Higher Education

The Perils of Law School

A chat about the rise and fall of legal fortunes with Paul Campos, Author of Dont Go to Law School!

Paul Campos and I are pretty far apart politically, but it turns out we have broad areas of agreement, like America's moral panic about obesity, and now, America's troubled love affair with putting everyone through more and more schooling.

In 2011, Campos anonymously started a scathing blog called Inside the Law School Scam (he was quickly outed, but kept blogging about the dramatic problems that law students faced in finding jobs), and he has now written an e-book on the topic. He and I sat down for a gchat about the book on Friday.

Megan: So I guess to start, tell me the personal side: how did you decide to become an undercover law school blogger?

Paul: I started studying the market for new law graduates in a serious way in the fall of 2010, partially because one of my favorite students, who had graduated the previous year, committed suicide. I don't of course know to what precise extent the disaster that is the contemporary legal scene was a proximate cause of his death, but I'm quite sure it didn't help.

Megan: So what did you find when you started poking around?

Paul: I found that half of our graduates, like more than half of graduates nationally, weren't getting real legal jobs at all, and the majority of those who did get jobs weren't making enough money to service their loans in a timely manner. I was also shocked by the radical increase in the cost legal education, and what has turned out to be a two decade long contraction in the market for the services of lawyers. This is a disastrous combination for our graduates, and indeed for lawyers at all levels of the profession

Megan: So let's start with the contraction of the market for lawyers: do we know what's causing it? And why did it take people so long to notice?

Paul: It's being caused by technology and outsourcing. Machines can now do many things that lawyers did formerly, such as e-discovery. In addition, corporations have found that much work which used to be performed by lawyers can be performed quite adequately by much cheaper sources of labor -- paralegals, compliance officers, and even people in India.

As for why it took so long to notice, law is a very hierarchical profession, and there's a great deal of stigma that attaches to failure. So as long as the contraction wasn't evident to people in the highest reaches of the profession, such as law professors at prestigious schools and partners at top firms, it remained largely invisible at the level of public discourse.

Megan: There's a bit divide between the graduates of Harvard, and the graduates of, say, Thomas Cooley

Paul: Yes indeed, but the waterline has now risen so high that large portions of the classes at top ten law schools are struggling, so now there's a "crisis."

Megan: A friend of mine--who is up for partner this year!--argues that law firms were actually quite "leveraged" in the sense that you had one revenue partner and a whole lot of associates. When the economy started to unwind . . . they "undid" the leverage, leaving classes full of graduates in big trouble

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Paul: Yes, this is known in the business as the Cravath model, after the firm that invented it, and there's quite a bit of evidence that its getting increasingly dysfunctional. The biggest problem from the perspective of the graduates of elite law schools who go to such firms is that the landing spots for people when they're "asked to leave" (which most associates are) aren't nearly so soft any more. There just aren't nearly enough jobs even for graduates of top schools. And the debt numbers have gotten insane.

Megan: Talk about that a bit. I was talking to one lawyer who said that when she went to a top ten school in the 1970s, tuition was a couple thousand a year--that's more in today's dollars, but not nearly as much as it now actually costs.

Paul: Harvard's tuition was $12,000 per year IN 2012 DOLLARS in the early 1970s. Now it's over $50,000 and a couple of schools are closer to $60,000. It's now routine for people to graduate with $200K and even $300K of educational debt, at plus 7% interest, accruing daily.

Megan: Do you have a sense of how that happens? The legend at business school--from which I graduated in 2001 with high five figure debt--was that the universities were using their professional schools as cash cows to subsidize the rest of the university

But perhaps the faculty is being paid lots and lots? . . . she said, wryly.

Paul: Faculty salaries have doubled in real terms over the past 30 years. Administrative salaries have grown by much more, and the sheer number of administrative positions has exploded. Facilities are much nicer (this is known as the amenities race), and at law schools faculty-to-student ratios are much lower because of the pursuit of rankings. It's just a crazy business model, all of which is enabled by no underwriting standards for student loans.

Megan: Presumably because they're not bankruptable.

Paul: Yes, and because the cost is borne by graduates (who are prone to cognitive errors, ie optimism and confirmation bias) and by taxpayers, who are a diffuse group. The benefits, on the other hand, are reaped by a very discrete group -- law schools in particular and universities in general. It's Poli Sci and Econ 101 respectively really.

Megan: How much does the rankings system matter in driving up costs?

Paul: It plays a significant role, in that it provides a pragmatic justification for spending ever-more money without regard to the net present value of law degrees. Indeed, the rankings treat spending per student as a direct proxy for institutional quality. So if two schools are identical in other respects but one spends more per capita to get the same results, it will be ranked more highly. You can well imagine what effects this incentive system has.

Megan: That's crazy.

Paul: Yes but extremely profitable for law professors. To quote Upton Sinclair, "it is difficult to get a man to understand something when his salary depends on his not understanding it."

Megan: I take it you've gotten some flak from your fellow law professors for pointing all this out?

Paul: Oh yes of course. Basically legal academia right now is France in 1780, and my lord doesn't care to hear about the supposed troubles of the peasantry.

That's a (slight) rhetorical exaggeration, but the level of denial remains extremely high, although economic reality is slowly beginning to erode the walls of incomprehension

Megan: How so?

Paul: Well, political pressure is finally forcing schools to disgorge something resembling halfway accurate employment and salary data, and this is having a striking effect on applications, which have fallen 25% over the last two years.

Despite the economy, so it's very counter-cyclical

Megan: Yes, that was always the backup plan for desperate English majors. So what were they doing before, to juke the stats, as they say on The Wire?

Paul: Schools would count every kind of employment, from getting a job with a top firm to working ten hours a week at Starbucks, in their reported employment rate. But they didn't disclose this -- they simply reported extremely high "employment" percentages, with the implication being that all or almost all these people were getting real legal jobs. Worse yet, they would report "average" salaries for graduates without disclosing that reported salaries were often from a very small and unrepresentative percentage of graduates (those who got good legal jobs and consequently reported their salaries).

Now that we have real data, I estimate that the median salary of ABA law school graduates a year after graduation is around $45,000, and this may be if anything optimistic. And median educational debt is around $150,000 and climbing rapidly.

So what used to be (as you say) a risk averse choice for people who decided to give up on writing the great American novel has turned into an extremely risky and indeed often flat out reckless gamble, wihch still retains the appearance of a sensible and prudent thing to do in the eyes of clueless baby boomer parents etc.

Megan: What happens to people who graduate from second or third tier schools? Do they all get hosed?

Paul: No, only 90% of them do! Seriously, almost none get jobs which would allow them to service their debt.

Megan: Only the people at the top of their class, or who can go to work in Dad's firm?

Paul: Those are the two groups who do OK, especially the latter. The cost structure of non-elite law schools is 100% dependent on the fact that the government will lend anyone the full cost of attendance who is admitted to any law school, and the school sets the price! That, like so many other aspects of this system, is simply nuts.

Megan: Where do the others end up? How many of them even have legal jobs? Do we know?

Paul: We're just beginning to gather longer term longitudinal data. It appears that a solid majority of graduates of low-ranked law schools are either completely out of the profession within a few years of graduating, or are hanging on doing low-paid temporary work -- document review in particular -- or trying to scrape out a living as solo practitioners, which is getting increasingly difficult because of a combination of DIY lawyering (LegalZoom and the like) and wealth stratification.

Megan: There's always been some of that, of course--John Grisham has dramatized it quite vividly. But now you're saying that we're basically putting the ambulance chasers out of business?

Paul: Well there's always going to be room for some personal injury lawyers, but the reality is that we're graduating 45,000 people per year for 20,000 jobs, and two thirds of those jobs don't pay enough to justify the cost of law school, so that's some pretty dire math. Of course people go to law school because they can't do math, hence here we are.

Megan: Ha! What do you tell your students, when you look at all those eager faces starting their 1L year?

Paul: I'm candid with anyone who asks me for advice, either in person or by email. And of course now I've written a book designed to reach people before they show up in the first place. It's a complex and uncomfortable position, but I'm of the old fashioned opinion that there's a difference between being an academic and a salesman.

Megan: So what is your advice for people looking at law school? Is it a simple "don't go"?

Paul: No, it's "don't go unless you have a reasonable basis for believing that the cost of your law degree will make sense given your career prospects." I estimate that for around 80% of current law students their degrees won't be worth the costs they incur in getting them. So law schools should be producing vastly fewer graduates at a much lower cost.

Megan: How can schools go back to a lower-cost model? Don't you all have tenure?

Paul: The most straightfoward short term solution is to return to the faculty student ratios and faculty compensation structures of three decades ago. This can be done through not replacing people who leave and buying out others. The altermative for universities is to simply close schools altogether, which I believe will happen in some cases (if a school closes tenure doesn't apply).

Megan: Presumably, the lowest ranked schools are the most vulnerable? Or is there some sort of market failure there?

Paul: There's a rough correlation betwen rankings and vulnerability, but it's complicated. The most vulnerable schools are high cost institutions in high cost areas with very saturated legal markets, like DC. If those schools have bad employment numbers, which even some fairly well ranked schools like American University have, they're in a perilous situation in the medium term.

Megan: Because potential enrollees can now look at their employment numbers and see what their chances of landing a well-paying job are

Paul: Right. Schools are really beginning to scramble, and the effects of greater transparency are just starting to kick in. If the federal government put any real limits on loans, a bunch of schools would go out of business quite quickly.

Megan: So on the policy side, what are your recommendations?

Paul: First, I think the ABA Section of Legal Education, which is largely controlled by deans of low ranked law schools, should be forced to publish the salary data it gets for every school's graduates. It has refused to do so. Second, we need real reform in educational lending. Student loans should be dischargeable in bankruptcy after a few years, and the government should refuse to lend to institutions with sufficiently dire employment outcomes. Third, legal academia has to get its collective head out of the sand and stop being so piggish (I am mixing my metaphors).

Megan: And very well, too.

But then the killer question: what do we do with all the English majors?

Paul: That is indeed the killer question, and I don't have a good answer. The answer I give in the book is: don't make a bad situation worse by doubling down on useless degrees. As I argue, going to the average law school at full price because you can't get a job with your English degree is like having a baby to try to salvage a crumbling relationship.