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Thursday, February 4, 2010

Northwestern Dean: Law School Only Makes Economic Sense If You Go to a Top 70 School

Northwestern law school Above the Law, Changes in Legal Education: Some Thoughts from Dean David Van Zandt, by David Lat:

Earlier this week, at the PLI Law Firm Leadership and Management Institute ... Dean David Van Zandt, of Northwestern University School of Law, offered some reflections on the future of legal education. ...

One of his most interesting tidbits was the starting salary that would constitute a “break-even point” for going to law school. In other words, what salary would you have to earn upon graduation in order to make going to law school an economically rational decision?

Van Zandt and some of his Northwestern colleagues did a study to determine the added value of a J.D. degree. They concluded that the break-even starting salary for a law school graduate is $65,000. Put another way, going to a law school with a median salary upon graduation that’s below $65,000 is not a wise investment.

Schools with median starting salaries under $65,000, which generally land somewhere in the 70s in the U.S. News & World Report rankings, are not good values. They need to either lower their cost to students and/or improve job opportunities for their graduates, according to Van Zandt.

(A break-even point of $65K seems low to us, given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry. We’ve reached out to Dean Van Zandt to ask for more detail about the data he utilized and the assumptions he made in reaching his conclusion. Another academic, [Tax Prof] Herwig Schlunk of Vanderbilt Law, believes that the break-even point is much higher.)

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Comments

How arrogant! I bet that "some dean in a Top 70 school" didn't get his money's worth if he ever took an economics course.

Yesterday, I had a discussion with a friend who outlined his reasons for applying to a "minor" law school in an urban university. He had figured the real income potentials and the psychic income potentials. Either, by themselves, made his decision worthwhile.

Now, how many people from top 70 schools are going to Smuteye, Alabama to handle personal injury and divorce cases, or are they too proud to do that? If they are, someone who went to another law school is going to make money at it. I'm glad that no one told those attorneys that they were wasting time and money in law school.

Posted by: Woody | Feb 4, 2010 6:09:55 AM

Certainly a worthwhile analysis would take into account what the student is giving up by going to law school. I had students doing spreadsheets to work this out, back in the 1990s when I was teaching Digital Legal Practice Skills. There was a big difference between the impact on someone who could get a job graduating from college that paid $30,000 and someone who could start at $70,000. Not to identify any specific majors, but ....

Posted by: Jim Maule | Feb 4, 2010 6:34:34 AM

This is why no one takes law school seriously. First Northwestern developed the concept of the top fifteen because they weren't in the top ten. Now there's the top seventy which of course will include at least 100 or 150 schools. Until law schools start emphasizing serious teaching and scholarship--start justifying their existence as other than elaborate placement services--we will have neither the respect of the profession or the rest of the academy. And we'll deserve neither.

Posted by: mike livingston | Feb 4, 2010 6:51:08 AM

As valuable as these projections are, they omit some critical information. An economically rational prospective law student would also assess the impact of his/her race/ethnicity and sex on employment and salary prospects. Demographic studies of the law profession demonstrate these criteria continue to impact hiring, promotion, and salary opportunities.

Posted by: Dustin | Feb 4, 2010 7:19:18 AM

I didn't go to a top 70 school. My school was probably in the bottom 70 at the time. I earned about $40,000 a year before law school. I would still be making that amount (my friends at my old employer still are). Law school cost me $60,000. I probably made about $50,000 - $60,000 my first year out of law school. I have made at least $90,000 - $100,000 every year since then. I have had some years where I have earned $150,000. I can easily envision making $250,000 - $350,000 a year in a few more years. I know that my story is very similar to others who graduated from my school. From my perspective, law school has already paid for itself and deciding to attend law school was the best financial decision I have ever made.

Posted by: annonymous | Feb 4, 2010 8:20:15 AM

Will Top 70 lawyers want to practice in places like the county seat towns in Ohio? Not likely.

Posted by: save_the_rustbelt | Feb 4, 2010 11:22:01 AM

Dustin,

You're absolutely correct. My son recently graduated from a law school on the lower tier. He is already making more money than many of his peers. Moreover, he has a "can-do" attitude, which means that his income will increase in the coming years. The firm for which he works looked for personalities and depth rather than schools.

Posted by: Jeff Minick | Feb 5, 2010 2:38:51 AM

During the Viet Nam [old timey spelling] war, to avoid the draft I enlisted [went to Viet Nam anyway]. But first, I was sent to electronics school.

After my discharge I got a job at a big defense contractor, doing electronic calibration of weather instruments. In 1973 my starting pay was $5.31/hr [about $25.50 today, or $53,000 a year], plus great benefits. Within two years I was being paid a little over $8/hr, equivalent to an inflation adjusted $80,000 today.

No college. And the new electronics engineer hires were paid less than I received after two years on the job. Plus they had the expense of college to pay off.

My boy just finished a hitch in the Navy as an enlisted nuclear reactor specialist. He's been offered a job @ $80K a year [but decided to get a degree first].

My advice: get a job - any job - at a really big company. They always give preference to employees when a new job opening comes up. And there are always new openings at big companies.

If you must, get that law degree by going to school nights & weekends. If you can't get into a top 10 school, get a degree at the cheapest school you can find. Skip the middle tier schools, they cost too much for what you're getting. With a law degree your employer will put you on their legal staff. You won't get rich, but you'll have job security and very good pay/benefits.

Or, get a real estate license instead of a law license. That's what I did, and it's much easier. Requires zero education. Big companies always have employees who are thinking about buying or selling a house. Save your commissions, and buy an investment property every 5 - 7 years. Retire in comfort.

Or, join the conventional rat race, pile up huge debt, and hope to get hired by a good firm so you can pay off your student loans.

But remember, this is America. Land of opportunity. There are alternate ways of making it.

Posted by: David S | Feb 5, 2010 4:03:34 AM

Half Sigma thinks only the top 14 are worth the time and tuition.

Posted by: bob sykes | Feb 5, 2010 4:32:16 AM

I'm sure someone has already stated that the Dean's comments are only meaningful if you assume that the sole reason people go to law school is to make money. I echo the poster above, although I didn't read the post, in presumably being appalled that a DEAN of a PROMINENT, SCHOLARLY LAW SCHOOL thinks his students are only interested in money.

Posted by: Jon | Feb 7, 2010 7:17:17 PM

Look, Dean Van Zandt is absolutely right. Some of you bloggers are misconstruing his generalization. First, he never said, don't go to 3rd tier law school. He merely pointed out that if a prospective student's goal is to improve his salary (90% of law students go to law school for this purpose) then $68k is the statistical number that makes rational sense.

He never said, you should not go to law school period unless you are going to a top 70 school. He is trying to inform the less rational young applicants who have wrong information on law schools, i.e. any law school will lead to 120k job.

Second, $68000 does not take into consideration of sentimental values. Maybe you just want to become a lawyer even though you will be in a worse financial situation than before. Van Zandt wouldn't say that you are stupid. If it is a personal goal then go for it. However, he doesn't want you to whine about not getting 160k out of law school and how the law school system defrauded you.

Given the current state of the economy, law school does not make sense for some people. Van Zandt is not stupid. He knows why 90% of students are enrolled at law schools. I want to again remind all of you that only 10% of law students would go into law school without caring about salary. And of those 10%, 9% are seriously irrational immature individuals with no financial responsibility and poor understanding of how Biglaw hiring process works. So that leaves 1% of the population with such a strong obsession for the study of law that designing the whole system around them makes no sense.

ABA should definitely take a more responsible position by getting rid of 4th tier law schools. Some of these students are naive enough to buy into biglaw hopes. In fact, go to a local 4th tier law school and tell the students, "graduating from this program you have 90% chance of making $55k a year as a public worker." Then see how many of those prospective students would go do something else. I would say at least 1/2.

Posted by: LawProf | Feb 13, 2010 3:07:50 PM