Paul L. Caron

Monday, July 29, 2013

Denver Post: Many Law School Degrees 'Worse Than Worthless'

Denver PostDenver Post, Many Law School Degrees "Worse Than Worthless":

In a development that would have been unthinkable a few years ago, some law schools around the country are shrinking. A few are even laying off faculty. The cause, as The Wall Street Journal reported earlier this month, is fewer law school applications and declining overall enrollment.

To say that University of Colorado law professor Paul Campos saw this coming would be an understatement. He's been sounding the alarm for years about the financial risk of attending law school in a glutted legal market. He even wrote a book on the topic: Don't Go To Law School (Unless): A Law Professor's Inside Guide to Maximizing Opportunity and Minimizing Risk (CreateSpace Independent Publishing Platform, 2012).

Apparently such warnings are finally having an effect — although Campos would argue, as I learned when speaking to him recently, that many more prospective students still need to get the word.

Campos[The] median salary of people who graduated from law schools last year was around $45,000. There is absolutely no way it makes sense economically to incur $150,000 in debt and end up with a $45,000-a-year job. That's what economists call negative net present value in terms of the value of the degree. That means the degree is not worthless, but worse than worthless. ...

CamposLaw schools need to tremendously reduce their cost of operation and the number of people who are graduating from law school. We should be graduating about half as many people. Students should be paying at most half as much as they're paying now. To get there, there absolutely has to be reform at the level of federal educational loans. That's the original sin here. Anyone who is admitted to law school can borrow 100 percent of the total cost of attendance as calculated by the law school from the federal government, no questions asked. And that has had completely predictable effects in terms of the price structure of legal education.

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Prof. Campos has a math problem. A $45,000 return on a $150,000 investment is precisely 30 percent. Can you tell me what in this economy would be a better investment?

Posted by: michael livingston | Jul 29, 2013 4:05:15 AM

Prof. Livingston, the entire $45,000 salary is not the proper measure of the return on investment. It should instead be the additional income that the $150k (not to mention 3 years of lost wages which have a definite cost) invested in law school will provide you when compared to a job you could get with only an undergraduate degree. Marginal benefit, not gross - admittedly much harder to measure, but necessary. If you want to include the entire $45k, then you should also combine law school + undergrad expenses.

Campos is spot on when he talks about the federal loan program as the original sin, something I have been saying for a while.

Posted by: Todd | Jul 29, 2013 10:08:32 AM

"Prof. Campos has a math problem. A $45,000 return on a $150,000 investment is precisely 30 percent. Can you tell me what in this economy would be a better investment?"

You're doing it wrong.

Posted by: Paul Campos | Jul 29, 2013 10:49:01 AM

> A $45,000 return on a $150,000 investment is precisely 30 percent. Can you tell me what in this economy would be a better investment?

As pointed out above, the $150k didn't produce the whole $45k and $150k isn't the total cost. (Claiming the whole $45k means that incoming students were basically useless, which I'm pretty sure is not what any law school says about them.)

Even under the same terms ($150k in debt after three years of no income), starting a small biz can have better return for the same cost or less.

Posted by: Andy Freeman | Jul 30, 2013 9:48:19 AM

What am I doing wrong? Of course, it is not the full 45,000 that counts, it's the added incremental salary. And, one must count the lost earnings during the period of attending law school, as well. But one attends law school for only three years, and the earning potential of an average college graduate in today's market is quite low. My point is simply that it is a complex calculation and a modest first year salary by itself doesn't prove very much.

Posted by: michael livingston | Jul 30, 2013 2:31:35 PM