A Plumber, an Electrician, and a Lawyer Walk Into a Bar . . .

Because the plumber was hired to replace the toilet, the electrician was hired to rewire the ice machine, and the lawyer had nothing else to do.

This provocative headline–For the Best Pay Relative to Education Cost, Choose Technical College over Law School, Analysts Say–led me a WSJ article titled What Hedge Funds Can Teach College Students. The lessons come from hedge fund manager Daniel Ades, who invests in portfolios of securitized college loans. Ades says he knows well the college loan market and its historic default rates (a robust 25-30%) but he is avoiding loans made to 2010 and 2011 college graduates “because we can’t quantify the risk.” Ades assumes 30-40% or more of these loans will default. The WSJ states “[t]his analysis translates into some surprising insights for students and policy makers. For example, in the current economy, it may make more sense to enter a technical college than to go to law school. Technical colleges “low cost relative to the higher wages they deliver” make their graduates better bets to pay their student loans.

Students should pick schools where the payoff from higher salaries upon graduation exceeds the cost of the education by the widest margin, especially when the job market contracts. By that arithmetic, technical colleges come out on top . . . Law school, on the other hand, can end up a sucker’s bet in periods of high unemployment, experts in student loan-backed bonds say.

[T]he U.S. has far more law schools than other professional schools, resulting in an excess supply of lawyers . . . In recessions, law school graduates have a harder time finding work than other graduates from professional programs and are more likely to default on their student loans.

Nevertheless, law students have been willing to take on even more debt for their degrees, borrowing a record $68,827 on average to attend public universities this year and $106,249 for private educations, according to the American Bar Association.

Law: The Faith-Based Career Choice

Hope drives rise in law school applications Despite grim job statistics in nearly every corner of the legal world, law school applications increased by 7% over last year. National Law Journal, 12 July 2010

Why?

“I’m obviously about to take on a lot of debt. I’m hoping by the time I get out of law school the job climate will be better.” Incoming University of Toledo College of Law One L quoted in the linked article.  From the same article, a fact I cited before in Law:  The Cuddly Profession:  “In a recent survey of 330 prelaw student by Kaplan Test Prep, 52% felt “very confident” that they would land a legal job after graduation, although only 16% felt confident that most of their fellow graduates would be as successful.”

Quoth Washington University law professor Brian Tamanaha “In 15 years of teaching, I’ve known a lot of students who came here because they didn’t know what they wanted to do.  A lot of this is about cyclical irrational decision-making. It’s based on a very human trait, which is overoptimism. For the people who have always wanted to be a lawyer, they should go to law school. For anyone else, it’s not a good decision.”