Law School Merit Scholarships

Brutally fine article in the New York Times business section today on merit scholarships used at law schools to entice 1Ls.  The 1ls receive scholarships to persuade them to come, and goose the schools’ LSAT and GPA rankings for US News and Report purposes – but then wind up losing the scholarship at the end of the first year because they are conditioned on meeting a certain GPA.

(Update: TaxProf Blog has a useful article excerpt, and has also posted the SSRN abstract of Professor Jerry Organ’s article, cited in the NYT article. Also, look at Law School Transparency’s discussion and proposed standard for law school disclosure.)

(Another Update:  I had never heard of “section stacking” until I read these comments.  Is it common among law schools?)

Doesn’t sound so bad?  Perhaps the school has an imposed mean, or an imposed curve – as many do for the first year class – and perhaps the required GPA is at the mean, but the school has given more than half the class scholarships.  Or perhaps the required GPA is 3.0 and the imposed mean is 2.8 and the number of scholarships is again relatively high.

Once you’re in for the first year, the scholarship is enough to entice you in, but not enough to allow you to forgo loans for a significant chunk.  You lose the scholarship, and feel like you have to finish out the three years even though it requires borrowing the whole cost for the other two years.  (Note: this is not as irrational as some commenters have suggested, if you had to borrow money for uncovered costs in the first year; saying, cut your losses and get out now, assumes that one has a lot more information about one’s uncertain prospects of employment as a lawyer than you necessarily do).

Meanwhile, in addition to goosing the front end LSAT and GPA, the students so enticed raise the first-time bar passage rate for the school at the other end. The school has obtained benefits with certainty; the students have undertaken an uncertain wager with little information upfront, and little certainty at the other end. The information needed to figure out what that generous looking offer means is not really available – particularly how many other students have been awarded the same deal.  Even if one believes that this is a pure disclosure problem, the realities of how schools provide (or not) information raises many questions about transparency that would provide useable information to both buyer and seller of legal education.

It is easy to say, buyer beware, and gosh, those would-be law students sure are stupid and don’t read or understand the fine print, if they had any idea how to find it and assuming the school provides it.  It’s even easier to say, stupid English or religious studies or whatever humanities major who can’t figure out the basics of something like a school awarding more scholarships than can fit above the median.  We can go on to the systemic behavioral irrationalities that are exploited by the schools.  Viz., it is indeed the case the humanities and social science majors tend to have undergraduate GPAs that look pretty stellar by comparison to science and engineering students; naturally they assume that they won’t be far out of that ballpark in law school.


Commenters, please skip any sneers about law students who can’t figure out the basics.  The real problem here is with the schools that in any ordinary sense conceal basic consumer information or bury it under an avalanche of love and group hugs.  Update:  Thanks – comments are worth reading.  Orin Kerr challenges some of the assumptions in the article with some hypos.  There is some interesting push-back.

For my part, I think I would like to ask commenters to address what the model form of disclosure would look like – what information should ideally be available, easily available, and in what form – to ensure well informed buyers and sellers.   (Byomtov in the comments offers a useful proposal for disclosure.)

And what would disclosure look like be if one were treating this as the kind of informed, plain language disclosure that we believe should be the ideal to create efficient decisions in consumer credit, things like the APR, etc.?   After all, in some of the most important aspects, this whole process – including the acceptance of a scholarship with its special conditions that make it part price discount, part embedded wager – is consumer credit on a very large scale for individuals. I would think that the disclosure process should take seriously the special features of this particular type of consumer debt – large amounts, uncertain ability to repay, little or no credit risk review by lender, lack of discharge in bankruptcy, etc.

(Update: The article features a new article on SSRN by Professor Jerry Organ.  I’ve skimmed it quickly and it is well worth a read.)