more and more law school graduates worse off economically than if they had never attended law school. If law is truly a profession deserving of the privilege of self-regulation, lawyers and law schools need to take steps to address these problems themselves before legislatures, regulators, and courts decide to do it for us.

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