The clouds gathering on the horizon of law school

As law schools return to an optimistic outlook after the 2020-2021 academic year driven by the frenzy and problem-solving of COVID challenges, and with the nearly 13% increase in applicants and a new cycle that appears repeating or even adding to these numbers, the clouds seem to be clearing up. On the horizon, however, three potentially darker storms could change the business model of law schools and pose an existential threat to a number of schools. These are the three in reverse order of gravity.

1. Over-enrollment in entry class in 2021

At the time of writing today, we have data on 126 schools which shows an overall increase in class size of approximately 8.9%. If this continues and is confirmed when official ABA data is released in 509 reports, we envision an increase of 3,400 students. This, of course, is good for law schools right now, as is the current increase of about 15% in applications from the last cycle and 50% from two cycles ago. But what happened the last time apps exploded? The Great Recession hit the upper classes in a double blow that resulted in a meteoric drop in applications. From 2009 to 2014, the pool of applicants decreased by 38%, from 87,900 applicants to 54,500.

Will it happen again? A lot of it depends on the economy. But employment opportunities are expected to become tighter than the current market indicates anyway. Even with a strong economy, a number of top law schools have class sizes 10% + larger than last year. This tends to saturate Biglaw’s positions for these schools and spills over into mid-law hiring. And even if employment opportunities outside of law school stagnate rather than decline, the flow of information from such a dropout will affect prospective students. That’s speculative at the moment, but you might see a smaller version of the aforementioned 2009 recession-induced drop in apps.

2. Student loan reform

The student loan debt itself is a huge problem, to the tune of $ 1.6 trillion. But the debt of law students is one of the highest proportionally, with data from the ABA showing that 90% of early career lawyers have student loans, averaging $ 130,000. Right now, law school registrants can virtually put their tuition and living expenses on a “credit card,” which is the federal government’s card. But it is unsustainable on both sides. The federal government cannot continue at this lending rate, and there is great pressure from many branches to have the castle gate open 24/7 for loans, and debt can suffocate graduates of the law schools. Again, according to ABA data, this debt has impacted graduates across a range of financial and mental well-being. If you google “law school loan reform” you will get story after story that is as familiar as it is sad: Despite getting a job after graduation, many students with high debt loads can hardly afford. to pay their bills, let alone move on in life. financially. While federal income-linked repayment plans can help, even the most generous options require borrowers to pay a significant portion of their income over decades. This can make it difficult for these borrowers to accumulate wealth for capital expenditures (homes, cars) or to build up retirement savings.

Reform is coming and needed in both directions. But, there is a real scenario where this reform also closes the door to some of the students who are currently enrolling each year at the faculty of law. Once again, access to “credit card tuition fees” is real now, and it won’t be forever. Law schools will either have to tighten their budgets – incredibly difficult given that for many, 75% or more goes to salaries and 15% to tuition remission (read: merit aid / scholarships) – or some of the candidates will be gone. This is a scenario where you see a few law schools shut down.

3. Demographic cliff

The college demographic cliff predicts that higher education institutions will experience serious problems attracting students over the next 10 years, as the potential college-age enrollment population declines in the mid-2020s.

Much of this decline is due to the Great Recession, which caused many people to delay or decide not to start a family. This smaller population of babies born during the recession will reach the traditional college age starting in 2026 – when colleges begin to have a much harder time attracting new students – and law schools in 2030. Additionally According to the Higher Education Demand Index (or HEDI), demographics that traditionally attend college are declining faster than demographics that traditionally do not, resulting in an even greater drop in college attendance than strict population figures don’t predict this. Clayton Christensen, professor at Harvard Business School predicts that the implications of these changes are dire, going so far as to predict that half of all colleges and universities will close or go bankrupt within the next decade.

What does this mean for law schools? Applications will fall off this demographic cliff – good news for future applicants, but not for schools. It is anything but inevitable. Plus, tuition fees will likely be frozen, as the power equation has shifted to applicants. Applicants will have more choices and schools will have to compete for limited places. They will likely do this by freezing tuition fees or cutting prices (read: more scholarships) to an even greater extent. It is also likely that we will see some law schools closing in this new diminished reality of applicants / applications / registrants.

Put it all together

I wouldn’t want to be a dean of a law school in the near future (in fact, I wouldn’t want to be a dean now, due to the interpersonal dynamics we discuss in our podcast with a bestselling author and famous speaker Terry Real here). But whatever the number of years, call it somewhere between three and eight, we are seeing a confluence of pressures, a perfect storm, coming together to make the challenges of the Great Recession potentially anything but trivial. Many law schools will have three choices: (1) reduce tuition fees by reducing salaries, decreasing merit assistance, or a combination of both; (2) create new value-added business models for the school / students (if they are student-based); or (3) facing closure. Some will applaud number 3 and say we have too many law schools and lawyers, but I wouldn’t agree. I think we have too many lawyers in too few fields doing the same types of law, but I think we need so many law schools and so many lawyers. Ideally, a more diverse mix of students from different backgrounds going to a more diverse range of practicing geographies and representing a more diverse range of clients. Which could be one of the pieces of the puzzle to help escape the looming storm. Like so many things, this is all yet to be determined – but the smarter and more creative the people who are aware of these challenges ahead, the more I think we can alleviate them.

Mike Spivey is the founder of The Spivey Consulting Group and has been featured as an expert on law schools and law school admissions in numerous national media including The New York Times, The Economist, ABA Journal, The Chronicle of Higher Education, US News & World Report, CNN / Fortune, and Law.com. Before founding Spivey A consultant, Mike was a senior administrator at Vanderbilt, University of Washington and Colorado law schools. You can follow it on Twitter and Instagram or connect with him on LinkedIn.