The Law-School Scam Continues

As bar-passage rates keep dropping at its for-profit schools, is InfiniLaw taking advantage of students and the federal government?

Last year I published an article outlining how three for-profit law schools run by InfiLaw, a subsidiary of the Chicago-based private-equity firm Sterling Partners, was radically slashing its already-modest admissions standards while collecting hundreds of millions of dollars in federally funded educational loans, many of which were almost certain to never be paid back.

The article described how David Frakt, a candidate for the dean position at one of the schools, had his presentation to the faculty cut short after he suggested the school’s abandonment of entrance requirements would likely lead to catastrophic bar passage results. The account proved to be too candid for the administration’s comfort.

Because law-school graduates typically take the bar examination either three or four years after their initial enrollment, the slashing—or perhaps more accurately the de facto elimination—of admissions standards, which began in earnest at the Infilaw schools in 2012, is only now beginning to be reflected in state bar results. Yet those results are already providing compelling evidence that Frakt was correct—that the bar-passage crisis he predicted is likely to get much worse, and that, moreover, this crisis could affect a large proportion of the nation’s law schools.

Bar-passage rates at the InfiLaw schools are now in a free fall. (The following percentages are for first-time takers of the July exam in the schools’ home states.) Florida Coastal’s bar-passage rate has fallen from 76 percent to 59 percent, Charlotte’s has fallen from 78 percent to 47 percent, and Arizona Summit’s has gone from 75 percent to an astonishing 30.6 percent.

This collapse has taken place despite the fact that, according to allegations in a lawsuit filed by a former Arizona Summit administrator, all three schools have been offering money to graduates who the schools identified as being at especially high risk for failure, to get them to hold off on taking the bar exam. Indeed, in July Arizona Summit’s dean confirmed that she had called various graduates the night before the exam, imploring them to consider the “opportunity” to withdraw from the test, in exchange for a $10,000 living stipend, that would be paid to them if they enrolled in enhanced bar-preparation courses provided by the school.

The InfiLaw schools’ bar-passage numbers are almost certain to get even worse. Although the schools reduced their admissions standards drastically in 2012, they have since cut them further, to the point where they are now admitting huge numbers of students with credentials including lower LSAT scores and GPAs that would have barred them from getting into these schools three years ago.  The admissions process at the InfiLaw schools is now close to a fully open-enrollment system, that inevitably matriculates many people who have little chance of ever passing a bar exam.

InfiLaw is not only exploiting these students, but also taxpayers who will foot the bill when these students cannot repay the hundreds of millions of dollars they borrow.  Because the schools are ABA-accredited (via a lax process epitomizing the dangers of regulatory capture) the federal government will loan the full cost of attendance to anyone they admit—even though it is likely that, given their entrance credentials, a very large percentage of InfiLaw’s current students will never pass a bar exam, let alone actually secure jobs as lawyers. (The full cost of attendance at these schools is now over $200,000.)

It would be bad enough if the collapse of law-school admissions standards, and the subsequent collapse of bar-passage rates, were limited to a handful of especially egregious bad actors in the world of for-profit higher education. But as I argued last year, the same basic path followed by Infilaw is now being taken by dozens of other law schools, almost all of which are nonprofits. The only difference between these schools and the InfiLaw group is that most of them waited a year or two longer before reducing their admissions standards in response to plummeting application numbers, and that therefore it will take another year or two before this is reflected in the national bar-exam results.

A new report from the watchdog group Law School Transparency catalogs exactly how severe the bar-exam crisis is likely to become. The report documents the steep decline in admissions standards at American law schools, and concludes that last year more than one third of ABA-accredited schools admitted classes in which at least 25 percent of the admits are at significant risk for failing the bar. Roughly three dozen of these schools—nearly 20 percent of all ABA law schools—admitted classes in which half or more of the entering class is at a high risk of failing the bar, according to the report. (The latter total has more than quadrupled since 2010.)

In theory, a law school with a low enough bar-passage rate is at risk of losing its accreditation, and therefore access to federal student loans. In practice, under current regulatory conditions it’s almost impossible for this to happen. The ABA accreditation standards require a school’s bar-passage rate to fall more than 15 points below the state average for at least three of the most recent five years before the school can even be considered for de-accreditation. Remarkably,  the passage rate of the school’s own graduates is counted as part of the state average, meaning that, the larger the school, the more likely it is the high failure rate of its graduates can suppress the statewide bar passage rate enough to protect the school’s accreditation.

This is just one example of how the ABA committee that oversees law-school accreditation has been, as I argued last year, captured by the very institutions it is supposed to be regulating. At this point, it’s unclear whether plunging bar-passage rates will inspire federal regulators to take a more aggressive role in protecting both severely underqualified prospective law students and American taxpayers from the predatory behavior of many of the country’s law schools.