Thursday, December 22, 2011

Cautionary notes

How much debt will people now applying to law school incur from attending the schools they're considering? Law school debt is a function of the relationship between, on the one hand, tuition and cost of living, and on the other, socioeconomic status, grants and scholarships, and money earned over the course of the student's legal credentialing.

Let's start with a simple rule of thumb: the average debt incurred by graduates who incur law school debt -- currently about 90% of all graduates nationally -- is about three times the tuition the schools they attended nominally charged when those graduates were 1Ls (This ratio will naturally be somewhat higher at the rapidly shrinking cohort of state law schools that charge residents significantly less than private law school tuition).  For example, Cornell 2010 grads with law school debt averaged $126K in such debt, while their 1L tuition times three was $131K.  Texas grads had $78K in debt while their 1L tuition times three was $75K (this latter figure adjusts for the one third of UT law students who pay out of state tuition). Boston University grads had $103K in debt while their 1L tuition times three was $110K.  The comparable figures for USC were $118K and $128K.  And so forth.  (This ratio gets worse at private third and fourth tier schools. For instance at Thomas Jefferson students have $137K in debt while their 1L tuition times three was $95K).

But this rule of thumb needs to be subject to several caveats.  First, keep in mind that law schools have in recent years started offering bigger and bigger discounts to many students in regard to their advertised tuition figures.   The actual tuition paid by students at these schools is probably no more than 80% of the list price tuition.  In other words, the debt figures above represent the average debt incurred by people who are paying, on average, significantly less than MSRP.  If you're offered little or nothing in the way of a grant off list price (or if you're offered a scholarship that could easily disappear after your first year -- this is especially a problem at lower-ranked schools), you should expect to incur quite a bit more debt than the figure you will obtain by multiplying your prospective 1L tuition by three.

Second, at elite schools, the SES of the student body ensures that quite a lot of students are coming from rich families who are helping the students pay for law school.  This can be seen by the fact that 19% of Stanford graduates, 23% of Columbia grads, and 27% of Yale grads have no law school debt whatsoever. This in turn means that another portion of the class will have relatively modest debt, because while their families aren't paying for the entire cost of law school, they are "helping out" in ways that, if you don't come from a rich family, aren't relevant to your situation.  Now it's true some portion of this effect is due to need-based scholarships, which, unlike almost anywhere else in the law school world, actually do exist at the most elite schools, but if you don't have such a scholarship and come from a middle class family -- note that at an Ivy League school "middle class" means a family with an annual income in the low six figures -- expect to owe a lot more than your 1L tuition times three.

Third, before you do anything rash, do yourself a favor and calculate how quickly a debt load featuring 7% to 8% interest accumulates when you're not making payments on it.  Here's an actual example from the Class of 2011.   "Richard Roe" graduated in May from a law school solidly within the top 20.  He received a discount of more than one third off the list price of his school's tuition in all three years of his attendance.  He finished in about the 65th percentile of the class in terms of grades, served on a journal, did a bunch of other extra-curricular stuff, "networked" left and right (he is as personable as he is energetic) and basically, as the phrase has it, did everything right.   He incurred $145K in loans over the course of law school, which, because the interest on the loans accumulates, has grown to a principal balance of $165K seven months after his graduation from this excellent school.  He currently has no employment of any kind other than a school-funded "fellowship" that pays him $15 an hour to do 30 hours of work a week for a non-profit.

There is, it should be unnecessary to add (but it very much remains necessary), nothing at all unusual about either his background story or his current situation.

Fourth, keep in mind that law school debt figures are only for law school debt.  Average undergraduate debt at graduation in the United States is currently around $25K, and climbing quickly.  The current class of 1Ls who have just finished their first year exams will probably graduate with, on average, around $150K of total educational debt.  This debt is non-dischargeable in bankruptcy, which means you can't get rid of it, short of moving to parts of the world you really don't want to live in.   So, as they say in first year contracts, caveat emptor.


  1. The problem with this analysis is that, with IBR, tuition PLUS ROOM AND BOARD is in a sense free. You can add an LLM, an MBA and a PhD too. The only cost is a huge debt load on your credit report which isn't too high a cost to pay if you do higher education right.

    If the taxpayers are dumb enough to pay for you to study bullshit for 4-10 years, then let them.

  2. So many attorneys, so little justice.

  3. @ 10:00

    Amen to that brotha

  4. Excellent post. Keep up the good work!

  5. To 10:00, Once (if ever) transparency becomes a reality and people see that a tier 2 law school =/= a job, then only the dumbest, laziest and most opportunistic sh*theads will go to law school. It'll be the losers who can either borrow and IBR loans for a three year vacation or work at the local gas station. Anyone who wants a job that will pay enough to pay back the loans will go into another program.

  6. I thought that was already the case for schools like Cooley.

  7. It is. But now it will be moreso.

  8. I think it is time to start talking about long-term strategies for people with no career prospects and $150K in non-dischargeable debt. Let's get practical. How long do you have to be on IBR for that to be erased? (20 yrs?) How much can you make before your IBR benefits really drop off? Are bankruptcy judges beginning to broaden the exceptions to non-dischargeability? (They are written narrowly, but I bet some judges would be open to applying them more broadly.)

  9. @10:00 - there actually is a limit you can get from the federal govt in student loans over your lifetime. Not that that changes your argument much...

  10. I've heard of this limit, but I don't think it exists post GRAD PLUS. Can anyone confirm?

  11. There's this fantasy that there was some idyllic law schhol Garden of Eden when tuition (and student loan debt) were nominal; jobs were plenty and salaries high.

    I bet that the price of gasoline has gone up more over the past 15 years than the tuition at top law schools like Harvard or BC.

  12. According to this, Harvard Law's tuition for 1996-97 was $21,700. Today, it's $47,600 (with an estimated yearly cost of attendance at $72,600).

    Using the CPI inflation calculator provided by the Bureau of Labor Statistics, $21,700 in 1996 had the same buying power as $31,288 today, making HLS' tuition increase 150+% greater than the average rate of inflation would cause over the same duration. Maybe gasoline beats that, but there are probably very few consumer goods or services that do if the CPI is any indication.

  13. "I bet that the price of gasoline has gone up more over the past 15 years than the tuition at top law schools like Harvard or BC."

    Are you seriously comparing the utility of gasoline to the utility of a legal education? One is necessary to get you from A to B. The other leaves you at A, except with a ton of debt and a black mark on your resume.

  14. one other thing, "nyc." you don't teach at harvard so don't sully their name. use pace or touro or whatever TTT employs you.

  15. "According to this, Harvard Law's tuition for 1996-97 was $21,700. Today, it's $47,600"

    According to a chart I found, gasoline went from approximately $1.40 a gallon in 1996 to approximately $3.40 now. That's a doubling plus 42 percent.

    By contrast, Harvard tuition increased by a doubling and only 19 percent. 42 is a lot bigger than 19, and that ignores the fact that financial aid and loan repayment programs are generally not available for gasoline.

  16. nyc, what did I tell you about harvard?

  17. "nyc, what did I tell you about harvard?"

    Is that the best rebuttal you can manage?

  18. I still can't figure out if NYC is a very subtle troll but for anybody who's taking what he's saying seriously:

    (1) Over the past 15 years the price of HLS tuition has gone up two and a half times faster than the average prices of goods and services in general. The fact that gasoline prices have gone up even faster is an irrelevant distraction.

    (2) The real problem with legal education isn't that HLS tuition has gone up much faster than inflation -- it's that the tuition of law schools at every level has gone up just as fast as HLS tuition (and this isn't a coincidence).

  19. "two and a half times faster than the average prices of goods and services in general"

    Would the "average prices of goods and services" include such luxuries as gasoline, food, the cost of a house in a nice neighborhood within 25 miles of New York, and college tuition?

  20. Food is cheaper today than it was 15 years ago. Nationally, the price of housing has returned to mid-1990s levels (inflation-adjusted of course). I don't know about nice neighborhoods within 25 miles of NYC specifically. Over the past 20 years law school tuition has gone up four times faster than college tuition.

  21. nyc, the point is you don't teach at harvard law. you teach somewhere with a much lower ratio of value / tuition.

  22. Give nyc his due. He may only be employed by a third tier toilet, but he has jumped through a lot of hoops.

  23. If there is a glut of lawyers, doesn't that show that law schools are charging too little, not too much? Or is the demand curve for law school seats so totally inelastic that it doesn't matter how much they charge?

  24. I think nyc is a troll -- having jumped through a lot of hoops myself, I can say that.

    That said, I agree that the Golden Age talk is overdone. In the winter of 1987, I went to ask a judge I knew to write me a recommendation letter for law school. He gave me a lecture about the insane amount of debt students were taking on. (I, of course, thought I'd be different, and so ignored him.)


  25. The only golden age talk is coming from the voices in NYC's head. To say that things are a lot worse for lawyers they were 25 years ago isn't to say they were great then.

  26. "inflation-adjusted of course"

    i.e. you are assuming your conclusion.

    If you use a shadowstats inflation calculator, Harvard tuition has actually gone down a bit.

    How is this possible? The government cooks the books a bit when calculating the CPI. Actual inflation is higher than the official rates and everyone knows it.

    It would be more accurate to say that tuition, health insurance premiums, and gasoline have risen in price faster than other goods and services. Well duh.

  27. NYC,

    Like most of the naysayers and Leiter defenders that show up here, you have constructed a strawman by incessantly talking about Harvard. If you reread this thread in its entirety, you will notice that YOU were the one who raised the topic of Harvard in your post at 6:49 PM. All discussion of Harvard flowed from your first mention of it. LawProf never mentioned Harvard in his post, nor did any commenter - until you did. Nice try. Nice diversion.

    Let's talk turkey about the increase in public law school tuition over the last 15 years at state flagships - UVA, Ohio, Michigan, Texas, Colorado, Washington, Boalt Hall. There is no question that these increases have oustripped inflation by any measure - CPI or otherwise.

    Let's get back on topic here....

  28. I think there is more than one NYC. Originally a poster calling himself NYC identified himself as a junior academic in NYC. That guy made generally reasonable comments, whether you agreed with them or not. Since that time, at least one other person appears to have identified him/herself as "NYC" and has made frankly strange comments best described as troll-like. In short, yes, I think we are being trolled here, by this "NYC."

  29. "you have constructed a strawman by incessantly talking about Harvard"

    What was the tuition at New York Law School in 1996?

  30. Come on guys! You are supposed to be lawyers! Or at least you are training to be lawyers!

    If a client walked into your office complaining that he had just been DEFRAUDED out of $100,000 or more, and the people who defrauded him were demanding sizable payments for the rest of his working life, what you do?

    After 25 years of law practice, a sizeable chunk dealilng with debt and bankruptcy, my answer, in a word is: DEFAULT.

    If you honestly believe someone has cheated you, you don't pay them.

    The simple truth in our society is that it is almost impossible to collect money if the debtor puts on any serious defense.

    Fraud is a defense. One of the remedies for fraud is restitution. And it is very hard to collect on a promisory note which was obtained by fraud.

    The attorneys fees for defending a fraud case will be high, probably in excess of the amount being claimed. As an unemployed attorneys, on the other hand, you have the time and the incentive to fight this.

    You have absolutely nothing to lose.

    Since the debts are non-dischagable in bankruptcy, you only other option is to litigate the hell out of these claims.

    Jeez! Don't they teach you anything in law school?

  31. Not to cast doubt on anything that was said in this post, but these numbers don't look right to me:

    "He incurred $145K in loans over the course of law school, which, because the interest on the loans accumulates, has grown to a principal balance of $165K seven months after his graduation from this excellent school. "

    Am I misreading this? If his loan principal grew from $145K to $165K in seven months, that's 1.85% per month, equal to an APR of very nearly 25%. My multiple loans (which I expect to be paying off until I die) have rates in the neighborhood of 2-3%.

    I apologize if there's something I'm overlooking here.

  32. Wait, never mind. I see it now; $145K was the total principal, which was accuring interest while he was in school as well. My mistake.

  33. You provides a very nice post to us. Its really very helpful to me to find result on search engine. Hope to hear more good information from your side.
    Law tuition London


Note: Only a member of this blog may post a comment.