For these lawyers, when they hear about students who have taken out $200,000 in loans, they sometimes shake their heads and ask "why didn't they just work more hours during law school?" or something along the lines of "I guess if they didn't want to work during law school, then they are going to have to pay for it now."
This is a massive disconnect and it serves to illustrate the vast differences in the experiences of these older lawyers in going to law school and being a young lawyer as opposed to those who are going to law school today.
Below, we try to get a vision of what going to law school looked like financially in the 1950s and how it compares to the experience of today. This should be useful to give law students and young lawyers insight into the preconceived notions that senior partners have about law school - and to serve as a resource that young lawyers can send to senior counsel who are not comprehending the difference - or refuse to relinquish their assumption that the accumulation of loans is somehow a sign of laziness or lack of drive.
To help us get a better handle on costs and how they have changed over the years, we will use a specific example. In a previous article we discussed the cost of attending the University of Pennsylvania Law school. We found that for the 2009 school year, tuition and fees were $46,514 and books and room and board were $19,096. UPenn Law is a fine law school and other schools charge about the same - we are just using UPenn as an example.
Now let's take a look at the numbers for UPenn Law in 1950 -
First, we find that tuition to attend law school in 1950 was $600/year and books, room and board (BRB) were $740/year.
Thus, even before we dig any further, we note a curious aspect - namely, that in 1950 the cost for BRB is actually 23% HIGHER than tuition. Conversely, in 2009, tuition has become much, much more expensive than BRB - in fact, tuition is now 244% of the cost for BRB.
Already we can see a very significant difference in the cost structure between 1950 and 2009. In fact, using the relative increase in the cost of BRB from 1950 to 2009 as a metric to predict how much tuition should be, we find that the predicted tuition is $14,704 - which is about $42,000 less than the actual tuition. To put it another way, the actual 2009 tuition of $46,514 is about 320% GREATER the predicted tuition.
These comparisons alone are very telling, however, let's get an even more visceral understanding by taking a look at the number of hours of work that these costs represent at the respective minimum wages of 1950 and 2009.
According to the Department of Labor, the minimum wage in 1950 was $0.75/hour while the minimum wage in 2009 is $7.25/hour.
Now, (ignoring the impact of taxes, which would be minimal) we find that the 1950 tuition of $600/year took 800 hours to earn at the 1950 minimum wage of $0.75/hour. The full cost of attendance of $1340 took 1787 hours at minimum wage. That's a lot of hours, but it is doable with working part time during the school year and full time over the summer (maybe with a little overtime or a wage that was slightly greater than minimum wage.)
However, taking a look at the 2009 tuition of $46,514 as compared to the minimum wage of $7.25/hour, we find that it would take 6,416 HOURS of work to earn enough to pay for law school tuition. Further, the full cost of attendance of $65,610 requires about 9050 hours of work.
In this regard, I note that a 365-day year only includes 8760 hours. Consequently, I feel confident in stating that no one working at minimum wage could hope to pay for their law school today. Also, comparing the required hours of 1787 in 1950 to the required hours of 9050 in 2009, I note that:
- Three times 1787 is only 5361, while three times 9050 is 27,150. Consequently, today's law student has to work about 5 times as many hours as a 1950s law student to pay for law school.
- Conversely, if the law student of today worked just as hard as the law student did in 1950 (1787 hours), there would still be a deficit of 9050-1787= 7263 hours. At the 2009 minimum wage, this deficit represents $52,657/year.
For those who are considering going to law school today, take heed of the numbers above and realize the different finanical impacts of the two scenarios. New lawyers in 1950 typically did not graduate with any debt at all. They could literally "afford" to try out different practice areas and find a practice that suited them and they enjoyed. They were not forced to take a high-paying job due to the pressure of making massive loan payments. Similarly, they had much greater freedom to choose a "lifestyle" firm that was less demanding (and less paying) because they did not have to make the huge monthly nut. Consequently, when older attorneys talk about having the freedom to discover themselves and the flexibility to work less and find the "work/life balance," recognize that they had opportunities that you will never be able to have. Also, when they talk about how satisfying they have found their career, recognize that the level of satisfaction they express is the level of satisfaction without having to pay back $175,000 in loans - your level of satisfaction is likely to be lower.
Amen. Sums it up perfectly.
ReplyDeleteAlso, back in the "good ole days" it was easier to get experience. As an associate you essentially carried the senior partners briefcase for a couple of years, observing and learning the practice. Now you are expected to bill 2000 plus hours, right out of the gate.
ReplyDelete1:52 - You sure are right! When I talk with older attorneys, I find that 1500 hours/year used to be considered a "good year". That's 30 billable hours/week, which probably took 40-45 hours or work time over the week to earn. That's a much different lifestyle.
ReplyDeleteI realize I'm late to this party, but I wanted to say this was a terrific post, and it confirms what I have suspected for some time now.
ReplyDeleteI am an attorney; my father is an attorney; and his father was an attorney. However, I would discourage my children from going to law school. It's just too expensive.
Not only that, the same thing is happening to college tuition. I feel somewhat guilty and ashamed that I will probably not be able to pay for my childrens' college tuition the way my parents paid for mine.
But the fact is that things have changed a lot in the last 20 years. When I was in college, tuition room and board was a bit south of 20k for a year. Perhaps 18k. So you could send two children to college for about 145k. Which is a lot of money, but if you saved and invested dilligently, it was achievable for much of the middle class.
Heck, I could probably come up with 150k (or 230k adjusting for inflation) over the next 6 years if I really had to.
But in 10 years, it could easily cost 600k to send two children to college.
nycsolo - Thanks for the comment! It was even a surprise to me how big the disparity was when I sat down and worked it out. It also is a wakeup call for those senior attorneys who sometimes go around and give talks about what law school and practice are like - the experiences that they had no longer reflect the financial reality. They are misrepresenting reality to the law students and should be a little more careful before they tell the students what the experiences will be like for the students. Please, please, do a little mroe due dilligence before you give someone bad advice.
ReplyDeleteAs for paying for children's tuition, you are dead on that college tuition just keeps rising and rising. Two things to consider, though: first, college expenses can be much, much less outside of the NY area. It may be worth tens or hundreds of thousands of dollars if your kids live in a lower-cost area for a year (to establish residency) before attending school there. If you had to pay $20K to support your kid living somewhere for a year and it saved you $100K on college costs, it would be a good deal, right? $20K is about all it would cost in a college town in the midwest. They could even be registered at a community college during that year earning credits that will transfer to the University.
Second, I note that some of the more expensive schools on the east coast are giving free tuition if your income is below a certain dollar value. For example, at Harvard, parents with incomes of less than $60 don't pay a dime, they don't consider your home equity, and those students are not expected to take out loans. See these articles:
http://www.fao.fas.harvard.edu/icb/icb.do
http://www.bloomberg.com/apps/news?pid=20601039&sid=a_jTWOco3Se0
From your moniker, I would imagine that you are a solo practitioner and consequently would have a great deal of flexibility in determining how much income you would realize in a particular year. You may wish to review the FAFSA and Harvard policies and take an opportunity to do some planning in that regard. Taking an extra few weeks vacation or pre-paying some expenses in order to save tens of thousands of dollars in tuition sounds like a good deal to me. How can you afford to take the vacation or do you need more than $60K/year? Pay off your mortgage before they go to college and get a home equity line if you need additional income while they are in college. As they say - the home equity is not considered. Good luck!
"It may be worth tens or hundreds of thousands of dollars if your kids live in a lower-cost area for a year (to establish residency) before attending school there."
ReplyDeleteIt's interesting you should say that. Part of the problem is that pretty much everyone in my family went to Ivy League schools so I feel a lot of pressure to let my children go if they get admitted, which they probably have a pretty good chance of.
"For example, at Harvard, parents with incomes of less than $60 don't pay a dime"
Yes, I am aware of these sorts of programs. The thing is, my wife and I together make decent money -- too much to qualify for most of them, but not enough money that I can save 600k. Unless I hit big on a few cases, which is possible but I can't plan on that happening.
"solo practitioner and consequently would have a great deal of flexibility in determining how much income you would realize in a particular year. You may wish to review the FAFSA and Harvard policies and take an opportunity to do some planning in that regard."
Yes, I can probably set things up so that my children will qualify for decent financial aid.
But that's not really the point. The main point is that emotionally, I find it hard to accept that my parents were able to pay my full tuition for a top college whereas I will probably have to rely on financial aid for my own children's hypothetical future tuition.
nycsolo - Yes, I can see the emotional component. It feels like we are somehow not being offered a square deal. We are willing to work and save and put away just as much as our parents did, but the costs have outpaced inflation so greatly that it is getting beyond our reach, no matter how much effort we put in.
ReplyDeleteI wrote a post last month on a Wall Street Journal Article about how Americans feel increasingly disheartened. Here's the URL:
http://thelegaldollar.blogspot.com/2009/11/wsj-article-americans-feel-increasingly.html
I went in a different direction with the post, but certainly the phenomenon you describe is adding to our feeling of disheartenment. Here's an interesting thought - instead of just raising taxes or taking other "reactive" measures, maybe it would be better if we as a country paused and re-examined the incentives and outcomes of our system so that we can design a system that produces more or what we want. I'm not talking a socialist, stagnant, lazy-man's paradise, but instead a vibrant, productive, innovative society that is efficient and focused on moving ahead. Instead we have a bewildering maze of incentives acting at cross-purposes producing unintended consequences that sap our energy and resources.