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Saturday, November 16, 2013

Cutting the Sticker Price

Following up (indirectly) on Matt's post yesterday about the future of law schools, it's worth noting the news (via Brian Leiter's blog) of a big tuition reduction at Ohio Northern.  Of course, many -- probably most -- schools substantially discount tuition for many of their students via merit scholarships, so a lot of students already are paying less than the full sticker price.  That's not to say across-the-board tuition reductions are meaningless.  Indeed, to the extent those scholarships are largely funded (as most law school expenses are) by tuition, the current structure amounts to some students subsidizing the legal education of their classmates.  Some might find that troubling, others might not (at least if there's transaparency about the amount of scholarship money that's being doled out, how it's being distributed, and where those funds are coming from).  It will be interesting to see if ONU's move gets matched, by whom, and what those schools end up doing with regard to scholarships.

Posted by Bill Araiza on November 16, 2013 at 02:06 PM in Life of Law Schools | Permalink


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In what world would it be rational for a prospective student who is trying to decide whether to attend a school to care about scholarships offered to other students?

If I am being offered non-transferable good A for price X, it's not relevant to my decision wether some other person is being offered it for price X-1 or X+1.

What is relevant, though, and often ignored by opponents of merit scholarships, is the quality of the class. If law professors are doing their job correctly, then the quality of students affects the quality of the school. From a self-interested perspective, if I were to receive the same scholarship under either plan, I would prefer that a school I was attending offer merit aid rather than need-based aid, as merit aid would lead to a stronger group of fellow students.

Of course, there's a redistributive argument to be made. But I think LRAP programs are a better way to address that then need-based aid, since LRAP does a better job of actually targeting those who need assistance.

Let me put this another way: the choice to say that merit scholarships involve some students subsidizing their classmates' education requires the assumption that there's an a priori correct set up under which each student pays equal tuition. But I don't see how you can make that claim -- students aren't interchangeable commodities; they each bring more or less value to the school. The price negotiation between school and prospective student simply reflects that reality. (The low-paid extras on a movie set aren't "subsidizing" the salaries of the stars.)

Are there students who, based on their previous record, shouldn't expect to get a lot of value of a law degree and so shouldn't be willing to pay full tuition? Sure. But if they can't get a school/price combination that makes the proposition a positive value one for them, shouldn't they just not go to law school?

Posted by: Andrew MacKie-Mason | Nov 21, 2013 6:14:23 PM

University of Arizona did this last year.

Posted by: ctr | Nov 19, 2013 9:40:32 PM

Re: Kinw

This is easily remedied by setting scholarships at a % of tuition, which would also be fairer where schools increase tuition during a student's tenure.

Posted by: Joe | Nov 19, 2013 5:43:33 PM

The interaction of merit scholarships makes it difficult to cut nominal tuition in some circumstances. Let's say the school has tuition at $45K and has a bunch of $40K and $20K scholarships. The next year, tuition is cut to $30K. You can certainly rachet back the scholarships for the 1L class, but the 2L and 3L classes already have their fixed scholarship amounts which are excessive in light of the revised tuition.

Posted by: Kinw | Nov 18, 2013 6:11:52 PM

I know how much lawprofs love regulation and advocate for it when applied to others, but perhaps this might be a good area for the Department of Education to get involved to help control how much loan money is available for an institution. Call it a transparency in pricing regulation. Schools could be required to report, post law school financial aid, the average tuition actually charged per pupil to attend the law school for the prior academic year. DOE could cap student loan amounts to that school for no more than the amount authorized the prior year, plus or minus some COLA. The result might be more transparent pricing.

Posted by: TS | Nov 18, 2013 1:04:46 PM

Just to chime in, the move to merit scholarships seems highly problematic on lots of levels but certainly schools should be concerned that they are asking those least likely to get a job to subsidize those who are most likely to obtain them, at least based on the numbers coming in. It is hard to imagine a scenario where that would not be morally problematic. It also has always seemed to me that there should be a way to work this out financially so that it leads to a smaller class that would work to everyone's benefit. If you assume that the bottom 25% of the class is largely paying for the top 25% of the class, couldn't you eliminate both of those and end up with the middle? It would not necessarily be easy to do, and it would depend on the distribution, but there has got to be room to make cuts at the top and bottom and come out roughly the same on the LSAT/GPA numbers that this crazy system is designed to protect.

Posted by: anon | Nov 17, 2013 11:50:25 AM

Brad: Thanks for noting the distribution effects of these scholarships within a given law school class. I might not have phrased it exactly as you did, but I agree with the gist of your point.

Posted by: Bill Araiza | Nov 17, 2013 11:21:07 AM

Merit scholarships funded by higher general tuition are particularly pernicious in that they transfer money from those least able to capitalize on their JD to those most able to do so. And, at least in schools with mandatory curves, the presence of those being subsidized is directly adverse to the interests of those doing the subsidizing.

In addition to being regressive in terms of future income, it's also likely to be regressive in the more traditional sense given the problematic correlations between LSAT scores and race, as well as socioeconomic background.

Posted by: brad | Nov 17, 2013 10:15:13 AM

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