This morning, as I was out for a pre-dawn jog, I saw an unusual sight: the bronze statute of Frank Shorter in front of the CU football stadium spontaneously detached itself from the podium and flew around the stadium three times. I wondered if this event might be an augury of some sort, and sure enough when I turned on my computer I found the first page of this article had materialized on the screen.
Jim Chen, who is not merely a law professor, but who is at this moment an actual dean of an actual ABA-accredited law school, has written a concise, accessible, and quite devastating indictment of the current financial structure of American legal education. Chen's analytical frame is based on a simple, plausible assumption: a lawyer's eligibility for a home mortgage is a good proxy for whether a law degree is a good investment.
Chen's analysis divides eligibility into three categories: those who qualify for a mortgage quite comfortably, those who qualify by what might be termed normal conservative assumptions, and those who will be, as the expression goes, "house poor," but will be marginally qualified under liberal (and government-subsidized) qualification terms.
The first category requires a ratio of annual income to law school debt equal to six times a year's worth of law school tuition. The second requires a ratio of three times, while the third stipulates a ratio of two to one. For example, if the graduate paid $40,000 per year in tuition (average mean tuition at private law schools last year was $38,292, so it's probably just about $40,000 this year. Current 1Ls at T-14s will pay an average of more than $50,000 per year in tuition by the time they graduate, as mean tuition at those schools last year was already $47,298) that means the graduate would need to earn $240,000 per year to qualify for a mortgage quite comfortably, $120,000 per year to qualify for a mortgage under normal front-end to back-end debt ratios, and $80,000 per year to scrape into a mortgage that will leave the homeowner markedly house-poor.
Chen makes the following assumptions:
(1) The graduate borrowed the full cost of tuition to attend law school, but did not borrow anything for living expenses.
(2) The graduate's law school debt will be amortized over 25 years at a fixed interest rate of 6%.
(3) The graduate entered law school -- and presumably left it -- with no other educational or consumer debt.
It should be obvious that all these assumptions are quite favorable to law schools. A very significant percentage of current law graduates -- about half -- are graduating with law school debt loads larger than the total three-year cost of their tuition. (Average law school debt among 2010 private law school graduates was in fact just about exactly three times the annual average tuition those students paid. Among public law school graduates it was closer to four times). Current law school loans average about 7.5% (6.9% for the first $22,000 borrowed per year, 7.9% for amounts beyond that). Current average undergraduate educational debt is $25,000. Most law students enter law school with at least some consumer debt.
So it's fair to say that Chen's analytical framework very much gives law schools the benefit of the doubt when evaluating the long-term economic value of the services they provide to their students. This is even more evident when we consider the salary figures Chen adduces for the purposes of his analysis. Chen quotes NALP via the BLS occupational outlook for the proposition that recent law school graduates earn, on average, $68,500 nine months after graduation. I will not belabor here how this is a wholly fictitious figure. Consider that Ohio State, much to its credit, just released salary date for its 2010 class revealing that the 45% of the class that reported "salary" (more accurately wage) data reported a median figure of $65,000. The real median figure for the class is of course much lower than that, since we can be quite certain that the 55% of the class that did not report income figures is making considerably less than the 45% who did. Now consider that, terms of law school rankings, OSU is currently in the 83rd percentile.
Indeed it's quite likely that, on a national level, the true nine-month out median wage for Class of 2010 graduates of ABA-accredited schools is less than $40,000. Following Chen's analysis, this suggests that, for the current modal graduate, law school would be a very good investment if average law tuition were $6,000 per year, a reasonably solid investment if it were $13,000 per year, and a very marginal investment if it were $20,000 per year. And again, all these figures are based on Chen's markedly optimistic assumptions about the actual amount of debt law graduates have, the cost of servicing that debt, and the ability of law graduates to do so.
In short, a law school dean is in the process of publishing a scholarly paper that all but explicitly argues that, at present, law school is a bad investment for the vast majority of current and prospective law students. This is truly what can be called a sign of real progress.