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VOL. 37 | NO. 29 | Friday, July 19, 2013

The case of the shrinking law schools

Enrollment slides as potential students argue costs v. benefits

By Jeannie Naujeck

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With lawyer jokes, the punch line is often a variation on: “There’s too many.” But if current trends continue, one day there may be too few.

For the third consecutive year, the entering class of “1Ls” – first year students – at law schools around the country this fall will be smaller than the previous year.

Tennessee’s law schools are not immune. Most will either maintain or further reduce class size this fall.

“The law schools have been shrinking. Very few are larger today than they were three years ago,” says Barry Currier, managing director of accreditation and legal education for the American Bar Association.

“We suspect there will be fewer than 44,000 this fall. We don’t know how many will actually show up.”

Applications and enrollment were lower, as well, forcing law schools to compete for their target students with more scholarship money, lower fees and other enticements.

That’s not necessarily a bad thing. As contraction in the legal market shows, there are too many lawyers, or at least too many competing for the same high-dollar jobs. But other legal needs are going unfilled.

If students are not choosing to attend law school, where are they going?

Likely to high-paying, high-growth occupations such as finance, technology and health care, the fastest-growing occupation this decade, according to the Bureau of Labor Statistics.

Between 2010 and 2020, the U.S. economy is projected to add 20.5 million new jobs; 3.5 million of those are in health care and health care support, which doesn’t include business and management positions in health care.

Kinsler

Memphis Law is launching a new Center for Health Law as part a university-wide emphasis on the growing field that also includes a new School of Public Health and expansion of the School of Nursing.

And the need for health care lawyers to help health systems navigate new federal regulations is one reason Belmont College of Law added a health law certificate within the business track of its curriculum.

The reduction in law school enrollment began two years ago. Enrollment declined 7 percent from 2010 to 2011 and 9 percent between 2011 and 2012. In other words, 8,000 fewer people have chosen to pursue law degrees since 2010.

But while declining enrollment is bad news for law school revenues, it may well have positive implications for law students entering the job market down the road.

“Nationally, the graduating class of 2016 will be approximately 35 percent smaller than the graduating class of 2013. This means that there will be approximately 17,000 fewer new attorneys,” says Jeffrey Kinsler, dean of the Belmont University College of Law, which enrolled its charter class two years ago and attained provisional accreditation last month.

“As a result, the job market will be entirely different in the second half of this decade.”

Return on investment?

The decline in applications this year, estimated at 20 to 30 percent, had some law schools scrambling this fall to fill entering classes with the quality students they desire.

Many schools, including some in Tennessee, have dropped fees, reduced tuition, offered more scholarships and extended application deadlines well into the summer, allowing prospective candidates to take the LSAT as late as June.

While that’s good news for those considering law school, the question is will the degree pay off?

Currier

“The problem isn’t finding the money to go,” Currier says.

“The problem is, is it worth spending your own money or incurring the debt? Is it a good value? What’s the ROI?”

Return on investment for a law degree, once a given, has been called into question by a changing market for legal services that coincided with the onset of the Great Recession. Technology and global outsourcing also hurt.

In 2012, the employment rate for new lawyers fell for the fifth straight year, decreasing by 1 percent compared to 2012, according to figures released in June by the National Association for Law Placement.

The median starting salary was $61,245, up slightly compared to $60,000 in 2011. But just three years earlier, the overall median was $72,000.

Meanwhile, private law school tuition averaged $40,500 in 2012, and graduates left with an average debt of $125,000.

“Most of the entry-level jobs that have been lost nationwide are in the big law firms in larger legal markets, and those at the highest salary levels,” says Karen Britton, director of admissions and financial aid and director of the career center at the University of Tennessee-Knoxville College of Law.

“That doesn’t directly relate to the personal career aspirations of all law students. But it tends to make big news, and it is certainly important to students who assume significant debt in anticipation that a handsome salary would result.

Britton

“We are all dealing with a ‘new normal’ in the employment market that will have direct implications for the type of student schools will attract, and what they will learn once they arrive at the law school of their choice in order to position themselves for the job of their dreams.”

‘A very different environment’

Applications for Belmont’s fall 2013 class were down about 10 percent, Kinsler says. However, the LSAT scores and undergraduate GPAs of the entering class are higher than those of the two previous classes.

Belmont had 224 1Ls in its fall 2012 class, and is still reviewing applicants for this fall’s class.

This year, the decline in applicants at UT-Knoxville tracked national trends for the second year, Britton says. The entering class of 1Ls next month will be smaller than normal, but larger than last year’s class.

Less than 1.2 percent of law school applicants qualify for the state resident tuition of $18,962 per year, putting UT-K at a disadvantage: out-of-state tuition, at $37,706, rivals costs at private colleges that may have larger endowments.

“Our scholarship resources are increasing, but we can’t be as generous as we’d like. So it’s more difficult for us to grow our applicant pool even in the best of times, much less when it’s challenging,” Britton says.

The state’s other public university law school, the Cecil C. Humphreys College of Law at the University of Memphis, is trending better than the national average but saw a drop in applications from 869 in 2011 to 817 in 2012.

Consequently, while Memphis Law’s entering class of 2011 had 144 matriculating students, the entering class of 2012 had only 112, a 22 percent decrease.

Guthrie

Even Vanderbilt School of Law, which is 15th in U.S. News and World Report’s 2014 law school rankings, reduced the size of its entering class to 175 students last fall to sustain the quality of the class and to reflect the changing market.

The class that entered in 2011 had 194 members, a typical class size for the past 10 years since 2004, which had an unusually large class of 227.

Admission to the school has gotten more competitive, with the median LSAT score rising from 164 in 2002 to 169 in 2012, and the median GPA rising from 3.62 to 3.71.

This fall’s entering class will stay at 175, culled from 3,300 applications. While that volume still enables Vanderbilt to remain highly selective, it’s a significant drop from the 5,000 who applied in 2010, a peak year.

“We’re not facing the challenges some of the schools are, but it’s certainly a very different environment than we were in four or five years ago,” Vanderbilt University Law School Dean Chris Guthrie says.

The school also is offering substantial scholarship money.

In 2012-2013, more than 80 percent of students received scholarships to attend Vanderbilt Law, with the median scholarship being $20,000 a year.

Britton says UT-K has maintained the quality of the entering class so far, but critical decisions will lie ahead if the applicant pool quality starts to drop substantially or if the job market continues to deteriorate.

“The next two or three years will tell,” she says. “There is still demand for lawyers across the state, and I think UT is very fortunate that our students have career goals that reflect both the nature and the needs of our state.”

LMU gives second chance

Judkins

This is the climate in which two new law schools were recently launched in Tennessee – Lincoln Memorial University’s Duncan School of Law in Knoxville in 2010, which just graduated its first class, and Belmont College of Law, which opened in 2011 and will graduate its charter class next spring.

Belmont just received its provisional accreditation from the ABA in June, becoming one of 203 ABA-approved law schools. The Duncan school was denied ABA accreditation on its initial try in 2011 and has since filed a second application under the guidance of interim dean Parham Williams. A decision is expected in early December.

The application downturn has hit Duncan harder due to its accreditation issue, with applications slipping 10 to 12 percent this year, Williams says.

To make up for it, the school has changed its recruiting and admissions process and is now accepting more students but actively recruiting those with higher credentials. Thirty students will matriculate this fall, compared to only 13 last year.

The Duncan school also is offering rejected applicants a second chance through its conditional admission program.

Applicants may take a free four-week course on the Federal Rules of Evidence taught by Duncan faculty. If they do well, they can earn a spot in the entering class.

The idea is to give students who don’t perform well on standardized tests an opportunity to prove themselves. The LSAT, Williams says, does not reflect the educational background of students coming from the Southern Appalachian Mountains, which LMU was founded to serve.

“You can demonstrate analytical ability through the LSAT or actual performance in a law school class,” he says. “The end result is the same.”

Burns

Duncan’s charter class of 77 graduated in May. Of those graduates, more than half already have law-related jobs before taking the bar, Williams says, which he says is on track with graduates of Nashville law schools.

Would-be lawyers should not judge their future prospects by the past – or the present, Williams says.

“When I interview prospective applicants, I point out to them to be mindful of the time span,” he says.

“Today, when they apply, there may not be a robust job market. But our economy is rejuvenating, which translates into a need for more lawyers in the future. By the time they graduate three or four years from now, the market for lawyers is going to be completely different than it is today.

“There will be job opportunities that don’t exist today. Not the same as in 2009 or 2010, but considerably better than it is in 2013.”

Belmont focuses on niches

Law jobs may indeed be in for a rebound, or at least a reversal. In 2010, 1.2 million people were employed in legal occupations, including 728,200 lawyers. By 2020, employment in the field is expected to grow by 10.8 percent, adding 73,600 lawyers (Bureau of Labor Statistics, Employment Outlook: 2010-2020).

Belmont officials have always maintained there is room in Middle Tennessee for a third law school – besides Vanderbilt, there is Nashville School of Law, a part-time night school that is not accredited outside the state – and they might very well be right.

When the college was in the planning stages, feasibility studies concluded that Tennessee’s population was underserved on a lawyers-per-capita basis. Health care lawyers are especially in demand here due to a high volume of regulatory and transaction work brought on by changes to the health care industry.

Mayden

And while Middle Tennessee is a modest-sized legal market, Kinsler cites a recent Nashville Chamber of Commerce study that predicts a shortage of all professionals, including lawyers, in Middle Tennessee after 2014, due to the region’s fast growth.

That doesn’t surprise the ABA’s Currier. After all, while big national players like Harvard and Yale may grab headlines, many law schools serve their local market.

“As Tennessee grows, the business climate develops and the population increases, it’s natural that a lot of training programs, services and businesses would spring up there to serve the increased population and the needs of the businesses,” Currier says.

“There are still a lot of opportunities in firms, lots of unmet legal needs all over the U.S.”

Belmont College of Law targeted two niches specific to the Middle Tennessee legal market when it created tracks in health care and music business/entertainment law. Many students indicated the concentrations were of interest when applying, says Belmont Provost Thomas Burns.

Whether students in those concentrations succeed in job placement is yet to be seen. Much of the work is done in the third year, which the charter class is just starting.

‘Hang out a shingle’

All new lawyers in Nashville may be competing with a bigger pool of seasoned lawyers looking to move here for quality of life. Much legal hiring these days is in the lateral market, as some are willing to take the same type job but in a smaller market.

“There are a lot of laterals out there eager to apply their skills in new areas,” Britton says.

Barbara Mayden, principal at Young & Mayden, a Nashville-based legal recruitment firm, predicts a day of reckoning for law schools if the employment trend does not reverse itself.

“Some law schools will close, some will downsize, especially faculty, because that’s where the biggest cost is,” she says.

Yet Mayden says that for young lawyers, there is plenty of opportunity if, after getting their diploma and passing the bar, they look beyond the big city law firms to smaller towns such as Clarksville and Franklin, and underserved parts of the country where there is a need for practitioners.

“We’re over-lawyered at the corporate level. You need to go to places that do need lawyers,” Mayden says.

“Hang out a shingle, get out there and build a business. With technology, you no longer need a phalanx of assistants and you can start building a practice in any area. Then you can take it anywhere.”

That’s what Jim Judkins did after graduating from Nashville School of Law in 2009. He went back to DeKalb County, where his family roots are deep, and opened a private practice in Smithville, serving as a general practitioner in personal injury, divorce, child custody, criminal defense, land disputes, wills and estates, probate, deeds, and other such cases that fall under the tag “community law.”

“I always wanted to come back and practice in Smithville. I became a lawyer because I have a strong desire to serve the people in my community,” Judkins says.

“My grandfather was a small town lawyer so that is the image I had when I chose to become a lawyer.”

It’s an image other law grads might want to adopt, at least until hiring picks up.

Still ‘a good investment’

While candidly acknowledging that even Vanderbilt graduates are having issues with finding suitable employment, Guthrie agrees with Kinsler of Belmont and Williams of LMU that the smaller class sizes will benefit today’s 1Ls several years down the road.

“We’ll begin to see in 2015 that law schools collectively will be graduating fewer students, so that will help with whatever market imbalance may be in place,” he says.

Whether the job market is cyclical as a consequence of the overall economic downturn or mostly structural as a consequence of the way the practice of law is changing is a matter of debate, Guthrie says. But the end result is the same.

“It’s a challenging marketplace for many law graduates regardless of where they want to practice. If there are five jobs and ten lawyers competing for those jobs, five lawyers aren’t going to get jobs, no matter what their experiences are,” he says.

“If you look at lots of other professions, though, the picture is frankly a lot more dire. It’s still the case that there are a lot of jobs out there and a lot of graduates get good jobs that pay well and allow them to do meaningful work and offer real promising career paths.

“It’s certainly not as rosy a picture today as it was five years ago, but I feel very confident that for the vast majority of law students – certainly for Vanderbilt Law students – it’s a good investment.”

Asking whether there are too many lawyers misses an important point, says Allan Ramsaur, executive director of the Tennessee Bar Association.

“For a long time there’s been this notion among lawyers that law schools were generating ‘too many’ law grads,” Ramsaur says.

“Lawyers are not a commodity, and it’s not just a certain number you need. You need the top graduates from a number of law schools to round out a bar and have it meet the needs of society.

“There has never been too many good lawyers or good law graduates.”

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