May 11, 2014

HIGHER EDUCATION BUBBLE UPDATE, LEGAL EDUCATION EDITION: Analyzing Moody’s New Report On Law Schools.

I found a few of their comments particularly interesting. First, Moody’s is not completelysold on what they note is the Brooklyn/LaVerne/Penn State/Iowa approach: the use of transparent price cuts and discounting as a survival strategy. They worry both that the price cuts could tamp down revenue too much and that there are serious reputational dangers to cost cutting. “Many students still associate price with quality.”

Perhaps this is a virtue of the Penn State “scholarship” strategy – as compared to the Brooklyn/LaVerne/Iowa sticker cut strategy. In any case, I think that price cuts at public (or apparently public) schools like Iowa and Penn State are less dangerous reputationally because many consumers may associate low price with generous legislators – rather than poor quality.

I also appreciated the fact that, unlike the WSJ, they ignored outside ranking organizations and instead clustered law schools into four groups, based on job placement. For this purpose, Moody’s used the number of students in JD or JD advantage jobs, full or part-time, long or short-term. (We can infer they included school-funded positions.) Using this method, the top quartile of schools (including all the super-elites) placed at least 84.1% of grads; the second quartile placed between 78% and 84%; the third quartile placed between 71% and 77%; and the lowest quartile placed less than 71% of graduates.

Finally, the report points out what we already know: standalones are under extra pressure. Moody’s has downgraded Vermont and New York Law in the last year. It suggests that these (and other schools) will need to diversify offerings. It also notes that new partnerships and affiliations are on the rise. Thus we have been treated to the WMU Thomas M. Cooley Law School. Moody’s points out that large, wealthy schools can “withstand enrollment challenges for a much longer period” – but does not opine on the bigger question: what will the smaller, poorer universities do?

The most important aspect of this report is that it will land on the desks of these university presidents who will now approach their law school problem with a fresh, objective analysis. I wonder what a similar Moody’s report will look like five years from now.

Well, I can’t predict the future, but I can take a hint.

And note that the University of Tennessee, measured by employment, is in the top quartile.