December 13, 2011
NLJ: Is Law School Worth It? Not for Most Grads
Following up on my prior post, Chen: Is Law School Worth It? -- The Ratio of Educational Debt to Income: National Law Journal, Law School, a Ticket to Economic Security? Better Run the Numbers:
You've graduated from law school. You've landed a job as an attorney. Now you want to buy a house and cement your status in the professional class.
But can you afford it? Probably not — unless you can count on earning three times your annual tuition, assuming you're borrowing the money.
That's according to University of Louisville Louis D. Brandeis School of Law Dean Jim Chen. In an academic paper, [A Degree of Practical Wisdom: The Ratio of Educational Debt to Income as a Basic Measurement of Law School Graduates’ Economic Viability, 38 Wm. Mitchell L. Rev. ___ (2012),] Chen uses qualification for a home loan while paying off student debt as a measure of whether a legal education makes economic sense. ...
Using the debt standards set by mortgage providers as guidelines, Chen concluded that law graduates need to earn three times their law school tuition annually to enjoy what he termed "adequate" financial viability. That assumes they borrow only the amount of their law school tuition and lack additional debt — a conservative assumption, Chen said.
Thus, graduates of relatively low-cost schools charging annual tuition of $16,000 would need to earn $48,000; 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.
To maintain a "good" level of financial viability — meaning they could easily secure loans and would be very financially secure — graduates must earn six times their annual tuition, Chen calculates. 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. ...
According to the National Association of Law Placement, new law graduates earn, on average, $68,500. That means many would be unable to purchase a home and repay their loans, according to Chen's analysis. Lenders generally frown on educational debt that represents more than 8% to 12% of the borrower's monthly gross income, he wrote.
Update: WSJ Law Blog, Are You, Law Grad, ‘Economically Viable’?
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Most of the numbers given out by law schools are totally bogus and never verified. Those schools make their bread and butter by confusing prospective students with smoke and baked numbers. They would be bankrupt if they told the truth, so they never ever tell the truth.
The law-school scam is really a scam, in the same way that Fannie Mae was a scam and Enron was a scam and Bernie Madoff ran a scam and the subprime mortgage industry turned into a scam. The law school industry may have been cleaner 20 years ago, but it has gotten very dirty in the last 20 years, because the huge amount of money made available corrupted it. It's now a dirty industry, even if many of the profs are decent human beings.
There is no institution so noble that it cannot be corrupted, in the sense of losing its way and integrity. The law schools lost their way and lost their integrity. As a class of institutions, now, on average, they are despicable.
Posted by: Lowellguy | Dec 14, 2011 10:40:17 AM
But this is silly… in what universe does anyone expect to graduate from school, get their first job, and buy a house in a tightly coupled sequence, 1-2-3?
In the real world you graduate from school, start your job, and live in an apartment for 5-10 years while paying off debt and saving for a 20% down payment on a townhome or rowhouse, timing your purchase as best you can to move in before your first child reaches its first birthday (or second if you’re stretching it). When you have three or more kids, then maybe it’s time to upgrade to a house.
If you’re financially blessed then maybe you buy your first car upon getting that first job, but not a house. This analysis reflects outrageous expectations. That this got published in a journal shows how privileged and disconnected academics (the peer reviewers) have become in our two-tiered society.
Posted by: Kristo Miettinen | Dec 14, 2011 11:43:43 AM
Kristo, you are missing the point. It doesn't matter when you go to try to buy a house, with debt like this, you will never get a mortgage loan. It doesn't matter if you are five years into your career when you try to buy a house, you will still be carrying a huge amount of debt on the record.
Secondly, I love the rhetoric of the phrase "start your job." It has such a comforting sound and seems to mean that there is a job out there with your name on it. That's not true. When you mean is, "You graduate, you try to get a job, you keep trying for months and years, and you perhaps land a job if the stress of dealing with a $1500 per month payment hasn't made you unemployably depressed."
The timeline you propose has someone who graduates from law school at 27, getting "their job" at 27, buying their townhouse at age 37 and their first house at maybe 42-47. You don't sound like you know anyone actually in this business, or know what the level of stress actually is for these people. Why don't you look at the number of law offices with for-sale signs posted on them? There are many in my city.
Yet the law schools shamelessly go on sucking up vaults full of cash that they have encourage deluded students to borrow and give them.
Posted by: Lowellguy | Dec 14, 2011 2:09:05 PM
So this banker came to take his friend the law school dean to lunch. They were walking into the restaurant when they passed this gorgeous, scantily clad young lady strolling by. The banker stared wide-eyed at her and said, "man, I'd like to f**k her." The law school dean looked at him in puzzlement and said, "really? Out of what?"
I used to think that was a joke.
Posted by: willis | Dec 14, 2011 3:20:20 PM