Law School Cost/Benefit

The WSJ Law Blog recently ran a post that’s worth linking to just for its title:  “Mamas Don’t Let Your Babies Grow Up to Be Lawyers.” Its substance–or the substance to which it links*–is less cheery, being an academic paper that addresses whether “a law degree is a good investment.”  The paper examines the investment of law school for three hypothetical students:

  • “Also Ran [who] achieves above average grades in a relatively nonmarketable major from a middle-of-the-pack undergraduate institution; he could have earned a mere $40,000 in a non-legal job. Also Ran manages to claw his way into a second or third rate law school and has at best a remote prospect of landing a “Biglaw” job[;]”
  • “Solid Performer [who] achieves relatively good grades in a relatively marketable major from a better institution; he could have earned $60,000 in a non-legal job. Solid Performer makes his way into a low-first or high-second rate law school and has a prospect (if all goes well and the stars are aligned), but far less than a certain prospect (since all does not always go well and the stars do not always align), of landing a “Biglaw” job[;]” and
  • “Hot Prospect [who] earns stellar grades in a very marketable major from a top notch institution; she could have earned $80,000 in a non-legal job. Hot Prospect attends a first rate law school and has a strong chance of landing a “Biglaw” job.”

The paper examines each hypothetical student’s opportunity costs, tuition and fees, and net summer wages to determine their respective total cost of law school.  It then looks at the direct benefits of a law degree, discounts them, and concludes

that even at a very modest 10% discount rate, much less a more realistic higher discount rate, Also Ran, who will with great likelihood fall into the $40,000 to $65,000 starting salary range, has no business investing in a private law school degree. Similarly, Solid Performer should question his decision to attend a private law school, in spite of the fact that his expected starting salary may be around $105,000.  The reason is that he faces a substantial likelihood of falling far short of that figure . . . Finally, for Hot Prospect, who will in all likelihood land a Biglaw job starting at $160,000 per year, the law degree appears to be an acceptable investment at a 10% discount rate, albeit hardly a no-brainer. However, if a discount rate higher that 10% is deemed appropriate, even that conclusion is open to revision.

To round out this grim tale

[t]here is no reason to believe that the currently-experienced changes in the legal market for freshly-minted law school graduates are temporary; indeed, some legal scholars think they may well be permanent.  If so, then it is not just the current crop of Hot Prospects, but all future crops as well, who will need to ratchet down their expectations not only with respect to first-year compensation, but also with respect to job security and chances for partnership.

The paper notes that each student’s calculations involve different factors; the three hypothetical categories of student are painted with broad strokes.  The paper is only twelve pages long and more readable than the WSJ Law Blog post suggests.  It does not sing a different tune than readers have heard from but it does provide a structured approach to analyzing the costs and benefits of attending law school.

*Yes, this a post about a post about a post.