The University of Chicago Law School Faculty Blog

The Rage Over Conditional Scholarships

The law school world has been abuzz since an article in the Sunday NY Times, two weeks ago, exposed the practice of recruiting new law students with financial aid, but conditioning the continuation of scholarships on good grades. Students were said to overestimate their chances of obtaining these grades, and then struggling with the financial burden of law school. A “smoking gun” was the fact that, given law schools’ grading curves, a substantial percentage of scholarship recipients could not possibly obtain the required grades. The article probably overestimated the number of law schools with such policies, but the issue is interesting, and there certainly are law schools where every scholarship is conditional on future grades – that only half the class or less could obtain. Admissions deans around the country now report receiving inquiries from lawyers involved in the ABA and from other organizations looking to define new rules, or perhaps best practices. 

There is no need to run through the obvious libertarian response that prospective students, and especially the subset offered scholarships, are smart consumers who can and do understand exactly what is being offered. After-the-fact disappointment should not always translate into before–the-fact-regulation, especially when it is perfectly rational for some or many students to accept the offers sent their way.  Incidentally, or by way of disclosure, I am fortunate enough to be at a law school that does not put this pressure on scholarship recipients (more on that, and the claim of good fortune in a minute), so I have no direct reason to favor or disfavor the current practice.

There are, however, at least two points missing from the current news coverage.  The first concerns the strategy of schools that engage in the criticized plan. Imagine an elite law school that offers $x/year for three years to an applicant, though the x will vary according to the student’s need and the school’s own calculation of its need and its competition. Schools are aware of the US News rankings and the impact of inducing high-number applicants to attend.  Occasionally, schools offer $y for one year, figuring that summer jobs and other things might help pay for later years., but three-year scholarships are common at elite law schools. Loans are, of course, also in the picture. But what about a school, often not a super-elite and well-endowed one, that offers $x per year, conditional on a 3.2 GPA? Put bluntly, the student will lose the scholarship if the student is not near the top of the class. My interpretation of this strategy is that it does not so much set out to fool customers as it tries to deal with the problem of transfers. The strategy might as well be described as follows: We will discount your first year tuition by $x, and then if you earn good grades you will be tempted to transfer to a higher ranked school. (Some schools lose a significant percentage of their top students this way.) We want to keep you for your second and third years, and so we will offer you a scholarship to stay with us rather than to transfer away. But instead of being so crass, and waiting for you to threaten to transfer, we will save transaction costs for both of us, and promise a scholarship if you have the sort of grades that facilitates transferring. Put this way, I think the strategy much less likely to raise objections.

Second, this interpretation of what is going on in the market explains, if that is the right word, why the elite schools do not offer similar, contingent scholarships. It is not just that, if they did so, risk averse students would accept unconditional offers, which they could surely garner in the present competitive environment, but also that the elite schools are less fearful that a large number of students will transfer out after the first year. Note that the scholarship itself discourages transfers. A scholarship recipient who transfers from any school, but even an elite school, will lose the scholarship from the first school and be unlikely to gain a scholarship at the new school. This is because the student is “less valuable” to the second school inasmuch as the rankings do not incorporate information about the GPAs of incoming transfers. It is only those incoming, first year numbers that are oh-so-important. Regulators and well meaning organizations should probably stay clear of this subject, unless they are sure of what they are doing.

Student Blogger - What Are You Hiding in that Statute?: Canvassing Federal Privacy Law

We live in an age of information, and it’s old hat by now to bemoan our inability to control the ebb and flow of the information formerly known as “private.”  Sensing the dissatisfaction of the voting public and perhaps an interest group or two, lawmakers at various levels of government have passed laws that regulate the use and acquisition of the unimaginably massive amount of data that our daily comings and goings generate.  Professor Erin Murphy (NYU) presented a paper to the Public Law and Legal Theory workshop that aims to answer several related questions: What does the federal statutory approach to regulating information with regard to law enforcement look like?  How does this compare to the Fourth Amendment’s ban on unreasonable search and seizure?  Do the courts or Congress regulate private information more effectively?  

Most of the federal statutes regulating private information are fairly new and have been passed since the 1970s.  There are a huge number of narrow and specific statutes relating to privacy.  In no particular order: the Stored Communications Act, the Bank Secrecy Act, the Genetic Information Nondiscrimination Act, the Real ID Act, and Video Privacy Protection Act.  These are a few of the twenty or so federal statutes that regulate in some manner the use and acquisition of private information.  Professor Murphy explained that no single coherent story seems to explain the passage of these statutes, although many of them were enacted after a triggering event.  For example, during Robert Bork’s Senate confirmation hearings his video rental history was released to the press.  Bork’s rental list was unremarkable, but shortly thereafter the Video Privacy Protection Act was passed, which imposed civil penalties on video rental providers that released such information.  Despite the knee jerk approach to federal privacy law, each of these statutes has a law enforcement exception that permits government officials to access information as part of a criminal investigation.  For example the Right to Financial Privacy Act prohibits banks from disclosing customer information to United States officials unless they are conducting “a lawful investigation or official proceeding inquiring into a violation of, or failure to comply with, any criminal or civil statute or any regulation.”  12 USC § 3401(8). 

Federal statutes regulating private information have many commonalities despite the seemingly random collection of statutes.  In general, these statutes tend to regulate both the acquisition and use of private information.   To return to the Right to Financial Privacy Act, the statute prevents government officials from transferring any financial records obtained in accordance with its law enforcement exemption and narrowly circumscribes permissible uses of information that is legitimately acquired.  Relatedly, the Cable Communications Policy Act requires destruction of information “no longer necessary for the purpose for which it was collected.”  47 USC § 551(e).  The Fourth Amendment by contrast generally permits free use of information that has been lawfully obtained by government investigators.

Striking the right balance between access and restraint in order to provide the appropriate level of protection to private information is a difficult and controversial task.  Will the Supreme Court or Congress do a better job?  Professor Murphy argues that given the complex and contested nature of the issue there should be cooperation amongst the branches.  Each branch has certain comparative advantages and in tandem the Court and Congress will do a better job than if only one or the other took the reins.  Legislators can adopt proactive structural remedies that courts cannot.  Legislators are also better able to gather systemic information about the collection and dissemination of information in a particular industry.  Courts, however, have historically been more attentive to abuses by law enforcement and have more vigorously used the exclusionary rule to deter government officials from conducting unconstitutional searches and seizures.  There are fewer interest groups advocating for the privacy concerns of those who will typically be the subject of the various statutory exemptions for criminal investigations.  While groups like the Electronic Frontier Foundation do show up to address the privacy concerns held generally, groups such as the National Association of Criminal Defense Lawyers that represent the interests specifically of criminal defendants have been absent when the various federal statutory privacy laws were considered.  All of this goes to show that the best solution is for the two branches to work together, and this appears to already have occurred in some areas of privacy law.  For example, the Drivers Privacy Protection Act governs the collection and disclosure of personal information gathered by state DMVs.  A portion of the statute authorizes a daily $5,000 fine to noncompliant offices, but only if a public official brings a lawsuit. 

The commenters pointed out that you can’t tell which branch is better at protecting privacy without some kind of theory about what the optimal level of privacy protection is.  Professor Murphy responded that this paper is intended to push past the question of what the right level of privacy protection is and instead focus on the relative differences between the branches in protecting the privacy rights of individuals against intrusion by government officials.  Other commenters pointed out that it is difficult or impossible to evaluate Congress’s track record on privacy without considering the panoply of state laws addressing privacy.  In some areas, for example trade secret protection, states have acted in a uniform and sufficient manner such that further legislation is currently unnecessary.  Professor Murphy responded that there is such a vast and disparate body of state privacy law that it wasn’t possible to consider in any systematic way the impact of state privacy laws and that considerable debate exists over whether the states have led the way, rather than followed the federal lead, in protecting privacy. 

All the talk about courts and Congress left me wondering what role our poor executive branch might be playing in this story.  The baseline assumption in the discussion seems to be that executive officials are always going to push to the limits of what is allowed by the two other branches.  This might very well be the case, but the story might not be so cut and dry.  If there is broad political support for the kinds of privacy legislation that Congress has passed in the last forty or so years, why is the President immune from that pressure?  There are various ways in which the President could restrain prosecutors, an Executive Order or revision to the United States Attorneys’ Manual being two such mechanisms.  Moreover, certain statutes, such as the provision in the DPPA that provides for a daily fine against non-complying DMVs following a suit by a public official, seem to require a fairly prominent role for executive officials.  

Student Blogger - Let's Work Together: Coordination Among Government Agencies

It’s no great secret that there are a lot of administrative agencies. A dauntingly large alphabet soup of government agencies regulates many industries, and these agencies often receive overlapping delegations of authority from Congress. As President Obama wryly pointed out in his 2011 State of the Union address, “The Interior Department is in charge of salmon while they’re in fresh water, but the Commerce Department handles them when they’re in saltwater. I hear it gets even more complicated when they’re smoked.” Most of what we hear about administrative agencies and government regulation of industry falls onto one side or another of a debate represented reasonably well by the following articles: “Regulation Lax as Gas Wells’ Tainted Water Hits Rivers” courtesy of the New York Times, and a piece by Alan Greenspan called “Activism” in which the former Fed Chairman blames our slow climb out of recession on too much government regulation. Or if you prefer a more adventurous headline, there is “Regulatory Overkill” courtesy of the Wall Street Journal.

Professor Jody Freeman (Harvard Law School) presented a paper she co-authored with Professor Jim Rossi (Florida State University College of Law) at the Public Law and Legal Theory workshop that builds on the observation of President Obama without getting mired in the stagnant debate of too much/not enough government regulation. Professor Freeman explained that traditionally administrative law has operated under the simplistic assumption that each agency acts separately from all the others in regulating in its own corner of the world. Would it were that it was so, Professors Freeman and Rossi say. Instead, what we have is a sea of agencies often with overlapping or concurrent delegations. To deal with this complexity, agencies need to coordinate. With more coordination it will be easier for agencies to write regulations and adjudicate disputes, and agencies will be able to avoid inconsistencies and redundancies in their regulations and decisions. Moreover, coordination can help mitigate the dreaded “tunnel vision” that regulators focused on a narrow slice of a larger problem are apt to develop.

Lawmakers and regulators have a menu of options to choose from when seeking more coordination between agencies. At one end of the spectrum there is the option of structural integration and the creation of mega-agencies like the Department of Homeland Security. Integration is difficult and costly, so instead lawmakers and regulators might require inter-agency consultation. Consultation can take many forms. For instance, regulators can voluntarily consult with other regulators, or they can draft contract-like memoranda assigning responsibility for various tasks and making other mutual commitments. Or Congress might require regulators from one agency to respond to the suggestions of regulators from another agency. Congress can also require that multiple agencies agree to adopt a single regulatory rule. The President too can take action to increase coordination by issuing Executive Orders regarding coordination between agencies, wielding threats of removal over regulators who won’t coordinate, and generally exert more centralized oversight over coordination through the White House.

Comments offered by the participants at the workshop centered around a related set of themes: How can you tell when coordination will work? How do we know when coordination is what Congress intended when it delegated lawmaking power to the agency? What is the appropriate level of centralized control? In some instances Congress actually intends to create multiple agencies and grant them overlapping delegations. Professor Freeman noted that much of the concurrent jurisdiction and regulatory overlap is, however, not the result of intentional choice by lawmakers, but rather due to the slow and ad hoc build-up of agencies and their responsibilities over time. This paper is intended to be the start of a new conversation regarding coordination between federal agencies. Other participants focused on the fact that the paper is heavily concerned with the inside baseball of regulation rather than the potential political impact of more versus less coordination. Having an efficient bureaucracy is not the end-goal of our regulatory apparatus. Rather, we want our regulators to implement statutory schemes fairly and accurately while taking account of changed circumstances. Professor Freeman noted that she and Professor Rossi strongly support agency coordination, because in some cases regulatory complexity is preventing the public from getting the benefit of programs that Congress has created.

Professors Freeman and Rossi made a deliberate choice to chart the available territory in great detail without becoming bogged down in some of the most difficult issues to resolve. The paper walks through a complicated landscape of MOUs, consultation provisions, joint rulemakings, joint action requirements, and interlocking and incorporated rules. Despite this detail, the paper does not attempt to develop general principles that tell us when regulatory complexity is preventing the public from getting the benefit intended by Congress or what coordination tools should be deployed in response. A paper can do only so much. Nonetheless, Professor Freeman explained that there are many instances of regulatory complexity where everyone can agree that there is a failure of coordination. (This of course raises the question of why the regulators haven’t voluntarily adopted one or more of the coordination mechanisms that the paper highlights.)

Technical though administrative law may be, the profits and public welfare at stake generate corresponding interest groups that are constantly in search of opportunities. When agencies coordinate there will be winners and there will be losers. It remains to be seen what kind of impact a greater emphasis on coordination will have.