Law Schools

Moody's warns that stand-alone law schools are most at risk, notes downside to tuition cuts


A new analysis (PDF) by Moody’s Investors Service has some gloomy news for law schools.

Moody’s says lower job-placement rates and salaries will keep demand depressed for lower-tier law schools, particularly stand-alone schools, which are “highly tuition dependent.” The Wall Street Journal Law Blog has a story, which was noted by TaxProf Blog.

“As students evaluate the return on investment for a high-priced professional degree,” the Moody’s says, “law schools without premier brands or the resources of a comprehensive university will face greater credit stress and risk of closure, requiring leadership teams to re-evaluate business models and strategies.”

The decline in demand for a legal education is part of a “fundamental shift in the legal field, rather than the typical cyclical rise and fall in demand,” the report says.

The six stand-alone schools rated by Moody’s responded to a deterioration in demand by admitting more students and becoming less selective from 2007 to 2013, according to the analysis. At the same time, the schools increased financial aid.

The dean of one of those stand-alone schools, Frank Wu of Hastings College of the Law, announced in 2012 that he planned to decrease enrollment by 20 percent at his school over a three-year period.

New tuition pricing could lead to a short-term boost in enrollment, Moody’s says, but it probably won’t lead to a long-term increase in demand because the pricing strategies “do not provide a fundamental change in the cost students are paying for legal education.” In many cases, schools announcing tuition cuts are simply realigning published tuition with what students are paying after financial aid.

The report also cautions that there could be a downside to tuition cuts because “many students still associate price with quality.”

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