ABA Task Force: Bring Tuition Down

Charleston School of Law

New Rule Spells Trouble For For-Profit Law Schools

 
Last May, the first step towards limiting for-profit law schools from accepting students unprepared for law school came into view. A New York federal judge officially dismissed a challenge to the U.S. Department of Education’s “gainful employment rule.” The rule will limit access to Federal student loans for for-profit colleges based on graduates’ incomes and debts and is set to begin next month.
The rule was enacted by the Obama administration and targets for-profit law schools that enroll students with small chances of success and encourage them to borrow large sums of loans to pay for their degrees. Often students either remain shackled with loans or they default the loans with no consequences to the schools.
Passing the rule has been a fight. The original gainful employment rule was put to rest in 2012, largely because of opposition from higher education institutes. But three years—and a couple of revisions to the rule—later, it now appears the last battles are over and the rule will indeed go into effect next month.
There are only six American Bar Association accredited schools that are currently run as for-profit institutions. And they might all be in trouble because they rely substantially on student federal loans.
The way schools pass or fail the rule is by comparing recent graduates’ median income to debt payments. Specifically, if graduates’ debt payments are 8% or less of their annual median incomes, the school passes. If debt payments are 8 to 12% of annual incomes, they are “in the zone” (which, is essentially like timeout). If the debt payments exceed 12% of the annual incomes, they’ve failed. If the school fails for two out of three years, their students will no longer be eligible for student loans.
According to The American Lawyer, graduates from the six for-profit schools have annual loan payments of anywhere from just over $11,000 to just over $17,000. That means they would need to make an annual income of anywhere from just over $93,000 to just over $145,000. This wouldn’t be too much of a stretch, but some of these schools report only half of their graduates getting jobs after graduation. Those minimal annual incomes from graduates who are either unemployed or employed without J.D. required jobs really drop the average.
The bottom line is this: If those six for-profit schools want to continue to exist, they will need to slash tuition costs and keep students from piling on student loans.
Source: The American Lawyer
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