Thursday, January 14, 2010

The Beginning - Prospective Law Students: Part 1

Here at The Legal Dollar I want to give financial advice for anyone working in or considering the legal field - from prospective law students pondering the financial rammifications of law school all the way to retired attorneys endlessly re-telling their most cherished war stories.

My goal is not to let any one age or period of a lawyer's life overwhelm the content of the blog so that lawyers of all ages can find something that is useful to them.  That being said, there are a few periods of a lawyer's life that just cry out for more attention and coverage because the decisions made at that time are so drastically life-altering.  One of those times is when a prospective law student is deciding whether to go to law school.  This time is especially important to discuss because the prospective law students typically don't have that much life experience and they are bombarded with very concerted advertising compaigns that distort the truth of the opportunity.

I don't want the "deciding whether to go to law school" time frame to dominate The Legal Dollar, but it is certainly a legitimate topic for discussion - and it also provided the final kick-in-the-pants to get me writing this blog.  I'll tell you a little about my posterior-booting and some advice for those considering law school after the jump.

I have long helped fellow attorneys deal with their financial issues on a one-on-one basis and had considered setting up some sort of blog because it seemed like I was encountering the same problems and lack of knowledge about 80% of the time.  However, the real impetus for starting this blog a few months ago were some interactions that I had with several prospective law students.

Now, a little background may be in order here, I should mention that I have been talking to prospective law students for several years.  I also work with many law students that are recent graduates and write recommendation letters and help them find jobs, especially in my specific area of practice.

Historically, I thought going to law school was generally a good thing for most applicants.  This would be in the mid 1990s time frame.  It seemed like law school was certainly not cheap, but the debt was pretty manageable in most cases.  Further, it seemed like the overwhelming majority of people found jobs - and not just part-time jobs - decent jobs.  Frankly, I did not know a single person that graduated from my law school class that did not have a job lined up after graduation.  I am sure that there were some, but there were very few.  The job might not have earned as much as they would have hoped, but they had something.

It was true that tuition was rapidly rising - tuition at my law school literally rose about 50% from the year before I enrolled to my last year in law school.  This shot all of my pre-law school budgets all to hell and created significant hardship and caused a significant increase in the amount of loans that I had to take out.  I try to warn prospective law students of this aspect in this post.

It was also true that the employment numbers and pay rates advertised by the law school did not appear to be quite reflective of the actual experience of the law students.  However, the numbers were generally pretty close.

Also, although US News had started publishing law school rankings in 1989.  They really were not all that important and were not central to most people's consideration of where to go for law school.   They were also not relied on much in the industry.  For example, if a lawyer interviewing at a law firm described his law school as "Tier 1", then the lawyer would be met with blank stares.  The specific school mattered and had a reputation - not the school's "Tier" as determined by some arbitrary ranking body.

However, while I think that the practice of law has worked out for me and the overwhelming majority of people that I went to law school with (and I felt very comfortable recommending it in the 1990s), there has been a very gradual yet fundamental change in the law school value proposition over approximately the last 10 years.
  1. Tuition rates have risen - at rates that would embarrass the most greedy robber baron - and far, far in excess of inflation.  (Also discussed here).  This means that the average graduate has substantially more debt than before.  (Also, don't think that the law school's reported numbers for average debt at graduation are going to apply to you - there are a significant percentage of law students that are independently wealthy and their parents or trust pays tuition.  These students graduate with zero debt and consequently lower the "average debt" number.  Law schools should be reporting the average debt of those who had to pay for law school on their own - that would be a more realistic (and much higher) number.
  2. Salaries -even top salaries - have stayed flat in real dollar terms for the last 10 years - and the average salaries are now DECLINING while the cost of law school keep rising
  3. Employment odds have been declining gradually for the past 10 years and fell off a cliff in 2008.  Nor is there any recovery in sight - certainly not back to 1990s levels - as we also discuss here.  As widely reported, currently, 45,000 law students will be graduating, but there are only 30,000 legal jobs for them to fill.  Even worse, a record 60,000 people sat for the LSAT this year, but there is no increase in the number of jobs in sight.
Unfortunately for potential law student's ability to evaluate the impact of these changes, these changes have taken place gradually over the last 10 years.  In this regard, I am reminded of the story of boiling a frog - if you heat the water to boiling before you put the frog in, the frog will jump out.  However, if you put the frog in room temperature water and then heat the water, the frog does not notice the increasing temperature because it takes place gradually.  Consequently, the frog does not jump out and ends up getting cooked.

Consequently, when the value proposition of going to law school is reconsidered in light of these new realities, it can be easily seen that there has been a fundamental change in whether law school is a "good investment" for a prospective law student.  Going to law school was not a "slam dunk" in the 1990s, but it was generally a good move.  Now however, it is a very expensive, very risky gamble that has a fairly substantial probability of not paying off for you land leaving you considerably worse off than you were before.  As a prospective law student, you can really "get cooked" like the frog.

Potential law students always want to argue that they have some angle that will make things easier for them - and for those that will be practicing in a speciality like intellectual property or corporate law, the hiring odds and salaries have historically been greater than the average.  However, even in those specialties, the odds are no longer as good as they were and the payoff from going to law school has become increasingly difficult to obtain.

This is not to say that everyone that attends law school is doomed.  There are still people making a first year salary of $160K.  However, there are fewer and fewer of those jobs to go around, and for every person making the big bucks, there are more and more people that end up with no job at all.  In this regard, at some point paying for law school goes from becoming a reasonable investment in your future to buying a very expensive lottery ticket - or like playing a very expensive game of Russian Roulette - with an ever increasing number of bullets in the cylinder.  Win and wealth will be yours!  (or at least the appearance of wealth - it is going to take years and years to pay off those loans and many, many attorneys get fired before they pay them off).  Lose and you incur more debt than you can ever repay - debt that is NOT dischargable in bankruptcy.  Debt that will ride you like a monkey on your back for the rest of your life.

So with this background in mind, in Part 2 I will tell you about a conversation that I had with several prospective law students that served as the final impetus to get me to start writing this blog - and we will address several of their mis-understandings for the benefit of prospecitve law students that might be reading this.


  1. I agree completely but I would add a couple things:

    First of all, private student loans are now non-dischargeable in bankruptcy. This wasn't the case in the 90s. So back then, in the worst case scenario where you had no job, your maximum debt was $55,000 or so -- the amount of your federal stafford loans. $55,000 is not a life-ruining amount of debt.

    Second, the gap between BIGLAW salaries and everything else has widened dramatically in the last 10 or 15 years. So that even if you have the option of working in BIGLAW, you've got a big problem if you decide you hate it.

    When I was in law school in the 90s, I had a few classmates who sought but did not get BIGLAW jobs so they instead worked at smaller firms. This was a disappointment but not a disaster.

    Nowadays, that would be a much bigger problem - 200k in student loan debt and a 50k a year job.

    All in all, I would advise people today not to go to law school unless they can do so without borrowing the money.

  2. Thank you for this post. I will share it with my mother. She's been pressuring me to go to school, and she doesn't understand when I tell her I don't think it's a good idea.

  3. As usual, nycsolo's comments are excellent -
    1) The change in debt fron dischargable to non-dischargable ends up being a pretty big deal. However, at the time there were much lower levels of private debt, so it passed without much argument as I recall. It's another great example of the financial aspect just gradually getting worse.
    2) The gap between the top salaries and the median salaries has certainly widened a lot. It used to be more like 25%-40%. Now it's about 100%-125%. Now that I think of it, one way that this is important is with regard to the overinflated numbers that the law schools pump out for salaries. For example, if the law schools are pumping out a number that is 25% too high, then when you end up making 25% less it is a hit, but it is not too bad. However, with today's numbers, when you end up making half or less of what you have been told it really has a huge impact.
    3) I had the same experience with regard to some people looking for biglaw job, not making biglaw, but ending up somplace decent. Same experience as nycsolo that it was a disappointment, but not a disaster.
    4) I also agree that telling people not to go to law school unless they can do so without borrowing the money is good advice. Even so, I am concerned about the job prospects with the current huge over-supply of law students. Even if you have no loans, it still stinks if you can't get a job. I would recommend that a person wanting to go to law school wait until the supply and demand gets back in balance. When and if the supply and demand gets back in balance, I would not be adverse to taking on a reasonable about of loan debt.

  4. 7:55 - Thanks! I hope that this helps. It is very frustrating that your mother would be urging you to take a life-altering course of action based on outdated and inaccurate information that no longer reflects the realities of the experience. (I assume, of course, that she likes you!)

  5. "As usual, nycsolo's comments are excellent - "

    Thank you!!

    "It's another great example of the financial aspect just gradually getting worse."

    I agree with this. It was really a surpise to me just how dramatically tuition has increased in real dollars over time.

    "I had the same experience with regard to some people looking for biglaw job, not making biglaw, but ending up somplace decent. Same experience as nycsolo that it was a disappointment, but not a disaster."

    And as far as I know, those people are all doing fine today making perhaps $100k or so a year. Maybe they aren't living in Scarsdale, but they are making a decent living.

    "Even if you have no loans, it still stinks if you can't get a job."

    Except that if you really want to be an attorney, you can always hang out a shingle. Which isn't necessarily the best option but it's not a terrible fallback position.

  6. Good, balanced post. I look forward to reading some of your older posts and for what is to come.


  7. Thanks Doug - Good luck in law school - there's going to be a lot of competition. In addition to doing everything that you can to make grades, one thing that I would recommend would be to start your networking activities with lawyers and the local bar right away. The sooner you start, the more groundwork you will have when those summers roll around. Also, the lawyers are often more open to networking when the student's need for a job is not imminent. Good luck - it's a very difficult time to be going to law school right now.

  8. Thanks for the advice. I'm going on basically a full tuition scholarship, and if I don't keep it after 1L I'm dropping.

    This is a second career for me, so I don't have much riding on it, but I do want to give it a try.


  9. Congratulations on your scholarship! That's a great way to limit your prospective debt liability. Let me also compliment your tight monetary control when you say that you will drop out if the scholship is not continued after your 1L year.

    One thing that you might want to consider is that the overwhelming majority of the people going to law school are not in your situation. First, and most importantly, they don't have your life experience that you got from working at your first career. From your first career you learned that life is unfair and that people are often out to sell you on things that you don't need and can't afford for their own benefit - and that they don't really care about you. Also, you learned that you have to thoroughly investigate an opportunity and not believe salesmen - even when they masquerade as authority figures. You also learned that even if a product might be desirable, you are going to get it at your price or you are going to walk away. Unfortunately, most law students are 22-year-olds who don't have this life experience - but I really wish that they did! I certainly agree that they *should* but from what I can see the reality is that they do not.

    Second, due to your life experience, you will not accept a financial arrangement that places you at risk (high loan debt). That's another great decision. You are obviously not being sold by the law school sales material. Unfortunately, mostly due to a lack of life experience, many 22-year-olds just don't have the life experience for this.

    One thing that I seriously think might be to blame is the coddling that we give to children these days. Giving all participants a trophy and making everything child-safe seems to create and expectation in our children - and we should take full responsibility for this because we ARE creating the expectation. In this regard, there is a considerable dissonnance that happens as our children transition from the "you can't lose, everything is safe for you" childhood that we make for them to harsh reality - and that really takes a few years and some life experience to make that transition. Consequently, if law school is marketed as a continuation of the "everyone gets a trophy and everything is safe" philosophy that the 22-year-olds are familiar with, it is easily believeable to them because it is what they have been living with for as long as they can remember. It's not true, but it would be really hard for a 22-year-old with no life experience to recognize that they rules have completely changed from what they have known their whole life. It also makes the entire law school marketing aspect that much more distasteful.

    It would be my preference that law schools would not accept law students until they have the amount of life experience that you have so that the prospective students have a better opportunity to evaluate the law school value proposition in light of the real world.