Struggling: Law school in the hot seat

Typical graduates of Florida Coastal School of Law can expect to earn about $46,000 annually, but they’ll spend a fifth of their salaries — about $9,800 on average — paying student loans, according to a recent government analysis.

That 21% debt-to-income ratio is too high, says the U.S. Department of Education, which is cracking down on for-profit degree programs that leave students with heavy debt and poor employment prospects.

Under the new “gainful employment” rules — implemented during the Obama administration — graduates are considered gainfully employed if student loan payments don’t exceed 8% of their total earnings, or 20% of their discretionary income. When loan payments exceed 12% of income, as with Florida Coastal grads, the program is designated as “failing.”

If Florida Coastal falls outside the government’s standards again next year, students will be ineligible for federal loans — a move that would effectively cut off the Jacksonville law school’s main revenue stream and could shutter the for-profit college.

In a recent e-mail to students, the school’s dean, Scott DeVito, denounced the gainful employment rules as “part of an anti-for-profit political agenda” and questioned the quality of the metrics for not taking into account geographic differences, such as the fact that northwest Florida is a “relatively low-wage region,” or considering that lawyers’ earnings typically don’t peak until around age 50. Moreover, he said, Florida Coastal has a loan default rate of just 2%, which is comparable to state schools.

While the school is appealing the results, DeVito has outlined plans to improve its debt-to-income ratio: To help lower student debt, Florida Coastal is raising scholarships and working on a new tuition plan. The current annual cost of attendance is $66,838, including tuition and living expenses, and 91% of students rely on federal loans. The school is also raising admissions criteria, bolstering its Bar preparation curriculum and enhancing career services to try to boost graduates’ job prospects.

There are two other possibilities, though, that could eliminate the regulatory issue.

One would involve Florida Coastal, which is operated by the Naples-based InfiLaw Corp., partnering with a non-profit, major university — a goal the school has been pursuing for the past couple of years. Since non-profit educational institutions aren’t subject to gainful employment rules, “a side-effect of such a change would be that the GE (gainful employment) would, after a potential transition period, no longer apply to Florida Coastal,” says DeVito.

The second scenario is that the Trump administration will roll back or eliminate the gainful employment rules. Congressional Republicans have criticized the regulations, and Education Secretary Betsy DeVos has vowed to review the rules to see if they’re achieving their intentions.

Florida Coastal has been grappling for several years with declining enrollment, low Bar passage rates and lackluster employment figures.

Last year, only 99 of 209 Florida Coastal graduates — 47.4% of first-time takers — passed the Florida Bar exam. By comparison, the overall state Bar passage rate in 2016 was 65.6%.

While Florida Coastal says it is boosting its incoming LSAT requirements to try to get a handle on the problem, the school’s graduates, like many newly minted lawyers across the country, are struggling to find work as lawyers. In 2015, only 43.3% of recent Florida Coastal graduates held full-time jobs that require or prefer a JD, according to American Bar Association data, and nearly 33% of the school’s 2015 grads are unemployed, even though most are looking for jobs.

Looking at recent admissions data, Kyle McEntee, executive director of the non-profit group Law School Transparency, concludes that Florida Coastal has “a long way to go” to improve its outcomes. “The students that they enrolled in 2016 were just as weak as the students who took the Bar exam that year, so when the dean says they’re improving admissions standards, I haven’t seen it yet.”

Florida Coastal isn’t the only InfiLaw institution facing problems. In January, the DOE cut off the Charlotte School of Law’s access to federal students loans after finding that the school made “substantial misrepresentations” to students about its compliance with ABA accreditation standards and the “likelihood that its graduates would pass the Bar exam.” More than half of the student body has since left, and faculty members have launched Go- FundMe campaigns and food drives to help remaining students cover their living expenses. A class-action lawsuit accuses the school of deception and fraud.

Under a proposed plan filed by Charlotte to help remaining students finish their degrees, Florida Coastal has agreed to provide technical support and oversight to its sister school. “There will be no adverse effect whatsoever on FCSL’s services to its own students,” DeVito says.

Tags: Of Counsel