The Legal One Percent

Thomas Jefferson: The Vampire Of Law Schools

 
If we have learned anything from the disaster of Thomas Jefferson School of Law in San Diego, it is that law schools cannot be taken down—at least not without a hard fight. Thomas Jefferson has taken the brunt of the market hit on law schools. It was the perfect storm, where whatever could go wrong did go wrong.
First, the school is ranked in the bottom-tier and located in California, which has more than 20 ABA accredited schools and a tough bar to pass. They are not exactly bringing in a ton of applicants (about 2,000). Next, graduates have the highest debt totals (an average of $180,665 in 2013) of any other school, according to the U.S. News. In 2013, nine months after graduation, only 29% of its graduates had jobs that required bar passage. The list goes on.
Tuition is nearly $45,000 a year with virtually no scholarship possibilities. And this has led to enrollment numbers nearly being cut in half (348 in 2010 to about 200 this year). The icing on top of the disaster cake is they took a $127 million loan at an interest rate of 11% for a brand-new 305,000-square-foot law building in downtown San Diego. You would think they have no hope. You would be wrong.
Ironically, their hope comes from their worth. According to creditors, the school is worth nothing. And that is just enough to save them. They cracked a deal with their creditors by handing over the building for a debt reduction to $40 million with a 2% interest rate. Additionally, if the creditors do not extend the lease after it is up in 10 years, they will lend the school the money to move locations and cut the debt by an additional $20 million.
This is exactly why law schools will not die: the buildings. Because what are creditors going to do with huge buildings with enormous lecture halls? The only possibility of repayment from a law school is to keep it on life support and hope for resurgence in the legal market. Conversely, law schools at larger universities are unlikely to close because of the amount of administrators, staff, and faculty who would lose jobs.
Perhaps the best argument is the inevitable resurgence of jobs. With enrollment down, practicing lawyers will also be down. Eventually there will be a need for attorneys who are not in the market. If law schools can continue to circle the wagons for a few years and ride out the storm, it is easier to keep them on life support instead of letting them die and then conceiving them again.
Source: The New York Times
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