Charlotte School of Law — It Sold a Bar Card to Students Who Couldn’t Pass
Summary
Charlotte School of Law was a for-profit law school in uptown Charlotte, North Carolina, opened in 2006 by the InfiLaw System and shut down in August 2017 after the American Bar Association placed it on probation and the U.S. Department of Education cut off its access to federal student loans. In its eleven years it grew explosively — to nearly 1,500 students by 2013, briefly the largest law school in the state — and then collapsed just as fast once the two things it depended on, ABA accreditation and Title IV federal aid, were withdrawn within months of each other.
InfiLaw, a chain of for-profit law schools backed by the private-equity firm Sterling Partners, built Charlotte on a strategy that looked like access and functioned like extraction. It admitted students with credentials — a median LSAT of 144 in the fall 2016 class, around the 22nd percentile — that gave many of them little realistic chance of passing the bar, charged them full tuition financed almost entirely by federal loans, and let attrition do the rest: roughly 36 to 49 percent of a recent first-year class failed out. Those who survived to take the bar often failed that too. Only 45.2 percent of first-time test-takers passed the July 2016 North Carolina exam, far below the state average. The school received roughly $48.5 million in federal student-loan dollars in a single recent year. The product it sold — a credible path to a law license — was, for a large share of its students, a fiction backed by their own non-dischargeable-feeling debt.
The end was administrative and swift. In November 2016 the ABA placed Charlotte on probation, publicly acknowledging for the first time the non-compliance it had cited privately since at least January 2015 — chiefly that the school was admitting applicants who did not appear capable of finishing and passing the bar. On December 19, 2016, the Department of Education denied the school's recertification, ending its Title IV eligibility effective the end of that month. Without federal loans, a school whose students paid almost entirely with federal loans had no business model. It limped through the spring on layoffs and a doomed teach-out plan, operated on a restricted state license from June 21, 2017, and closed when that license expired on August 10. The North Carolina attorney general confirmed the closure on August 15, 2017.
What it left behind was a diaspora of indebted students, many holding partial degrees from a school the ABA had said should not have admitted them, and a tangle of litigation — a class action that settled for $2.65 million for as many as 2,500 former students, and InfiLaw's own counter-suits against the ABA. Charlotte became the cautionary archetype of the for-profit law school: a business that monetized the dream of a legal career while quietly selling it to the people least able to realize it.
Timeline
The Access Pitch and the Extraction Model
Charlotte School of Law opened in 2006 as a node in the InfiLaw System, a chain of for-profit law schools — Charlotte, Florida Coastal, and Arizona Summit — owned through the private-equity firm Sterling Partners. The pitch was access: a law school for a fast-growing Sun Belt city, training practitioners for regional practice, opening the legal profession to students whom the elite schools would never admit. Provisional ABA accreditation arrived in 2008, full accreditation in 2011, and the school grew with startling speed. From an inaugural class of around 85 students in 2006, total enrollment climbed past 1,100 by 2011 and approached 1,500 by 2013, making Charlotte the largest law school in North Carolina by a wide margin.
The access pitch concealed an extraction model. A for-profit law school makes money the same way any for-profit college does — by enrolling students who bring federal aid — and the legal academy's federal aid is unusually generous: Grad PLUS loans let a graduate student borrow up to the full cost of attendance with no meaningful cap. That structure rewarded volume and punished selectivity, and Charlotte responded accordingly. It admitted students with academic credentials that gave many of them long odds of ever passing the bar — by the fall 2016 class, a median LSAT of 144, roughly the 22nd percentile, and a median GPA of 2.80. Tuition ran at full freight, financed almost entirely by federal loans; the school took in roughly $48.5 million in federal student-loan dollars in a single recent year.
There was, in the school's brief golden age, a genuine constituency it could point to: students who would not otherwise have had a shot at law school, some of whom did graduate and pass and practice. But the institution's economics did not depend on those students succeeding. They depended on those students enrolling and borrowing. And the gap between the two — between a school that profits when students enroll and a school that profits when students succeed — is the whole of the Charlotte story. A recent first-year class saw somewhere between 36 and 49 percent fail out. For those, the school had collected a year or more of federally financed tuition in exchange for a debt and no degree.
The Numbers the ABA Hid
A law school sells one thing above all: a credible path to a bar license. Charlotte's path was crumbling, and the body responsible for accrediting it knew. As early as January 2015, the ABA found Charlotte in substantial non-compliance with its standards — but neither the ABA nor the school disclosed that finding publicly. For nearly two years, prospective and current students made one of the largest financial decisions of their lives without knowing that the school's accreditor had privately judged it deficient. The first public acknowledgment came only in November 2016, when the ABA placed Charlotte on probation and stated the core charge plainly: the school was admitting applicants who did not appear capable of completing the program and being admitted to the bar.
The bar results confirmed the indictment. In July 2016, only 45.2 percent of Charlotte's first-time test-takers passed the North Carolina bar exam, against a far higher state average; an earlier February 2016 sitting had seen first-time passage as low as 34.7 percent. These were not the numbers of a school giving long-shot students a fair shot; they were the numbers of a school admitting students it had reason to know would mostly fail, then collecting their federally financed tuition on the way through. The median LSAT of 144 was not an accident of a tough applicant year. It was an admissions policy, and the policy was the business model.
The deception ran to the students directly, too. When the Department of Education later moved against the school, a central finding was that Charlotte had not been honest with its students about its ABA accreditation troubles — that it had let them keep enrolling and borrowing while concealing the probation risk that threatened the value of the very degree they were financing. A law school that hides its accreditor's warnings from the people paying tuition has stopped selling education and started selling a security it knows is impaired.
Two Withdrawals, Five Weeks Apart
The collapse was a two-step regulatory shutoff, and the steps came close together. First, on November 2016, the ABA probation. Then, on December 19, 2016, the U.S. Department of Education denied Charlotte's recertification for federal student aid, ending its Title IV eligibility at the end of the month — the Department citing, among other things, the school's lack of candor with students about its accreditation status. For an institution whose students paid almost entirely with federal loans, losing Title IV was not a setback; it was the end. By January 2017 the school was laying off large numbers of faculty and staff. The revenue had simply stopped.
What followed was a doomed attempt at an orderly exit. Charlotte filed a teach-out plan, the mechanism by which a closing school lets enrolled students finish, and the plan was also the school's route to possibly regaining federal aid. But the school had no money to fund it and no realistic future to teach toward. North Carolina permitted operation only under a restricted license beginning June 21, 2017. The required contingencies were never met. The ABA rejected the teach-out plan on August 11, 2017, on the grounds that it assumed the school would continue to exist — which it would not. The restricted license expired August 10, and on August 15, 2017, the North Carolina attorney general confirmed what was by then obvious: Charlotte School of Law had closed. Students learned of the end, in a final indignity, largely through the alumni association rather than the administration.
The school did not go quietly into the legal record. InfiLaw sued the ABA, arguing it had never been out of compliance with the bar-passage standard and that the accreditor's action was unjustified. Former students sued the school, and that class action ultimately settled for $2.65 million for as many as 2,500 people — a figure that, spread across thousands of borrowers carrying tens of thousands of dollars each, looked less like restitution than like a rounding error against the debt the school had generated.
The Five Factors
Aftermath
The students bore the cost. Many had been admitted, by the ABA's own finding, when they did not appear capable of finishing and passing the bar; they left with partial degrees, full debt, and a credential from a school whose name had become a liability on a résumé. Those who had nearly finished faced the choice between transferring — into a market where seats at accredited schools were scarce and credits transferred unevenly — or abandoning the effort with the loans intact. The roughly $48.5 million in federal aid Charlotte drew in a single recent year was, for a large fraction of the people who borrowed it, money spent on a path that closed before they reached the end of it.
The institutional reckoning was thin. The class-action settlement of $2.65 million for as many as 2,500 former students drew objections from more than 70 of them as inadequate, and against the debt the school had generated it was modest. InfiLaw, for its part, went on the offensive, suing the ABA and contending the school had never violated the bar-passage standard, before the various suits moved toward resolution. The campus in uptown Charlotte emptied. North Carolina lost a law school as quickly as it had gained one, and the wider lesson outlived the institution: Charlotte became the textbook case of the for-profit law school as an arbitrage on federal graduate aid, and a central exhibit in the broader argument that the Grad PLUS program had created a market for selling law degrees to students who could not use them.
Lessons
- Cap or condition graduate federal lending on program outcomes, because uncapped aid lets a school profit by enrolling students with little chance of passing the bar.
- Hold professional-school admissions to a floor tied to realistic licensure odds; an LSAT and GPA profile that predicts mass bar failure is not access, it is extraction.
- Require accreditors to disclose findings of non-compliance promptly, since a private warning lets students keep borrowing against a degree the regulator has already questioned.
- For students, treat an accreditor's probation — or any opacity about accreditation status — as a reason to pause, not a technicality, because a degree's value depends entirely on the standing the school may be hiding.
- Do not approve a teach-out without confirming it is funded and feasible; an unfunded plan that assumes the school's survival strands the students it claims to protect.