Why Law Schools Should Consider Paying Students to Quit

The law, lawyers, and the court.
Nov. 18 2011 2:53 PM

Paying Students To Quit Law School

An unorthodox solution to the problem of too many graduates unable to repay their loans.

Austin Hall, Harvard Law School.
Austin Hall at Harvard Law School.

Photograph by Daderot via Wikipedia.

A crisis is threatening legal education. In constant dollars, tuition at private law schools nearly tripled over the last quarter century. Many a graduate faces a six-figure debt and can’t find a job paying enough to service that debt. Especially troubling are allegations that some schools admit students they know are unlikely to repay their loans—leaving taxpayers (who guarantee some of these loans) holding the bag.

Some of these problems are not unique to law schools—they apply to much of American higher education. But law schools are engaged in a specific program of instruction, with a specific goal—passing the bar—as its purpose. Measuring and even predicting this dimension of success is more straightforward. Besides, as law professors, we know law schools best. So we have a few ideas for dramatic reform.

First, give applicants better information about how past graduates have fared. All students who received federal loans should be required to report whether they passed the bar as well as their annual salary for the first 10 years after graduation. Law schools should be required to disclose this information in a standardized format, enabling applicants to better assess what their degree will be worth, long-term. This reform directly addresses the current problem of woefully incomplete disclosure. Law schools usually only report how well their most successful students do, and only for the first year after graduation.

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In addition to reporting average results, schools should disaggregate data to avoid misleading applicants at greatest risk of failure. For example, how did previous applicants with low entering test scores and college grades fare after graduation? Anyone who starts law school with less than a 50 percent chance of passing the bar within three years of graduation should be required to sign a special waiver that he has been informed about the riskiness of his education investment.  Warning high-risk applicants before they matriculate helps them protect themselves and reduces the government’s risk of unpaid loans in the future.

But more transparent information at the threshold of law school is only the start. Many an entering student believes that he will beat the odds and win the lottery. Once in law school, many may be inclined to double down on a bad bet unless schools intentionally structure a system of sober second thought.

Consider the innovative employment policy of the Internet shoe seller Zappos. At the end of a four-week training course, Zappos offers new employees a one-time offer of $3,000 to quit. In part, the company uses the offer as a screening device. If you’re the type who prefers a quick three grand to the opportunity to work at a great company, then Zappos isn’t the place for you.

Law schools might analogously offer to rebate half of a student’s first-year tuition if the student opts to quit school at the end of the first year. (If the student has taken out government loans, this rebate would first go to repay this debt.)  A half-tuition rebate splits the loss of an aborted legal career between the school and the student. Each has skin in the game, so students will not go to law school lightly, and law schools will have better incentives not to admit students likely to fail.

The idea is to mark the end of the first year, after students have received their grades, as a salient decision-making point. At that time, students will have learned more about their legal abilities and inclinations. Law schools will also have learned more about each student’s abilities, and schools could now disclose how previous students with similar first-year grades fared after graduation. Students accepting the offer would be choosing to quit not just their school, but the pursuit of a law degree. Anyone who took the money but re-enrolled in another law school—within, say, five years—would have to repay the rebate.  This would guard against the risk that good students would take the rebate and transfer to another school just to reduce their cost of becoming a lawyer.

After a few years, law schools could disclose what proportion of students, with varying grade profiles, accepted the rebate offer. They could even disclose the salaries of the former students who had accepted the rebate offer and left the school. This comparative disclosure would provide applicants with powerful new information to make better decisions about whether to continue their legal careers. 

In making this proposal, we might be accused of having an institutional conflict of interest.  We’re pretty confident that few students at Yale (like few employees at Zappos) would take the bribe to quit early. But if we’re right, this is something about which to be proud. If 20 percent of the students at another school took the offer, applicants might think twice before enrolling. And if the percentage taking the rebate becomes too large, government should think twice before lending.

Another possible reform would oblige law schools to lend money directly to students—so that defaults hurt the school’s bottom line rather than taxpayers’. While educational lenders are legally allowed to insist on repayment even after bankruptcy, schools are free to renounce this option. Schools that would bear the loss of unpaid student loans would have better incentives to admit students who will avoid bankruptcy. Any school unwilling to lend to its students this way would be sending a strong negative signal to its applicants. Any school that is truly a good deal should put its own money where its mouth is.

The government as lender might mandate first-year rebate offers to reduce the chance that students will take out loans that they will not be able to repay. But why wait for the government to act? We’re lobbying our dean to unilaterally offer our students a bribe to quit. Like Zappos, Yale could gain a first-mover advantage.

Akhil Reed Amar is a Yale law professor and author of America’s Unwritten Constitution: The Precedents and Principles We Live By.

Ian Ayres is a professor at Yale Law School and a co-author of Voting with Dollars.

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