Friday, September 20, 2013

"Measuring the Downside Risk of Law School Attendance"

That's the title of a draft article posted by Professor James Chin (Michigan State) on SSRN here.  Below is the abstract followed by a short excerpt.

Legal education has come under severe political pressure, both external and internal, for its perceived failure to deliver tangible economic benefits to law students. But legal education is not alone. The financial crisis of 2008 and the economic recession triggered by it have forced many other industries, to reevaluate their balance of costs and benefits. Many institutions, even entire industries, must now endure stress-testing in the form of debt-to-income or debt-to-capital ratios. This document focuses on student welfare, especially the core economic question of whether law school attendance delivers a valuable return on students’ investment. It also describe the tools, drawn from quantitative finance and econometrics, that it uses to evaluate downside risk and inequality within any cohort of law school graduates.

. . . .

What emerges from these models of downside risk in law school attendance is at once perilous and promising. Law school graduates today face a job market that is uncertain or even grim. Law schools and the legal profession must do all they can to keep legal education affordable. Law schools should eschew the deceptive and destructive trap of merit stipulations on financial aid. Because a full law degree, unaccompanied by bar passage, is scarcely better than five-sixths of a law degree, law schools should also strive to prepare their students for the bar exam. The continuing economic crisis compounds the usual sources of negative outcomes in legal education. We must now worry about more than just academic attrition and bar exam failure. Unemployment and underemployment continue to haunt American legal education’s most critical constituents. In the face of daunting new economic realities, any school that hopes to survive must control costs, hold the line on tuition, award financial aid both generously and sensibly, and be creative and responsive in the face of the greatest economic challenge the American legal profession has ever faced.


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