Standard & Poor's has put out a new study questioning the stability of private law schools. Enrollments grew during the recession because young people could not find jobs, so they went to law school. But as the economy has recovered, there has been a "significant reduction" in enrollments, says S&P.
San Diego's Thomas Jefferson School of Law has expanded enrollments until there was a slight decline in fall of this year. "However, operating surpluses have not boosted financial resources fast enough and, as a result, the law school has violated its balance sheet covenants for fiscal 2012 and fiscal 2013," notes S&P. Management doesn't think the school will meet its financial covenants until 2018.
Jefferson's large amount of debt and high debt service, resulting from construction of a new facility that went into sevice in 2011, are weaknesses, says S&P. It gives Jefferson's debt a B+ rating with a negative outlook. That's a junk rating. S&P's AAA, AA, A, and BBB are considered investment grade. Ratings of BB, B, CCC, CC, and C get the junk tag.