Law School Financing & For-Profit Institutions

Early last month, the Wall Street Journal's Law Blog posted about a new task force created by the American Bar Association - The Task Force on the Financing of Legal Education.

As reported, "[t]he creation of this task force comes four months after another ABA task force completed its work. The earlier one, the ABA Task Force on the Future of Legal Education, examined more broadly the ailments of the American legal education system, including the rising costs of tuition and student debt levels. That task force said the system of financing legal education must be 're-engineered,' faulting law schools for raising tuition and then offering substantial discounts to students with higher grades and test scores, whose academic credentials can help boost law schools in annual rankings. The practice, it said, ends up loading the students with the weakest credentials with the most debt."

The ABA has directed members of the new Task Force on the Financing of Legal Education "to study the cost of legal education for students, the financing of law schools, student loans and educational debt. The ABA said the group will also scrutinize law schools’ use of merit scholarships."

I wonder if the new task force will take aim at for-profit institutions akin to what is happening at the undergraduate level. The argument at the undergraduate level is that for-profit institutions are eligible to receive federal monies and turn a profit but are not sufficiently preparing students for employment and leaving them with loads of debt.

According to the NYTimes, "there are six for-profit law schools in the country, and InfiLaw owns three of them: Arizona Summit Law School, Charlotte School of Law and Florida Coastal School of Law."

During the hearing over the sale of Charleston School of Law to Infilaw, "it was revealed that the five owners had taken out $25 million in profits over the last few years and had received a $6 million advance to buy out two of the owners as well as an unknown amount for renting space to the law school."

"How was the money made? It appears to be off the students. Exact profits for Charleston’s owners are not public, but filings with the commission disclosed that Charleston’s cost per student was $20,995 in 2011. Tuition that year was roughly $35,000. If you take the cost per student as Charleston’s total cost, that means that Charleston’s owners made about $14,000 for each student. These are estimates, of course, and any scholarship money would have to be subtracted. In 2012, roughly half the student body received a median scholarship of $6,000."

Or maybe the new ABA task force will rely on the notion of caveat emptor. As the NYtimes article stated, "[t]he point is really to make sure that students know the costs and benefits before they matriculate so they can make a sound judgment about whether to attend. In other words, if InfiLaw or Charleston cannot provide an education that helps students obtain jobs, then presumably students will know and not attend. That is really what legal education these days is about at the regional law schools...."

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