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The Issues with For-Profit Law Schools

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Summary: This article describes the dangers of for-profit law schools for lawyers and the legal profession.
The Issues with For-Profit Law Schools
  • To become a lawyer has been your lifelong dream.
  • You want to be an influencer within the profession while also helping people overcome their legal issues.
  • And with that, you went to the best law school possible – which happened to be a for-profit institution.
  • Problem is no one will hire you; at least not with the degree you have been awarded from the school you attended. Now what?

At first, their intentions may seem good. The for-profit law school seeks out someone other than those with the brains, unscrupulous drive and infinite financial abilities who attend top-notch law schools.

For-profit law schools seem to cater more to the average student who nonetheless wants to make an impression within the legal world.

It’s as if the for-profits law schools hold a little-known key that opens the door to the exclusivity of Big Law, but holds it for the common person, not presumably the super-gifted law students other schools graduate.

This all sounds fine and good – at least on paper. But for-profit law schools, it has been found, have a dark underbelly that the “legitimate” legal world has come onto, rendering these learning institutions as schools to avoid, not to embrace.

Keep reading to find out what exactly for-profit law schools are, and how, if you attend one of these learning institutions – doing so may delay, if not completely ruin your legal career.

What are for-profit law schools? Ask your favorite hedge fund

Paul Campos, writing for The Atlantic, somewhat tersely defines for-profit law schools in his article The Law-School Scam as institutions identified by the American Bar Association which admit large numbers of severely underqualified law students.

These students in turn take out hundreds of millions of dollars in loans annually, much of which they will never be able to repay. Eventually, federal taxpayers will be stuck with the tab, even as the schools themselves continue to reap enormous profits.

For the most part, these schools are looked down upon by several well-established institutions within the U.S. One of those institutions is the collective whole of not-for-profit law schools that range the gamut from small state colleges to heavy-hitting law schools such as Yale, Harvard, NYU and Stanford – arguably some of the best law schools in the country.

Another institution who looks down on for-profit law schools is the American Bar Association (ABA). The ABA has been opposed to these schools for almost as long as the notion of them and their business practices have been in existence.

According to Campos’ article while there is only a small number of for-profit law schools nationwide, a close look at them reveals the perverse financial incentives under which they operate are merely extreme versions of those that afflict contemporary American higher education in general. And these broader systemic dysfunctions have potentially devastating consequences for a vast number of young people—and for higher education as a whole.

In most cases, for-profit law schools are part of a large corporate conglomerate. In the case of The Atlantic, Campos concentrates his article on a for-profit law school called Florida Costal, which is based in Jacksonville, FL. Florida Costal, and is one of three law schools owned by the InfiLaw System, a corporate entity created in 2004 by Sterling Partners, a Chicago-based private-equity firm.

InfiLaw purchased Florida Coastal in 2004, and then established Arizona Summit Law School (originally known as Phoenix School of Law) in 2005 and Charlotte School of Law in 2006.

It might not be readily apparent that this sort of conglomeration of for-profit law schools can make an immense amount of money for its corporate parent, but you’d be wrong to think not. To be sure, there’s an enormous amount of profit to be made off government-backed student loans, while at the same time, traditional law schools as well as the ABA, see these institutions as pure and simple rip offs that graduate subpar attorneys.

Well, we should all take that concern with a grain of salt. After all, it’s easy how the traditional law schools would be upset by these somewhat shady law schools simply from the huge profits they’re taking in, leaving schools like Yale, Harvard, NYU and Stanford on the alumni-funded endowment sidelines. And as far as the ABA goes, why shouldn’t they be suspicious of schools that populate a profession with attorneys with questionable-at-best legal skills, leaving the ABA governing body dubious as to how, if at all, it watches over the quality of legal services available to those who need them.

To be sure, a lot is on the line due to for-profit law schools. Law schools are losing out on student business that would otherwise potentially go their direction, while the ABA as it engages in continual legal battles with for-profit law schools, stands to lose face as a concerned governing body.

Add to that one last vestige of all that is perceived as wrong with for-profit law schools, and that’s the fact that the American taxpayer foots much of the bill due to these so-called lesser learning institutions.
Why aren’t for-profit schools recognized as legitimate law schools?

As Campos suggests, the heavy corporate investments sunk into for-profit law schools were made around the same time that a set of changes in federal loan programs for financing graduate and professional education made for-profit law schools tempting opportunities.

The most important such change was a 2006 extension of the Federal Direct plus Loan program, which allowed any graduate student admitted to an accredited program to borrow the full cost of attendance—tuition plus living expenses, less any other aid—directly from the federal government.

Campos explains that the most striking feature of the Direct plus Loan program is that it limits neither the amount that a school can charge for attendance nor the amount that can be borrowed in federal loans. Moreover, there is little oversight on the part of the lender—in effect, federal taxpayers—regarding whether the students taking out these loans have any reasonable prospect of ever paying them back.

Needless to say, this arrangement is remarkably attractive to private-equity firms: The investors get their money up front, in the form of the tuition paid for by student loans. Meanwhile, any subsequent default on those loans is somebody else’s problem—in this case, the federal government.

Campos alights that this arrangement bears a notable resemblance to the subprime-mortgage-lending industry of a decade ago, with private equity playing the role of the investment banks, underqualified law students serving as the equivalent of overleveraged home buyers, and the ABA standing in for the feckless ratings agencies.

But Campos rightly warns there is a crucial difference.

When the subprime market collapsed, legislation dedicating hundreds of billions of taxpayer dollars to bailing out the banks had to be passed. In this case, no such action will be necessary: the private investors have, as it were, been bailed out before the fact by our federal educational-loan system.

This situation, from the perspective of Sterling Partners and other investors in higher education, comes remarkably close to the capitalist dream of privatizing profits while socializing losses.

In short, free money for a student’s legal education, no strings attached – at least for the student and the for-profit law school the student attends.

Meanwhile, as an example of the caliber of student that attends these for-profit law schools, in the case of Florida Coastal’s more recent classes, less than half of the students were likely to pass the bar – ever.
What type of lawyers do these for-profit schools graduate? Severely underqualified who are up to their ears in debt.

In an article that appeared on the website Elite Daily, writer Michael Wells deftly highlights through his article, The Skeezy Truth About For-Profit Law Schools And Why To Avoid Them the type of graduates for-profit law schools thrusts into the legal community.

First of all it should be known that these lawyers are vastly underqualified to work within any legitimate law firm. This, of course, goes beyond the simple fact that the for-profit law school these graduates attended more than likely has not, nor will ever, receive accreditation from the ABA.

These graduates also took subpar legal courses, which in some cases were taught by instructors who weren’t even lawyers. Thus, with a poor curriculum, a second or third-rate so-called “professor” and graduates emerging from a law school that isn’t even accredited, there is no reason not to understand why law firms would reject these newly minted lawyers.

To prove this point, Wells contends that one only has to look at the caliber of student for-profit law schools admit, which needless to say, is a fairly poor caliber.

Wells states that for-profit law schools accept many students with LSAT (standardized test used to assess potential law students) with scores well below the national mean of 151.

One of the largest for-profit schools' recently entered a class that had a median LSAT score of 144, which was the 23rd percentile of all test-takers.

Not to forget mention that these schools are also flooding the market with graduates who cannot pass the bar exam and who likely could not get authentic legal jobs even if they could pass the exam.

Of course when you graduate from “law school” and you can’t pass the bar, you are not licensed as a lawyer, and with that, no legitimate firm in town will ever hire you at a full associate’s status.

This simple fact leaves nearly all graduates of for-profit law schools in severe debt that they more-than-likely will never get out of – not as long as they’re taking orders at Starbucks or asking drive-thru customers, “Would you like fries with that?”

What that ends up doing is shifting the debt to other areas of income and funds, namely the federal government and soon after the American taxpayer.

Referring back to Campos’ article, Wells states that Americans are projected to incur nearly $1.3 trillion in student debt by 2025, which many strongly feel will be the source of the next big economic bubble to burst.

To that end, economic data claims that 90 percent of students graduating from for-profit law schools will have debt of at least $204,000. When multiplied by thousands of potential associates with no source of associate-level income, the student debt caused by for-profit law schools is nearly insurmountable.
A World Drowning in Lawyers

The implication of for-profit law schools doesn’t end with the graduation of underqualified lawyers. For-profit law firms literally flood the market with lawyers, which only exacerbates in already flooded market.

At this point, the real victim is the law school graduate who went to a legitimate law school, achieved high marks and successfully passed the bar. They get swallowed up in this flood of lawyers which even without for-profit schools, still finds law to be a profession with an 11-percent unemployment rate.

This is where, fortunately, the American Bar Association has decided to step into the picture. Sure, some of their presence in the for-profit scandal is for the purpose of saving face within a profession (law) that is already wrought with distrust and scandal.

But the ABA has also come to the defense of good, legitimate lawyers who have sought out the best education possible for themselves while their studies have granted them a legitimate chance at taking and passing the bar exam.

So almost like a knight in shining armor (or a shiny business suit), the ABA has come to the rescue of the integrity and dignity of the legal establishment.

Lately, the organization has been on a tear, demanding for-profit law schools to produce reasons as to why they should be accredited, an ultimatum that these schools and their horrifically wealthy parent companies are fighting tooth and nail.

The latest battle involves, once again, our old friends at Florida Coastal, which according to an article in the Daily Business Review, has sought a preliminary injunction blocking an American Bar Association-imposed requirement that it publicly disclose that it was found out of compliance with several accreditation standards.

Florida Coastal’s bid for a preliminary injunction is the latest development in a wave of litigation brought by InfiLaw and its three for-profit law schools against the ABA for what the schools claim is an unfair accreditation process with vague rules applied unevenly across law school campuses.

Each of the schools—Florida Coastal, Arizona Summit Law School, and the now-closed Charlotte School of Law—were found noncompliant with the ABA rules meant to ensure that accredited campuses offer high-quality programs.

Charlotte closed down after the ABA placed it on probation and the U.S. Department of Education removed the school from its federal student loan program. The ABA also removed Arizona Summit’s accreditation, a decision the school has appealed. (The school will maintain its accreditation until the ABA reaches a decision on its appeal.)

Meanwhile, the ABA found Florida Coastal out of compliance with rules pertaining to its educational program and academic support. Near that same time, the ABA’s Council of the Section of Legal Education reached the same conclusion.

The law school’s poor bar passage rate in recent years emerged as a particular issue, in which Florida Coastal’s pass rate fell in the range of 25 percent to 51 percent during the four exams in 2016 and 2017, though it rose to 62 percent for the February 2018 administration.

The ABA thus required Florida Coastal to post a notice on its website disclosing the finding of noncompliance. The organization also mandated that the school inform all current students of the school’s abysmal bar pass rates; all this on top of the ABA requiring a fact finder to visit the school.

As expected, though, the big bucks of the hedge fund that oversees institutions like Florida Coastal, filed an appeal with the ABA as well as a due process lawsuit against the accreditor. The school followed up with a motion for a temporary restraining order and preliminary injunction.

The reason for this, Florida Coastal argued, was that disclosing the ABA’s noncompliance finding would drive highly credentialed potential applicants away and hurt its ongoing efforts to improve the quality of its student body.

The school claimed that bar pass disclosure is misleading because the pass rates are based on classes of graduates with lesser academic credentials than current students, who generally have higher Law School Admission Test (LSAT) scores and are more likely to pass the bar.

In short, overstating the risk of failing the bar exam will hurt current students’ studies and prompt some to transfer to other schools.

The question is, what other schools would take them, surely not accredited law schools.

So it’s back to the for-profits many of the “transfers” schools such as Florida Coastal fear will become transfers once again. And with that, it’s back to the for-profit grind, the further flooding the legal market with poorly equipped lawyers whose student debt will increasingly become our problem.

Make no mistake about it: It isn’t easy to become an attorney. High grades, personality, dedication, and a penchant for hard work are all part of what makes a viable candidate for a well-paying law profession.

In other words, there are no shortcuts. You have to do the work to earn the position.

One shortcut that increasingly seems to not work in favor of those who seek to become lawyers is their attendance to non-accredited law schools.

And honestly, the bad rap the ABA, as well as prestigious law schools and law firms assign to non-accredited law schools, is one of the best services these entities can instill upon perspective law students.

In one way, they don’t want law students to waste their time, money and effort, and as importantly, their self-esteem once they are told by either the ABA or a law firm to which they are seeking employment, that their credentials are no good – anywhere.

Sure, the ABA and legitimate law firms have their druthers; they don’t want to be associated with subpar associates, or for putting subpar lawyers in a position where they might have access to clients and their legal issues.

And just as well, the ABA and legitimate law firms both want top-notch material in incoming associates – not legal hacks who think they can easily ascend to the level of a Yale or Stanford law graduate, potentially pass the bar, and then make a Big Law’s first year associate’s salary of $190,000.

Such loftiness is reserved for those who put in the work and have the grades and background to prove as much. If a law student who cuts corners can’t see that in themselves, rest assured someone else will. And in that, the outcome will not be pleasant.

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