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Law school is now for rich kids


While looking over the latest debt numbers for law graduates, it’s striking how high these numbers have gotten; conversely, it’s also how many people are graduating with no law school debt at all. Nationally, about 15% of the class of 2012 graduated with no law school debt, but this percentage varied widely between schools, from a high of 30% to a low of 0% (32% of UC-Irvine’s initial class graduated with no debt, but this is a special case as the entire initial class paid no tuition).

You don’t have to be an ethnologist to detect a certain pattern in the distribution of these percentages as they relate to, among other things, matters of socioeconomic status. For example, here’s a half dozen schools with especially high percentages of graduates who incurred debt:

Thomas Jefferson 98%
Phoenix 97%
Western New England 96%
Regent 98%
Appalachian 96%
Texas Southern 100%

Now here are six schools that had relatively low percentages of graduates taking out any law school loans:

SMU: 70%
Penn: 71%
Fordham: 72%
Texas: 74%
Emory 76%
Vanderbilt: 76%

Note that the estimated cost of attendance at the schools with lots of debt-free graduates is on average quite a bit higher than that at the schools where essentially everyone is graduating with law school debt. So how is it that, for example, nearly three out of ten graduates of Fordham manage to graduate without taking out any law school loans?

The answer, of course, is that lots of really rich kids go to Fordham (and SMU and Vanderbilt, etc.). These schools have become staggeringly expensive to attend: For instance, Fordham now charges just under $50K per year in tuition and fees, and has a nine-month estimated cost of living of over $25,000. (Federal loan programs only allow people to borrow living expenses when they’re enrolled in school, so summer expenses aren’t covered for most students.

Fordham also gives out very little in the way of scholarship money: two-thirds of the class gets nothing, and the median grant for those who do get tuition breaks is $10K, meaning that the school’s effective tuition rate is around $46K per year.

Yet three out of ten Fordham grads are coming up with $240K in cash to pay for three years of tuition and cost of living expenses in mid-town and environs. What happens to the rest?

The 72% of the 2012 graduating class that took out loans during law school took out an average (mean) total of $134,350 over the course of law school. But this total is misleading. First, a significant minority of that 72% are borrowing only minimally. From what I’ve seen at various schools, about 10% to 15% of the graduating class takes out relatively small loan totals, to cover for example part or all of their living expenses, while parents pay the full cost of tuition. In addition, until last summer it was possible to get $25,500 in interest-free subsidized Stafford loans over the course of law school — the government paid the interest pre-graduation — and I know some people who took out such loans purely for the arbitrage opportunity, and then paid them off at graduation.

So probably about 60%, roughly speaking, of the Fordham class took out really large loan amounts. This means the median amount borrowed among the 72% of the class that borrowed was quite a bit higher than the mean. And as of last year, all such loans accrue interest as soon as their issued, and average rate of about 7.5%. What this means is that the median amount owed in law school loans by the more than half of Fordham grads who took out significant loans was probably more on the order of $200,000 — and this doesn’t include other educational debt, or consumer debt.

Now it’s true that one third of Fordham’s 2012 class got high-paying big firm jobs (how long they’ll hang on to those jobs is a different question). But for what should be obvious reasons, it’s unlikely that the distribution of such jobs was random between the 60% or so of the class that’s incurring massive debt totals, and the 40% that’s incurring no or relatively little debt.

This back of the envelope calculation leads to the conclusion that around half of the 2012 class at this highly-ranked school is basically screwed (100 of the class’s 466 graduates were either completely unemployed nine months after graduation, or working in short-term and/or part-time “jobs” funded by the school itself, to pump up the school’s putative employment rate). And that half is likely to largely overlap with the three-fifths of the class that doesn’t come from major money.

A very similar story can be told about the graduating classes at Emory and Vanderbilt and Texas and SMU — hyper-expensive schools catering in large but all too limited part to the children of the one per cent, where the large majority of the graduating classes don’t get anything close to a high-paying entry level job, or in some cases any job at all. (A commenter points out that UT is not hyper-expensive relative to these other schools, at least for in-state residents. Although even for in-state residents annual COA is $53K a year, which will produce nearly $190K in debt if fully debt-financed. Out of state COA is $70K per year).

And, comparatively speaking, these are among the best law schools out there, in terms of “investment value.” Compared to Thomas Jefferson et. al., these schools feature good outcomes — in the sense that breaking your ankle is a good outcome relative to getting your leg amputated.

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  • norbizness

    I know Texas Law resegregated a bit after Hopwood (right after I graduated) and there were legacy components, but I never thought of it as hyper-expensive (even with tuition deregulation, which only began 10 years ago) or catering to the 1%. Although it does now cost $100K for 3 years and there’s no other explanation for 1/4th of the graduating class not needing loans.

  • Joey Maloney

    But what we really need to know is, how many of those no-debt graduates have a BMI of over 30?

    • Pooh

      Just no.

  • TribalistMeathead

    Sure it is. Because, as soon as summer associate positions become unpaid internships, everything will just fall into place so nicely.

  • firefall

    Law school is now for rich kids. In other breaking news, sun rises in east, water is wet, hydrogen rises.

  • Davis X. Machina

    Was reading the chapier in David Herbert Donald’s Lincoln last night where Abe took his borrowed copies of Chitty’s Pleadings and Blackstone’s Commentaries and years of OJT and parleyed into the chapter title “At the Head of His Profession in This State”.

    How things have changed….

  • klondike

    Your analyses of law school ROI and deceptive recruiting practices smacked me in the face when I saw this. MA’s top lawyer, Martha Coakley, grandly announcing a crackdown on the deceptive recruiting practices of … (wait for it!) a rinky dink trade school in Brockton. I’d love to see your take on Cogliano’s alleged crimes versus the average law school recruiting pitch.

    • There are no law school recruiting pitches as such. The allure of the glamor profession is all that law schools need, and the crumbier the school the more desperate the poor souls are to attend, cost be damned.

    • BigHank53

      Also, some trade schools were engaging in truly egregious behavior. If you can remember far enough back, all those late-night TV ads offering to teach one how to be a long-distance truck driver were basically Pell Grant grindhouses.

  • TribalistMeathead

    Even if you don’t have to pay income tax on your loans while you’re in school (or at all), $25K for nine months does seem kind of low, especially for that section of the Bronx.

    • Fordham’s law school is on the Upper West Side, near Lincoln Center.

      • TribalistMeathead

        I sit corrected.

        $25K for nine months seems low for the UWS.

        • fatguy

          I didn’t even have $25K a year in living expenses during my first year as an associate pulling down $160K.

  • wengler

    You can pass the bar without law school in some states, right?

    • Per Wikipedia: “In California, Vermont, Virginia, and Washington, an applicant who has not attended law school may take the bar exam after study under a judge or practicing attorney for an extended period of time. This method is known as “reading law” or “reading the law”.
      “New York requires that applicants who are reading the law have at least one year of law school study (Rule 520.4 for the Admission of Attorneys).
      Maine allows students with two years of law school to serve an apprenticeship in lieu of completing their third year.”

      Even if one were so inclined there is the question of opportunity cost. I suspect that most of the people in the last 25 years who have been admitted after reading the law have been legal secretaries, and good for them: chances are that they were in a position to take over or move into a going practice. I’d imagine that any such would also have all of the necessary real-world skills that their practice required. That to me is the largely unspoken part of the law school scam: A law degree and a license are essentially the base requirements for being a lawyer. Rare indeed is the person out of law school who is equipped to actually practice, even if hanging out a shingle made any sort of sense economically.

      • TribalistMeathead

        My great-uncle read the law and went on to be a very successful lawyer, but this was in the immediate post-war years.

        I cannot imagine the amount of self-discipline it takes to use that approach.

        • Nathanael

          Not that hard for someone competent.

          Most lawyers are incompetents, mind you. Apparently going to law school doesn’t mean you know jack about the law.

  • With today’s economy it’s harder for some kids to spend the type of money for law school esp. if they can’t afford it.

  • Jean Louise Finch

    Disclaimer: I attended Texas 20 years ago.

    According to the Texas website, the average loan amount is $84,681, which the school explains:

    “This figure represents the average debt of UT Law students after completing all three years of law school, irrespective of residency, who use student loans to finance their law school degrees. Accordingly, the amount for residents would be slightly lower than the figure reported and, for nonresidents, slightly higher. When comparing this figure with those of other law schools, it is important that you verify whether the program calculates average debt using only actual borrowers (as UT does) or using all students, including those who did not receive financial aid.”

    When I attended law school, tuition was about $3K per year. Back then, Texas believed in the value of a publicly funded education. I was shocked a few years ago to read about tuition escalations at all/most law school and public schools. It certainly does not make sense to me from a public policy standpoint, or from an economic standpoint for the individual students. Nevertheless, I don’t see how the loan percentages actually prove that only rich people go to Texas (or the other schools, but Texas’ cost to them makes it more of an outlier to me). How many students at Texas, versus cheaper and more expensive schools, receive aid from the school that is not reimbursable? How many actually pay full rack rate? How does it compare to other schools that are also well regarded? Texas is among the 3-4 cheapest in the US News Top 25 (for whatever it’s worth; Texas itself thinks it should be much higher). does its value compare to other schools of similar loan rates? tuition rates? are there statistics about the socioeconomics status of Texas students?

    in other words, I have questions about your reasoning here. honest questions–you are well versed in this area and may well have considered these factors and more.

    • kindasorta

      The point is not that only rich kids attend the University of Texas School of Law. The point is that only people who

      (a) need not borrow an amount greater than a fifth or a tenth of the University of Texas School of Law’s cost of attendance; and

      (b) need not find work in the law afterwards that would permit a middle-class lifestyle while repaying even the IBR-discounted loan payments; and/or

      (c) already have such a job lined up through personal connections that makes the dire employment outcome statistics irrelevant,

      could sensibly attend the University of Texas School of Law. Since most schools can’t afford to give discounts that massive to 30% of the class, then the student for whom attending makes any sense whatsoever is in most cases a rich kid.

  • Sooner

    Yes, the rich have it good. Not only do they get parental support to directly pay, but between the comfort provided and access to resources many do not have (private LSAT tutors, no need to work part-time jobs while in undergrad, social connections), they are also the economic class most likely to get academic scholarships (the only real scholarships, other than those reserved for token minority recruitment). So that not only do the rich have more resources, they get more subsidization from those who are not. Winning.

  • Ancient Mariner

    Twenty years ago I was working with a woman who had borrowed $90K to get through law school – 100% of tuition, fees, books, living expenses, etc. She was from very humble origins and had gone to college on a full ride. In the long run she did very well by moving to an insurance company and then into non-legal work in the insurance industry. She had a very happy ending and I am glad for her.

    But in about 1993 I told her that if the government stopped enabling people to borrow so much the tution would stop going up. She replied that then only rich people could go to law school.

    Ironic hpow things have worked out.

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