Why haven’t any ABA law schools shut down yet?

A specter is haunting law schools: the specter of bankruptcy.

Not literal bankruptcy — educational institutions eligible for federal student loans can’t as a practical matter ever file for bankruptcy, because doing so makes them ineligible, and federal loans are the lifeblood of higher education in the US in general, and of law schools in particular (around two-thirds of the average law school’s revenue is in the form of such loans).

Rather, I’m using bankruptcy in the metaphorical lay sense of going out of business. Given the the steep decline in applicant totals over the past five years, why haven’t any ABA schools shut down? (There are dozens of non-ABA-approved law schools, mostly in California, and some of them do close from time to time, but they are the equivalent of Wildlings beyond the Wall, and nobody really knows anything about them).

Now in fact one ABA law school has gone out of business, practically speaking: Hamline University allowed its law school to merge with the freestanding William Mitchell School of Law, but since the new law school is going to be approximately the same size as William Mitchell was before the merger, this was effectively a face-saving way for Hamline to close its school.

But, that aside, all the other 204 ABA schools are still operating. Why?

For one thing, total enrollment hasn’t declined as sharply as applicant totals, because a number of schools are now pursuing de facto open admissions policies. While applicant totals fell by 40% between 2010 and 2015, total JD enrollment fell by only 23%. A bit this is a lag effect of the somewhat larger 2013 entering class that hadn’t graduated yet — first year enrollment fell by 29% over this time — but applicant totals appear to have bottomed out, at least for the present, with 2016 marking the third straight year in the 55,000 range, down from 88,000 in 2010 (and 100,000 in 2004).

Still, by this coming fall total JD enrollment is going to be about 30% lower than it was six years earlier.* Why hasn’t this sunk any schools yet — Hamline excepted — especially considering that this 30% average masks wide variations between schools, with some schools suffering enrollment declines of 50% or more?

There are, I think, a couple of related answers to this question.

90% of ABA law schools are located inside larger universities, and universities are clearly reluctant to close law schools, even though as of now the large majority of law schools are losing money for their parent institutions. (As for the free-standing schools, they’ll stay open as long as the value of an income stream of federal loan money minus operating expenses is greater than the liquidation value of the enterprise to its creditors). This reluctance is itself a product of several factors:

First, some observers have noted that in the 1980s and 1990s a number of universities, including some prominent ones, closed their dental schools, and they’ve wondered why the same fiscal logic hasn’t yet been applied to law schools. The answer is that (a) dental schools, like medical schools and unlike law schools, are inherently expensive operations, what with equipment, labs, clinical requirements, etc.; and (b) there are no TV shows or movies about dentists; and (c) there are no dentists in the state legislature.

In short, closing a law school is a pain in the ass for central administrators, because having a law school is “prestigious,” and universities these days are obsessed with prestige, because of the rankings nonsense. In addition, a bunch of politicos are graduates of your school, and these people can and will hassle you if you try to close their alma mater, thus violating the prime directive that guides your professional identity as a modern university administrator, i.e., avoiding conflict with connected guys/gals.

Second, it’s actually not all that difficult to slash a contemporary law school’s operating costs. In fact, given the current financial structure of postgraduate education in America it should be practically impossible to lose money running an ABA law school.

Consider that at present the federal government will loan the full cost of attendance — not just tuition — to anyone a law school chooses to admit, and that furthermore law schools can charge whatever they want in terms of both tuition and their cost of living estimates.

Imagine if you were running a car dealership, and the government would loan the full cost of any car you sold to whoever wanted to buy one of your cars, and that furthermore you could charge whatever price you wanted for your merchandise. It would be very difficult to lose money in that business, but obviously it wouldn’t be impossible.

You could, for example, double your sales force and triple your administrative staff, while selling the same number of cars. You could allow some of your sales people to never come into the office, and do their pitches by Skype or pre-recording. Jeff Harrison describes a few of the numerous holders of the Donald Trump Chair:

Many law professors hold this esteemed position. It is for those who sell nothing to unsuspecting buyers. Here is what I mean. There was a fellow at a law school at which I once taught. He was up for tenure and that meant class visitation. The visits took place over a 2 week period. Near the end of that time, a student asked me why Professor Trump was giving the exact same lecture every day. Yes, he had one particular presentation he had down pat and he went to that one whenever a visitor appeared.

And then the was the Trump professor who did his summer teaching by way of a prerecorded course. This way he could be paid for both teaching and research in the summer, a custom made side deal. One year, though, the same guy needed an extra course in the regular school year to qualify for a sabbatical. All of sudden the prerecorded course, that was offered at the same time it was always offered, was listed as occurring during the spring semester and our boy gets his sabbatical with no additional effort. He may be recruited by Trump U — the experts in something for nothing.

A friend of mine who is a high school principal tells me that whenever he has to contract the parents of a student whose parents work at the university he call them at home. He asked me, “what is this working at home thing.” Some people do work at home but some people are able to actually teach at home. One particular Trump professor, likely hired because he was the grandson of a political celebrity and former Harvard professor, managed to teach his students from home after creating a course that involved supervising students who were teaching high school students about law. Yes, no need to come in to do research or to teach. Nice (non) work if you can get it.

All of us have minor Trump appointments in the form of confercating — going to conferences that are actually vacations. I am happy to say that the new dean at my school has a rule that you actually must do something at a conference before the School will fund it. God forbid! Great idea but there is still the moral hazard of a 5 minute minute panel appearance or recycling the very same work you reported on 23 other times.

Of course if cars were sold in this way they would become insanely expensive, to the point where a lot of people would stop buying them, despite the no-questions-asked financing. At that point a lot of sales people and even some administrators would get fired. But it would be easy enough to keep all the dealership open, as long as the feds were willing to keep picking up the tab.

In sum, even under today’s conditions (much smaller enrollments, bigger discounts off sticker tuition) it will be fairly straightforward for the vast majority of law schools to take steps to stop losing money: just spend half as much money, in real terms, as they’ve been spending recently. Doing so would in many cases simply return them to the financial structure under which they operated not very long ago, so it’s not as if somebody has to invent the equivalent of a cold fusion reactor to pull off this feat of financial engineering.

*Another way of thinking about this is issue that declining enrollments have had the functional effect of closing three out of every ten ABA schools, assuming constant per school enrollment levels.