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S&P’s December Report Says Law School Future Dismal, But Management Holds the Key

Standard & Poor’s December report on the credit ratings of law schools titled “As Law School Demand Drops, Credit Quality among U.S. Schools Diverges,” focuses on three principal findings. First, the report finds that law schools are using different strategies to respond to the drop in demand. Second, the report finds the credit quality gap widening between standalone and composite law schools (integrated within bigger organizations like universities). And third, the report finds that only strong management provides the key to a successful future for law schools.

 

While dealing with the different strategies used by law schools, the report observes that law school education “will continue to be beneficial for many graduates, but it can involve significant financial risks and opportunity costs…. With a high cost of attendance and weak job prospects upon graduation, fewer recent potential law school students have been willing to assume those risks.”

 



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And one of the conclusions of the report is that the number of law school applicants will continue to dwindle and affect the demand metrics. At the same time, growth in the number of ABA-approved law schools will result in greater competition among law schools vying with each other for better students. Even in the face of steep decline in demands for legal services and in the numbers of law school applicants, the number of ABA-approved law schools has continued to rise from 183 in the school year 2000-2001 to 201 in 2012-2013.

 

The report says S&P believes the law school “sector faces significant credit risks” given the recent decline in operating performance. However, the key to overcoming the situation is in the hands of the management and different law schools are adopting different strategies to cope with the situation.

 

The research finds high management attentiveness to operating performance and strategies “to develop new legal education models, such as part-time enrollment” are positive credit factors if accompanied with strategic planning. Law schools will need to take difficult decisions about how to right-size their operations to fit current and future enrollment levels.

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Posted by on December 7, 2013. Filed under Law School News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.