Savvy college graduates are no longer heading to law school in the same numbers, as they recognize that law school grads outnumber jobs by a 2-to-1 margin.

However, as ZombieLaw notes, law schools refuse to die:

Everybody knows that law school applications are way down. You would think that this would lead to a contraction in law schools. But that has not happened. Instead, MORE law schools are opening. … any law school that is connected to a university will not be allowed to fail, even if the same school standing alone would. These zombie law schools are going to prevent the market from clearing, with adverse consequences for faculty and students.

TaxProf Blog offers a piece from Matt Leichter, a noted writer and attorney, about how federal loans for professional degrees are helping to sustain schools that would otherwise fail.

…allow me to summarize Schrag’s argument, which goes as follows: If the economic model of U.S. legal education doesn’t work for many students because it leaves them with low incomes against unpayable debts, the solution to their problems is the government’s Income-Based Repayment plan (IBR) and its 10-year-public-service-job sibling, Income-Contingent Repayment.

However, as Leichtet points out, it is the loans that are a major source of the problem:

The more conservative response would not be a persistent defense of IBR but would instead be a focused attack on both Grad PLUS loans and how private student loans are treated in bankruptcy. The changes to these two aspects of the student loan system, which occurred in 2006 and 2005, respectively, have insulated many ABA law schools from a credit and enrollment crisis that would otherwise imperil them because private lenders would not be willing to lend money to law students indefinitely while the government has.

To illustrate, here’s the annual Stafford loan limit (subsidized plus unsubsidized) and median law school tuition, adjusted for inflation.

There are a few observations that arise from this chart:

• The real value of Stafford loans has dropped significantly since its 1994 peak.
• In the 1980s and part of the 1990s, most law schools charged less than the annual Stafford loan limit.
• Perhaps this academic year median public resident tuition exceeded the Stafford loan limit for the first time.
• Starting in 1997, law students have increasingly needed to use other means to pay their tuition. Until 2006, options included savings, family contributions, Parent PLUS loans, and private loans.

Between 1999 and 2005, the number of law schools whose tuition exceeded the Stafford loan limit by $10,000 constant dollars exploded from 9 to 70. As of today, only nine private law schools charge less than this threshold.

Leichter concludes:

Sadly, in the actual world we inhabit, the federal government has chosen to sustain a number zombie law schools that can only be killed by convincing students who pay full tuition via unlimited debt not to attend them. Even if some of these schools shutter, there’s no reason to believe that the remaining ones will reduce their tuition significantly because the nucleus of the enrollment pool consists of people willing to pay whatever law schools tell them to. Thus, conservatives who are interested in using market forces to manage law school pricing should start first with the Grad PLUS Loan Program, and then wait for inflation to erode away the Stafford loan limits.