Tuesday, January 20, 2015

The Bell Tolls for the Scam

One of the ironies of (at one point) anonymously managing  a blog lamenting the plight of dejected law grads is that I achieved a certain level of fame – most likely the greatest celebrity I will ever experience in my life.

No, it didn’t amount to the fame of a well-known legal scholar nor of even some of my other former “scam blogger” contemporaries. Nevertheless, I certainly never expected to be interviewed or profiled by the National Jurist or the Wall Street Journal.

It was, of course, ironic because all of the attention was directed towards a pseudonymous caricature, and instead of heralding success, it was a byproduct of my miserable condition.

Nevertheless, my anti-LS scam compatriots and I were usually one side of a story that also featured at least one apologist for the reigning system – whether law school dean, an ABA representative, or just a general mercenary for the machine.

In those days, condescending and dismissive remarks were the norm. I remember one dean bemoaning that LS critics tended to make the most noise because they were the most displeased. She further asserted that the majority of graduates were happily and quietly pursuing post-JD endeavors.

We now know this to be nonsense. In the years that have elapsed since this and other blogs have gone dormant, the mainline media has recognized that something is amiss as class after class of law grads are thrust into the unemployment grinder.

The Washington Post, the New York Times, and Slate have all run stories to this effect. If they don’t fully endorse the idea that the law school cartel is managing  a full blown scam, they are at least exploring the repercussions of saddling freshly minted JD’s with mind blowing debt while the schools shout ‘caveat emptor’ and hungrily look towards the next harvest.

Sure, every now and then an apologist pops his head up from the trenches in order to predict the imminent recovery of the legal market or to offer an unpersuasive case for paying the equivalent of three or four Mercedes for an unmarketable degree.

Nobody is buying it, though. The damage has been done. Yes, law schools are still signing up poor naifs who never paid attention to begin with, but class sizes have shrunk drastically. Anyone who has done a modicum of research knows that a nightmare awaits most law grads.

Let’s not get ahead of ourselves, though. What changed between 2009 and our present period in which enrollment is tanking, faculty is being axed, and even multi-campus outlets are shuttering some of their satellites?

For one thing, while the conventional wisdom about law school has moved closer to the truth, it still adheres to at least one fallacy: The idea that law school was an A-Okay option prior to 2009.

This was not the case. Yes, between 2003 and 2008, a T-14 degree probably would land you solid employment. Even grades in the top 50% at a top 25 school would make you competitive for large firm jobs.

This more sanguine picture, however, concealed the dark truth about the fates of non-elite students. After three years of study and tens of thousands of dollars’ worth of debt, these students ended up in toilet law legal mills, document review sweatshops, or non-legal roles that would have been easier to secure without the JD.

For years, the strategy of the law school cartel was clear: dangle the ostensible treasures afforded to the top 10% in front of prospective students and then lump toilet law proles and document  review slaves into the ‘ol “Employed – JD required” bucket for reporting purposes.

The masses bought it; the mystique and prestige of the law degree was preserved while unctuous law administrators and professors feasted on the ceaseless blood money flowing from Sallie Mae and Access Group via the financial futures of so many deceived souls. 

It’s little wonder that the perpetrators of the scam saw the crash as more of a hiccup than a catastrophe. In their collective minds, all they needed to do was enjoy the influx of prospective students fleeing an ailing labor market and lie and deny whenever pressed about the fate of their recent graduates.

They reasoned that once the market rebounded, it would be business as usual. There would once again be enough elite, “golden children” to mask the plight of the average graduate, and the scam could start humming along as usual.

The law schools, however, grossly miscalculated the extent of the crash. When the bottom fell out of the legal industry, it didn’t just filter out some participants, it utterly obliterated the sector’s very infrastructure.

Cost conscious firms carefully scrutinized their legal bills in an effort to save costs; the reverberations impacted the entire industry all the way down to the mills and document review.

BigLaw associate classes appear to have permanently shrunk. The ripple effect has made hiring down the chain even more competitive than it previously was. Less funding for public legal resources has introduced added pressure, and the once safe haven of document review – if safe havens can be found in poorly ventilated, converted boiler rooms – is nothing like it used to be.

While the overall economy has more or less rebounded from the Great Recession, the legal industry remains stagnant.

We can quibble about the mechanics of the sorry state of legal employment, but it is undeniable that five years out, there isn’t enough good news for the LS cartel to countervail the tales of debt and despair that dominate legal employment articles.

The economy is likely the best it’s going be during this present expansion, and at some point, there will be another recession. This will bring only further misery to attorneys and further deprecate the law school brand.

The jig is up. Even the slickest deans haven’t been able to spin the situation. Their previously enticing coos of prestige and prosperity sound more and more like a cacophony of used car salesmen trying to unload those jeeps from the 90’s that used to flip over.

This, however, still begs the question why haven’t we seen the cartel collapse under the pressure of these seemingly irresistible economic forces?

The easy answer is to point to the ubiquitous loans and their “generous” repayment terms.

To be sure, were the federal student loans to disappear tomorrow (particularly if coupled with the ability to discharge private loans in bankruptcy), the law school cartel would vanish as well.

Moreover, without GradPLUS loans and the IBR/PAYE repayment plans, the default rate among recent graduates would be astronomical. As depressing and infuriating as the post-law school horror stories are today, the criminality of such a situation would quickly bring the enterprise crashing down whether by the market or the courts.

Nevertheless, from a short term perspective, you can essentially go to law school for free. Moreover, when you graduate, you will never pay more than 10% of your AGI in student loan repayments.

Two hundred large in debt is hard to overlook even under these conditions, but if people really did believe that signing some promissory note and spending three years at school meant entrance into the upper middle class upon graduation, this might still be enticing.

The “free” education argument, however, isn’t washing with more and more prospective law students. Sure, the debt may be “manageable” (though non-repayable), but if there’s no pot of gold at the end of rainbow, why even assume supposedly manageable debt.

The law school machine has been routed in the PR game, yet despite the hits it has taken, no major, accredited law school has fallen.

While discouraging, I am nevertheless optimistic that we’ll eventually see some of the schools give up the proverbial ghost. The student loan elixir has delayed the inevitable, but at some point, market forces will give way to a necessary correction.

It remains to be seen whether the closing of a few law schools will either result in institution wide reform – more practical coursework, lower tuition, and fewer semesters – or simply a reduction in the number of “firms” in this saturated sector.

For the time being, however, law schools have to grapple with the present economics of reduced demand for their services.

With fewer prospective students, law schools only have two unpleasant choices: Reduce tuition and hack away at the scam’s raison d'ĂȘtre or attempt to retain the present cash flow and torpedo the prestige to which these pseudo-august institutions so jealously cling.

There really is no other choice. Bread and circuses won’t fly anymore. If prospective students are unpersuaded that there are ample legal jobs available, no amount of moot court rooms with mahogany benches and cutting edge technology is going to drive them in.

If enrollment continues to decline, maintaining both high academic standards and fiscal solvency will be a difficult feat. There will be a smaller and smaller pool of quality applicants, who will be on the lookout for either bargains or true prestige.

Prospective students will still be courted heavily with scholarship offers from schools that at one time would have been far outside of their leagues. It’s unlikely that the “pedigree” of a top 50 or even 25 school would be enticing in comparison.

As enrollment tanks, this will be a very costly strategy to pursue. Cutting costs could mitigate the impact of decreased revenue from tuition, but less impressive facilities and fewer perks like lavish moot court trips could make law school an even more miserable environment.

Moreover, cutting faculty could mean the availability of fewer interesting courses, and a reduced support staff would likely result in delays in important administrative tasks (transcript requests; graduation verification).

I’m certainly not advocating retaining the largesse of the cartel, but for students with shorter-term time preferences, the loss of such immediate perquisites could serve as disincentives to matriculation.

While reducing tuition either directly or more subtly via increased financial aid is a costly endeavor, sacrificing student quality could be an even more dangerous game.

Schools somewhere in the middle can tolerate poorer LSAT scores and GPA’s for a while. They just need to hope that their peer institutions need to make similar sacrifices, and they can at least hold their relative place in the LS pecking order – for whatever that’s worth.

While the mid-tier schools can try to wait out the rough seas in their metaphorical dinghies of reduced academic standards – awaiting either miraculous salvation or the final storm to take them under – the bottom feeder schools don’t have such luxury.

At first blush, one might see this as business as usual for the true toilet institutions. These schools never really served any purpose but to separate the fool from his money to begin with. What should they care if someone barely signed his name to the LSAT and did nothing else?

While the TTT(T) class of schools may have no problem emptying the local sanatoriums and having classes full of law students drooling on themselves while some old codger drones on with a canned lectured about Penoyer, the ABA may think differently.

Sure, the ABA and related bodies have been pleased to let the cartel run on its merry way, but they are starting to face more pressure. Moreover, even during the heyday of the scam, they were only willing to tolerate a certain bar failure rate.

This means, that unless the ABA abruptly jettisons all standards, the absolute garbage schools are going to start coming close to the end of the rope. They may be willing to tolerate students who don’t know the difference between long arm statutes and chewing on their own arms, but the state bar examiners won’t be so kind.

In summary, as long as conditions remain the same or continue to deteriorate, the law schools are stuck in a vicious cycle of financial decline and academic debasement.

Only the most elite schools – the only ones with any purpose under the present law school model – can attract strong student bodies. Middling schools will have to contend for what were once mediocre matriculants (and will pay heavily for them).

For many schools, this is the pathway toward a level of financial calamity that was once only reserved for their graduates. Nevertheless, the alternative – academic degradation – will instead send bar passage rates into the cellar (with the attendant possibility of loss of accreditation).

The nation’s fixation on higher education at any cost and the undying spigot of student loans mean that law schools still have time to limbo to see how low they can go both financially and academically.

Nonetheless, as mentioned, nothing short of a radical reversal of fortune for the legal labor market will change this trajectory. With this phenomena unlikely, the collapse of the law school scam is all but inevitable if not immediately imminent.

Yes, it would be nice if the courts or the government did their job and pulled the plug on this colossal fraud. Nevertheless, the slow, painful death of the scam is underway even if the government won’t give it the swift execution it deserves.

The law school apologists may be able to grab a few more bucks on the way out. They may even be able deny and continue to spin on their way to their demise, but evidence of the collapse abounds.

Faculty buy-outs are on the rise. One law school is teetering on bankruptcy. Enrollment rates are low as they’ve ever been. Deans are sucking in as many transfer students as possible to try to simultaneously retain revenue and preserve their academic rankings.

Perhaps the most telling sign is that the deans are even marching to war against each other in an academic survival of the fittest. The aforementioned scrounging for transfer students has pitted the American and George Washington deans against each other.

Regardless of the specific observations, the once unsinkable scam has hit the iceberg and is taking on water faster than it can bail it out.

When I was consistently blogging about five years ago, the debate was somewhat theoretical. It was a political debate like the death penalty or tax policy. Each side had their own arguments and metrics.

Sure, the anti-scam movement was correct, but in the same way you may feel you’re correct about the political issue de jure. Someone is always going to disagree with you, and the debate will often get lost in a morass of competing statistics, rhetorical barbs, and outright insults.

While debates over philosophy and theory may be difficult to resolve, debates over the feasibility of a commodity are subject to a market test. A business owner (or shifty law dean) can proclaim to the world that his product is the best, but if the masses believe he’s hawking overpriced schlock, he’s out of business.

Sure, he can believe that consumers are fools and they don’t know what they’re missing, but that will be all the consolation he will have as he fills out the bankruptcy paperwork.

I began this article with the irony of attaining “fame” while guarding my anonymity, so let me end with another unexpected twist.

At one point, the law school cartel and I actually had the same thought process. We both assumed the secret sauce of their scam just needed two ingredients: Easy money (in unlimited student loans) and a healthy dose of marketing deception.

In the case of the law school cartel, the realization of this miscalculation has resulted in the gnashing of teeth as they recognize Rome is burning. For me, however, it is an unexpected signal that - after all the debt, despair, and ruin imposed by the law school machine – an immoral empire will eventually be brought to its knees.

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