Saturday, July 16, 2011

New York Times Examines Law Schools Putting Profits Ahead of Students, Use of Phony Salary Numbers to Encourage Students to Enroll in Law School

An alert reader pointed out that the New York Times today published a lengthy article on how law schools are cashing in on students enrolling in law schools while at the same time the number of legal jobs has declined sharply.  The article focuses on New York Law School and its dean, Richard A. Matasar, who has frequently criticized law schools for not serving students employment prospects very well.  It turns out New York Law School, which charges $47,800 a year in tuition despite being considered a third tier school, has increased class sizes despite Dean Matasar's concerns.  The article does an excellent job of explaining something I was not aware of  - that university law schools make so much money that they subsidize other parts of the university.

Here's a bit of the article:
The basic rules of a market economy — even golden oldies, like a link between supply and demand — just don’t apply.

Legal diplomas have such allure that law schools have been able to jack up tuition four times faster than the soaring cost of college. And many law schools have added students to their incoming classes — a step that, for them, means almost pure profits — even during the worst recession in the legal profession’s history.

It is one of the academy’s open secrets: law schools toss off so much cash they are sometimes required to hand over as much as 30 percent of their revenue to universities, to subsidize less profitable fields.

In short, law schools have the power to raise prices and expand in ways that would make any company drool. And when a business has that power, it is apparently difficult to resist.


Among deans, the money surrendered to the administration is known informally as “the tax.” Even in the midst of a merciless legal downturn, the tax still pumps huge sums into universities, in part because the price of a law degree continues to climb.

From 1989 to 2009, when college tuition rose by 71 percent, law school tuition shot up 317 percent.

There are many reasons for this ever-climbing sticker price, but the most bizarre comes courtesy of the highly influential US News rankings. Part of the US News algorithm is a figure called expenditures per student, which is essentially the sum that a school spends on teacher salaries, libraries and other education expenses, divided by the number of students.

Though it accounts for just 9.75 percent of the algorithm, it gives law schools a strong incentive to keep prices high. Forget about looking for cost efficiencies. The more that law schools charge their students, and the more they spend to educate them, the better they fare in the US News rankings.
Another part of the U.S. News and ABA ratings depends on the employment data about the graduates that the schools submit  I have long said that law schools LIE about the number of people employed and the salaries they earn.   First, they have an incentive to lie - the ratings consider that information.  Second, most graduates don't report income and there is no audit of the raw data universities claim they used to arrive at their employment figures.  The NY Times article picks up on that fact:
Determining exactly how many graduates make even those relatively modest salaries isn’t easy. The information posted online by N.Y.L.S. about the class of 2010 says that only 26 percent of those employed reported their salaries. The nearly 300 students who reported being employed but said nothing about their salaries — who knows?
Like all other law schools, N.Y.L.S. collects this job information without anyone else looking at the raw data or double checking the math. Which gets to another dimension of the law school business that other companies might envy: a lack of independent auditing, at least when it comes to these crucial employment stats. It’s kind of like makers of breakfast cereal reporting the nutrition levels of their products, without worrying that anyone will actually count the calories.
To see the rest of the article, click here.

Several years ago, I submitted an open records request to the Indiana School of Law-Indianapolis asking for the information they used to determine the employment data the school reports.  The university's attorney refused to provide the documentation claiming it was not subject to open records.  It came out during our exchange though that in coming up with the employment figure, the school "estimates" the salaries of graduates who don't report.  What are the chances they estimate that those graduates are making $35,000 a year, which is a more likely salary, if they are indeed employed at all?  Slim and none.

For the record, the IU School of Law at Indianapolis reports that, within 9 months, their 2009 graduates working in Indianapolis earned an average of $72,000 and those recent graduates employed at law firms averaged $82,500.  The school also reported 94% employment of graduates within 9 months.  Of course if you're working at McDonald's, they will still list you as "employed."  It's interesting that they say that only 1% of the graduates employment status is "unknown."  Not sure how that squares with the fact that about 2/3 of the graduates never respond to the survey.   Of course, the law school isn't terribly interested in being honest about the numbers. What they are interested in the cash they can score from naive young men and women hoping to improve their employment prospects through a law degree.


Meyer said...

Where did you get the figures about the number of students who haven't responded to the survey?

Paul K. Ogden said...
This comment has been removed by the author.
Paul K. Ogden said...

The New York University responded that only 26% answered the school's survery, i.e. 74% didn't. I assumed a similiar figure for IU-Indianapolis Law School. (I might have run across the figure the claim locally during our exchange but I can't remember what it was.)

The bottom line though is whatever figure they tell me, I'm not going to believe them until I see the raw information. The law school has a history of lying about numbers. I have no doubt they'd also lie about the number of people responding to a survey