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%
Western New England 96%
Texas Southern 100%
Now here are six schools that had relatively low percentages of graduates taking out any law school loans:
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.