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Saturday, April 6, 2013

WSJ: More Than 50% of Law Graduates Aren’t Making a Living

Wall Street Journal:  More than 50% of Graduates Aren’t Making a Living -- Study:

More than 50% of law school graduates from the 2011 class aren’t earning enough to buy a house, according to a new study [Jerry Organ (St. Thomas), Reflections on the Decreasing Affordability of Legal Education, 41 Wash. U. J.L. & Pol'y ___ (2013)]. ...

Mr. Organ took a formula for measuring a law school graduate’s economic viability developed by University of Louisville Law Professor Jim Chen [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. 1185 (2012)] and applied it to employment outcome data published on a per school basis by the ABA for the class of 2011.

Graduates need to be earning an annual income that’s at least two times their annual tuition — or an income that’s at least two-thirds of their law school debt — to reach “marginal financial viability,” according to the formula. Those below the threshold can’t afford to buy a $100,000 house and struggle to retire their debt. ...

He concludes:  Across all law schools and after accounting for scholarships in the manner described above, the estimated percentage of graduates from the Class of 2011 who have marginal financial viability increased from roughly 33% to roughly 46.5%, while the estimated percentage of such graduates who have less than marginal financial viability declined from roughly 67% to roughly 53.5%.

Those facing the bleakest prospects are graduates with lower LSAT scores and grade point averages who are more likely to pay full tutition, and those who went to school in places where legal education is more expensive, like California, Illinois, Massachusetts, and New York.

“Law schools are going to find themselves with fewer students to fill their seats unless costs come down or the job market improves significantly,” Mr. Organ told Law Blog by email.

See also Above the Law, If You Want to Own a Home, Don’t Borrow Money to Go to Law School

From Jim's article:

To offer good financial viability, defined as a ratio of education debt to annual income no greater than 0.5, post-law school salary must exceed annual tuition by a factor of 6 to 1. Adequate financial viability is realized when annual salary matches or exceeds three years of law school tuition. A marginal, arguably minimally acceptable level of financial viability requires a salary that is equal to two years’ tuition. The following table compares some tuition benchmarks with the salary needed to ensure the good, adequate, and marginal levels of financial viability identified in this article:

Chen

http://taxprof.typepad.com/taxprof_blog/2013/04/wsj-more-.html

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Comments

Only 22% of Loyola Los Angeles graduates had a real job at graduation, one of the worst employment rates out of all the 200 or so ABA approved law schools.

Loyola ranks in the top 15, however, in average student indebtedness.

Posted by: Anon | Apr 6, 2013 3:37:39 PM

Jim Chen's method is absurd. Home ownership rates and wealth levels are higher for law school grads than college grads.

Posted by: Anon | Apr 6, 2013 4:00:27 PM

A high majority of law school deans, assistant deans, administrators, and tenured lawprofs are making a comfortable living. Prospective law students -- caveat emptor!

Posted by: Jake | Apr 6, 2013 4:46:47 PM

Those are weird stats. If you make $288,000, keep 180K after taxes, and live on 40K a year, and borroed 48K a year, you can retire you entire law school debt in a bit over a year, even if you made no money during the Summers in law school.

Posted by: Avi99 | Apr 6, 2013 7:02:50 PM

Come on Anon at 4pm, you know you need to be citing something to support that kind of statement. And whatever it is has to accurately reflect current law student debt levels and employment outcomes.

Posted by: evidence, please | Apr 6, 2013 9:48:26 PM

Even if one gets a coveted BIGLAW position and accompanying salary, how many people feel comfortable taking on a 15-30 year mortgage when the expected job longevity is 2-5 years? And that's assuming one doesn't get Lathamed and be pushed out after a few months.

Posted by: UVAgrad | Apr 7, 2013 9:31:24 AM

If only this statisic was accurate for all classes since 1902.

Posted by: person of choler | Apr 7, 2013 11:56:58 AM

"Jim Chen's method is absurd. Home ownership rates and wealth levels are higher for law school grads than college grads."

I bet if you limited the analysis to individuals who obtained in their undergraduate degree between 1998-2000, the JD home ownership rate would not be even half of the rate for individuals with no advanced degree.

Your stats surely include individuals who obtained their JD between 1960-1985 for next to nothing.

Posted by: JM | Apr 7, 2013 2:09:26 PM

Not being ale to afford to buy a house on graduation is a silly standard. Overlooks the obvious need to work to that level. Seems we finally have too many lawyers. I guess these kids haven't yet gotten on the class action suit gravy train. Still no better off than the class "participants".

Posted by: Fred17 | Apr 7, 2013 5:45:37 PM

Although I agree that home ownership is a poor standard to measure viability, these stats generally make sense to me. Perhaps he should substitute home ownership with housing costs or some other expenditure. Living in a big city is fairly expensive and I can easily imagine rent in some locations approaches a sizable mortgage payment.

Yes, Anon at 4PM is probably citing some study that includes older graduates. I can guarantee the situation has dramatically changed. Many recent grads have no hope of meaningful legal employment at any point in their careers. Once you're out of the job market for a year or two, it's very hard to find that entry level position. After all, there's another wave of legal grads hitting the job market. I think some law professors and deans are just in denial. Anyway, the legal education bubble is popping and I expect some of these folks to be in the legal labor market again soon.

And to UVAgrad's point, BigLaw employment is very precarious. One cannot expect the high salary to last in perpetuity.

Posted by: HTA | Apr 9, 2013 3:01:39 PM