Law Schools

Even Moody's Is Down On The Future Of Law Schools

According to ratings agency Moody's, the future has gotten worse for law schools.

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sad studentRemember California Western School of Law? Last we checked in with them, they were in the ATL March Madness Bracket for The Worst Law School In America, ending their run in the Sweet Sixteen. The stand-alone law school has not drastically improved their overall prospects since then, and according to ratings agency Moody’s it has gotten worse.

Earlier this week Moody’s downgraded Cal Western’s bonds to Baa3 from Baa1, which they indicated reflect “materially worse” operating deficits. And it isn’t a momentary dip, as the downturn is “longer than expected.” Yikes.

The outlook remains negative based on weak prospects for net tuition revenue growth, our expectations that the school will continue to draw down on its reserves to support its rightsizing efforts and that operating performance will remain pressured in the near term.

Factors that Could Lead to an Upgrade

Sustained improvement to student demand including growth in net tuition revenue
Multi-year trend of improvement in operating performance

Factors that Could Lead to a Downgrade

Failure to meet projections for FY 2016 or failure to reduce deficits starting FY 2017
Greater than expected decline in liquidity
Declining enrollment

This outlook makes clear the pressure that law school administrations are under in order to “put butts in seats” at any cost. Of course, this is probably bad news for the overall legal profession which is in the midst of a brain drain. As schools struggle to fill classes they are dipping deeper and deeper into the pool of applicants such that folks that 5 years ago would have been rejected from law school (and free from the staggering debt that usually brings) are now going to law schools around the country.

As the Washington Post notes, the issues inherent in Cal Western’s downgrade are endemic to the entire industry:

California Western is not alone in its struggles. Fewer students are going to law school and fewer graduates are obtaining the jobs that they went to law school to get.

During the past decade, the number of law schools increased by 9 percent, to 204, according to Moody’s, while the number of new students hit its lowest number since 1973, when there were just 151 law schools.

Then they throw shade like a boss, pointing out the myopic outlook most law school administrators have when forced to confront the future of legal education:

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But it seems everyone is aware of the changing (and depressed) job market for lawyers except for the people running law schools. Even as the prospects for legal education grew dimmer in recent years, American University continued to push forward on a massive new $130 million law school complex at Tenley Circle in Washington, D.C., which recently opened to students.

Seems like we aren’t the only ones concerned. Message to all current and future law students: you’ve been warned. Getting into a law school — especially one below the first tier — is not a representation of the likelihood of future employment. It’s hard out there for a (new) lawyer.

Three predictions about the future of higher education [Washington Post (gavel bang Tax Prof Blog)]
Moody’s downgrades California Western’s bonds to Baa3; outlook negative [Moody’s]
Earlier: ATL March Madness: The Worst Law School In America — Sweet Sixteen
The Great Law School Brain Drain Is Why More People Are Failing The Bar Exam Than Ever Before
Who Is To Blame For The Dumbing Of The Legal Profession?

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