John's post below raises a question I've been thinking about for awhile: how do we, as law professors, identify and handle the conflicts of interest that arise in legal education? The dispute underlying the Phoenix complaint looks in many ways like a typical conflict-of-interest scenario, not unlike the ones that we discuss every day in professional responsibility classes.
According to the allegations in the Complaint, there was an underlying disagreement about who was owed a greater duty--the school or the students? The plaintiffs allege that "Associate Dean Willrich announced that she had already adopted a policy of not writing recommendation letters for students seeking to transfer out of the School," but that other professors questioned that policy, arguing that "refusing to provide recommendation letters for students who were considering a transfer out of the School . . . was inconsistent with the School’s professed 'student centered approach.'” Nonetheless, the plaintiffs allege, "the InfiLaw representative, referring to faculty writing recommendation letters to students who were considering a transfer out of the School, responded that writing recommendation letters would be contrary to the interests of the School and questioned why a faculty member would write recommendation letters."
The underlying question seems to be who was owed a greater duty--the school or the students? And how is the "school's" interest defined--by the shareholders' interests, or are there other stakeholders with relevant interests? In the for-profit context, I suspect there will always be a tension between the shareholders' interests and student interests. But we also see similar tensions even in the non-profit educational world, when it is not always clear whether a particular policy choice serves institutional interests, student interests, or both. And, again in parallel to the types of conflicts that arise in legal practice, the faculty's own interests are often at stake as well, and may diverge from either student or institutional interests: Jeff Harrison's Class Bias in Higher Education blog has chronicled a number of ways in which schools can make short-sighted decisions that benefit faculty decisonmakers.
Government-supported higher education also owes a duty to society at large--taxpayer support of education relies on idea that the schools' educational practices will benefit the public. And while we've certainly seen a decrease in state funding for higher education, this decrease has been offset by significant increases in federal funding for higher education through the provision of student loans. Again, returning to Phoenix School of Law, the school obtained $22 million in Title IV funds in 2009-10, and $36.9 million in in 2010-11. By the end of 2010, 87.94% of the school's revenue came from Title IV funds--an amount that comes quite close to the federal government's cap of 90% for for-profit institutions. Presumably, the burden of these loans will be shared by the students who struggle to repay them and by the taxpayers who will bear the cost of loans ultimately forgiven under IBR and PAYE.
So, I think the short answer to John's question is easy: "Is it fair (is it ethical) to hobble your students for your own economic benefit?" No--it is not. But I think that most schools do not engage in the egregious practices outlined in the Phoenix complaint, just as most lawyers do not cheat their clients. The harder question, to my mind, is how do we create the kind of institutional culture capable of identifying the relevant conflicts of interest and resolving them appropriately?