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Moody’s: Law Schools Cutting Tuition Are Making a Major Risk

Moody’s Investors Service has warned that law schools are taking risks by lowering tuition to attract more students, according to the Wall Street Journal.

Moody’s states: “In many cases, these reductions simply realign published tuition with what students are paying after financial aid. We do not anticipate the published reductions to result in a sustained increase in demand, though there may be a short-term benefit as price transparency is enhanced.

These strategies carry both reputational and financial risks that must be carefully managed. Despite the desire for greater value, many students still associate price with quality. In addition, failure of predictive models and execution risk could lead to schools missing their enrollment and tuition revenue targets, exacerbating an already increasingly challenged operating environment.”

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The outlook for law schools not in the top tier is pretty grim from Moody’s.

“With reduced job prospects, the number of students pursuing a legal education is unlikely to return to previous highs,” Moody’s said. “Like many industries, the legal sector is undergoing notable change driven by multiple factors, including technology and globalization.”

Moody’s believes that law schools not affiliated with larger universities will struggle the most. The reason for this is their dependence on tuition, which can leave the unaffiliated schools vulnerable.

Some legal educators believe that the shrinking pool of graduates will attract more students to law schools in the coming years.

A Moody’s senior vice president, Susan Fitzgerald, does not think this will make a difference.

“Our expectation is that the fundamental restructuring of the legal service industry will continue to lead to fewer jobs, so even with a shrinking pool of graduates, legal placement will likely remain challenging,” she said in an interview with the Law Street Journal.

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