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Is Law School Worth it (Financially)?

Legal Notebook

Published: December 29, 2011

While there have been numerous studies on the average amount of salary that a recent law school graduate receives in his or her first job, none of those studies to date have actually attempted to mathematically explore those graduates’ purchasing power against the grad’s student debt.

“The need to deliver returns on students’ educational investment is at its apex in applied fields such as law,” writes Jim Chen in a law review article entitled: A Degree of Practical Wisdom: The Ratio of Educational Debt to Income as a Basic Measurement of Law School Graduates’ Economic Viability, to be published in the William Mitchell Law Review.

Chen is dean of the University of Louisville’s Louis D. Brandeis School of Law.

“To put the point sharply, law schools sell a product that students will buy only to the extent that they can make a decent living with it,” he writes. “The J.D. is a degree of practical wisdom, and legal education should evaluate itself according to the extent to which law schools prepare their students, financially and intellectually, for lifelong careers.”

In this article, he writes that, “I will assess the immediate viability of a student’s decision to borrow money in order to attend law school.” This study is driven, at least in part, by Chen’s acknowledgment of the current uproar about student loan debt versus educational value which is being covered extensively on these pages. In this article, Chen acknowledges this particular battle, and seeks to give lawyer starting salaries some weight of purchasing power value so that the many raw figures can be worked with in real-life scenarios.

The article’s hypothesis is essentially that a law school graduate’s qualifying for a home loan, while paying off student debt, is a viable measure of whether or not a legal education makes economic sense.

He qualifies this position in several ways, stating that not every law school graduate wants to or will buy a home, but, at the same time, he writes that a home purchase is a generally accepted measure of whether or not a person is on the way to realizing the “American Dream.”

Chen writes that law school debt averages over $25,000 per graduate and that debt from higher-tier private schools can top $100,000. What kind of life, Chen asks, can a law school graduate expect saddled with that kind of debt out of the career gate?

Chen engages in a complex set of mathematical formulas used by mortgage providers as guidelines for writing home loans. Even if a graduate’s only debts are student loans and a home loan, Chen’s math made the startling conclusion that law graduates needed to earn three times their law school tuition annually to obtain "adequate" (his concept) financial viability.

The figures for an “adequate” lifestyle work out this way: graduates of schools charging annual tuition of $16,000, for instance, would need to earn $48,000 per year; graduates of schools charging $32,000 would need to earn $96,000; and graduates of schools charging $48,000 would need to earn $144,000.

Going a little lower, Chen figured what it would take to obtain “marginal” financial stability: graduates of $16,000-a-year schools would need to earn at least $32,000; graduates of $32,000 schools would need to earn $64,000; and graduates of $48,000 schools would need to earn $96,000.

It would take considerably more than that—six times annual tuition-- to obtain complete, or “good,” financial security, according to Chen’s math. That means graduates of $16,000-a-year schools would need to earn $96,000; graduates of $32,000 schools would need to earn $192,000; and graduates of $48,000 schools would need to earn $288,000.

The average new law school graduate would fall somewhere in the middle of all of this. The National Association of Law Placement has found that the average starting salary of new lawyers is about $68,500, putting many, if not most, new lawyers out of the home buying market using only their initial salaries.

In addition, said Chen, banks generally hesitate to give loans to recent graduates whose educational debt amounts to more than eight to twelve percent of the borrower's gross monthly income.

Ultimately, it will be up to each individual to decide if law school is an economically viable choice. But drilling down into this kind of math shines a completely different light on the choices that are actually available.