Standard & Poor’s Downgrades Standalone Law Schools
And you thought lower enrollments were rough on the big schools? Well, it’s an outright crisis for stand-alones.
That was the conclusion from a recent report published by Standard & Poor’s, a leading credit ratings agency. Last week, S&P issued ratings for five standalone law schools: New York Law School, Brooklyn Law School, Thomas M. Cooley Law School, Albany Law School, and the Thomas Jefferson School of Law. And all but the Albany Law School received negative outlooks, with the Thomas Jefferson School of Law earning a rating equivalent to junk bond status.
Here is how standalone law school ratings rank in comparison to university law schools:
So why are standalones struggling to keep pace with large university law schools? Well, it’s all about the endowments. According to the report, standalones “are generally supported by smaller endowments and are more susceptible to negative operating trends in individual programs, such as their law school components.” In other words, an enrollment decline will reverberate deeper in stand-alones, since they cannot make up the tuition shortfall through other programs or past donations.
To compound the problem, the report notes that many standalone law schools lack the diverse curriculum and fundraising capabilities of their university brethren:
“The five stand-alone law schools are among the least selective law schools we rate, and the respective ratings reflect this. Their management teams are generally more entrepreneurial and driven by the bottom line than leadership at component law schools. We believe this is partly due to the lack of program diversification at stand-alone institutions relative to comprehensive public and private institutions. We view it as a credit weakness. Stand-alones also typically lack the type of developed fundraising function that characterizes many of the public and private higher education institutions we rate.”
Unfortunately, standalone schools aren’t the only law schools vulnerable to a continuing decline in enrollments. The report cites schools like Pennsylvania’s Widener University, New York’s Pace University, Virginia’s Regent University, and Massachusetts’ West New England University and Suffolk University as potential risks.
Although S&P didn’t sound a warning for top-tier programs like Harvard and Stanford, you can’t help but wonder. If enrollments continue to drop, how long will they be able to cover deficits with their endowments? Maybe the state of standalones is a sign of what lies ahead.
To read the full Standard & Poor’s report, click here.