December 22, 2011 2:39 PM

ABA Regulations Don't Cause Tuition Increases, Law Schools Do

Posted by Matt Leichter

In his latest New York Times piece on law schools' problems, "For Law Schools, a Price to Play the A.B.A.'s Way," David Segal places the responsibility for needless tuition increases on the American Bar Association's (ABA) accreditation regime. Segal writes:

"In 1995 . . . the Department of Justice in an antitrust suit . . . charged that A.B.A. standards had artificially inflated faculty salaries. The A.B.A. signed a consent decree, agreeing to a number of strictures intended to pry the process out of the hands of legal academics and end the fixing of salaries.

Since then, the cost of law school tuition has soared, though at the high end, those prices are not the fault of the A.B.A. They are attributable to the prestige race prompted by U.S. News & World Report’s rankings of law schools, along with the wide availability of student loans."

I think Segal is trying to make three claims here:

(1) The consent decree caused law school tuition to increase over the inflation rate.

(2) Tuition increases at the most well-regarded law schools are caused by U.S. News's rankings and the Federal Direct Student Loan Program.

(3) The ABA's standards cause tuition increases in law schools that are not well regarded by U.S. News.

These are bold statements, particularly the third one, because if they are true, then criticism toward law schools ought to be redirected towards the ABA, and the solutions would probably not require significant modifications to the federal student loan system as it works with law schools. By referring to the "wide availability of student loans," Segal wisely hedges himself, for that's a bigger problem here than the ABA's regulations, which set a price floor on the costs of operating a law school, but no ceiling.

To the first claim: There is no connection between the consent decree and tuition increases and to test this, here's real law school tuition since the 1980s according to the ABA and the CPI:

Private law school tuition, which is the appropriate measure of the tuition bubble because public law schools receive varying degrees of state subsidies, appears to have increased at the same rate both before and after the consent decree was executed. Thus, Segal overreaches by citing the consent decree as a factor.

As to his claim that tuition increases are caused at the high-end by U.S. News? I'm willing to give him that, particularly because U.S. News rewards law schools for spending—and therefore charging—more money. Part of the problem, though, is that so long as the economy does not create jobs for college graduates, top-flight law schools and other postgraduate programs will not suffer a shortage of applicants. Even if news trickles down that law school provides minimal or negative returns on investment, deterred applicants will simply flock to other professional or graduate programs that offer better job security, such as medical or dental school. Or worse, potential applicants will determine that Income-Based Repayment is a small, 25-year price to pay for escaping unemployment for three years in a depressed economy.

Segal does not substantiate his third claim because he does not point to what aspect of the accreditation standards causes tuition increases. Indeed, some of the standards contradict this claim, as I will show below. But first, permit me to investigate the tuition levels at U.S. News's lesser-ranked law schools, pejoratively referred to as its "Fourth Tier," though now they are a combination of "Rank Not Published" and "Unranked" ("RNP/UR").

Segal's claim would have persuasive force if private RNP/UR law schools' tuition grew at a slower rate than the average private law school's or the average of U.S. News's most-favored law schools, the "T-14" group that have not fallen below the 14 slot since U.S. News's rankings began in the late 1980s.

Allow me to introduce you to the concept of "adjusted private law school tuition."

• Take all private law schools' tuition.

• Exclude Brigham Young's LDS tuition.

• Exclude Puerto Rico's two private ABA schools.

• Take the mean of these three bullets, and then include all public law schools whose in-state tuition is greater than this mean. In 2010–11, this adds Virginia, Michigan, and the California public schools to the number of private law schools, as their subsidies are either minuscule or have been eliminated. At this point, they are "public" in name only.

• Take the mean of the resulting data and any other statistics you desire.

Here's a graph of the mean-adjusted private law school tuition, U.S. News's T-14 schools' mean tuition (excluding Texas, which joined them last year), and last year's private RNP/UR law schools' tuition. In 2010–11, there were 40 private RNP/UR law schools (up from 30 in 2004–05), including Widener's Harrisburg campus, which the ABA counts as a separate law school but U.S. News does not.

And here they are relative to the mean-adjusted private law school tuition:

In fact, in the time period above, mean-adjusted private law school tuition grew 20 percent, and mean T-14 schools' real average tuition grew 23.5 percent. As for mean private RNP/UR law schools' tuition?—22 percent. Contrary to what we would expect, private RNP/UR law schools' tuition have not grown at a slower rate over the last several years. Instead, they've been increasing at about the same speed as the average and that of even the biggest competitors in U.S. News's rankings.

This reduces the persuasiveness of Segal's third claim—that the ABA's accreditation standards are causing tuition increases at the low end and not the high end. So what else does Segal say about the standards that leads us to think they aren't relevant?

According to Segal, the ABA's accreditation standards require three years, large libraries, and too many full-time instructors. Full-time faculty must be paid some kind of living wage as they can't work elsewhere, and if the ABA eliminates this requirement, law schools will hire more adjuncts who will cost less to employ. These three factors (there are likely others) suggest a price floor for establishing a private ABA–accredited law school, but look at law schools' average student faculty ratios by full-time enrollment (FTE):

As a reference here's the distribution of law schools by FTE according to the Official Guide.

I have no good way of smoothing this out to account for enrollment shocks, but you can see the trend. Returning to Segal's first claim, it's possible the consent decree affected this, as the slope starts dropping more quickly in the mid-1990s. The average student faculty ratio is obviously 15:1, yet Chapter 4 of the ABA's accreditation standards allows law schools to operate with ratios of 30:1. Clearly, the lower ratio reflects choices not mandated by the ABA but made by law schools. I also don't see how the consent decree's requirement of including non–law school faculty on ABA committees would cause law schools to hire more faculty, nor does it explain why the student faculty ratios at schools of varying FTE sizes have converged. Segal does not connect the accreditation standards to higher tuition and faculty growth above what the standards require.

So how then does the ABA force low-end law schools to raise their tuition? Even law schools say it doesn't. In a 2009 Government Accountability Office report titled, "Higher Education: Issues Related to Law School Cost and Access," which, after concluding that "accreditation requirements do not appear to be a major driver" of increasing law school tuition, cites "law school officials" who claim that legal education's shift towards hands-on clinical training requires more instructors. I find this unconvincing because it does not exclude the possibility of maintaining a minimal full-time faculty for doctrinal courses while employing cheaper adjuncts for smaller clinical courses.

Segal even quotes New England School of Law (NESL) dean John O'Brien who says salaries and not accreditation drives his law school's costs:

"The argument for high salaries has always been that law professors could earn even more money at a law firm. As for tenure, one oft-cited reason for requiring it is that the most sought-after talent demands it, putting a school that doesn’t offer tenure at a disadvantage.

'I need to get the best teachers out there,' says Mr. O’Brien, the [ABA Section of Legal Education] chairman, 'and the fact of the matter is that in order to do that, to compete for top-quality faculty, I have to offer tenure.' "

That's the reason? The so-called "War for Talent" that human resources departments whine about despite mass unemployment? Aren't law professor hiring conferences ("meat markets") overflowing with job applicants willing to work as scholars for much less, even with tenure? Plus, there's little evidence law professors can earn more at firms or in government, and given the drubbing Segal gave the law schools over their pedagogy last month, "top-quality" faculty don't appear that useful in private practice due to their inexperience.

I should add that from 2004–05 to 2010–11 NESL's student faculty ratio dropped from 28 to 21.9, and its inflation-adjusted tuition grew from $25,944 to $39,990 (52 percent (!)). And with what perch did U.S. News reward NESL for such savage tuition increases?

"Rank Not Published"

There's no evidence that previous generations of NESL grads were any worse lawyers than today's grads are with or without hands-on coursework, so to say that it's necessary to hire additional rock star faculty to teach them is dubious. One can infer that NESL is more interested in making the numbered rankings in the future than Dean O'Brien's stated reason of finding a greater number of even more luminous instructors for its students.

Thus, while the accreditation standards create an operational price floor, private ABA law schools could try running the "minor-league hustle": hiring cheaper full-time faculty, adhering to a higher student faculty ratio, hiring more local attorney-adjuncts for those clinical courses, skimping on the library as best as possible, using cheaper facilities, etc. This isn't to say that the accreditation standards and U.S. News have no effect on tuition, but law schools, especially those that are unattached to universities like NESL, can be cheaper under the current ABA system.

They just choose not to be.

But why? The only answer I have is Segal's erstwhile hedge about student loans: Universities are outright rentiers. They have easy access to debt-revenue, so they take it. Sure, the ABA’s accreditation standards romanticize elite industrial-era law schools, but until the boards of trustees of America's NESLs challenge themselves to kick their Direct Loan habits, they’ll simply charge more—and take more—because they can, irrespective of what U.S. News or anyone else thinks of them. The only thing left to surprise us is on a moral level: How can university administrators sincerely believe their own justifications for economic rents?

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