Aug 20, 2010

More on the Law School Blame Game: Numbers for the Class of '09

I want to get in a final word on the recent press regarding law school marketing, the job market, and debt loads. Ashby Jones had another good piece over at the WSJ Law Blog on the "ire directed toward law schools" this week. Read the piece and the newspaper article on which it is based, but the gist of it is that many law grads who can't find work are speaking out against the marketing practices of law schools, who they claim are often degree mills that inflate their employment stats to attract students. The piece in the Newark Star-Ledger ran with the headline "Irate Law School Grads Say They were Misled about Job Prospects." One disgruntled graduate is quoted as saying that law school is a "scam." "It's just one big ponzi scheme."

When I bought my first new car, I had to borrow money for it. Knowing that I was going into debt, I carefully considered a host of options: could I get I used car with money I had on hand? Could I instead walk to all the places that I needed to go? Was there a better rate at which to borrow? My wife and talked about the decision, carefully weighed our options, and ultimately borrowed the money.

One of the reasons that the decision was so painful was that I was still in law school and had not started my first job yet. We were, in a sense, presuming on my future earnings. I had accepted a job offer and our plans were certain. But . . . what if I didn't pass the bar? What if something happened to the firm between now and graduation? We didn't think too long about these possibilities, but they were most certainly lurking in the back of my mind. We didn't agonize or take weeks to decide, but we were careful.

Over a $15k car loan.

As I've discussed quite a bit lately, many prospective law students are jumping into law school expecting to borrow between $50,000 and $150,000 to finance their legal education. And I would venture a guess that it is the folks in the upper end of that range who are "irate" at their alma mater.

The good news is that the legal job market may be showing signs of revival (see, e.g., this post on a coming Mergers a& Acquisitions boom and this article on the NYC summer market [HT: WSJ Law Blog]).

The bad news is that the overall job market is a tough thing to monitor in a profession that is changing so quickly (see, for example, theories on "the Death of Biglaw"). And even in a good job market, there aren't very many jobs that make paying off a $100k student loan easy. (See, for example, discussions on the Empirical Legal Studies blog re salary graphs for the classes of 2006 and 2007).

What should prospective students and the classes of 2010 and beyond be thinking about?

Writing in the July 2010 NALP Bulletin (read the whole article, here in pdf), Professor Bill Henderson, says that the 2009 figures from the NALP signal "a fundamental reordering of the legal services industry." The overall employment number looks great at first glance: an 88.3% employment rate for the class, but other indicators are worth a closer look. Henderson points out, for example, that:
  • Approximately 25% of these jobs are temporary;
  • A substantial number of grads are "employed" by law firms, but don't have a start date (the infamous deferrals of the summer of '09);
  • 22% of those employed were "still looking for work;" and
  • Solo practice accounted for 5% of all law firm jobs.
And only 70.8% of grads held a job for which a JD was required. Think about that little tidbit for a minute.

In addition, consider the salary distribution curve for the class of 2009:

Note that while half of the class makes less than $85K median (!), there are very few who have earnings near that range. The curves are set lower -- 45k-65k and higher-- 160k-170k. A large portion of the class-- well over a third-- will earn between $45K and $65K. This is not nearly enough to service $100,000 in law school debt. If a student is not in the top 10% of her class or in the top quarter at an elite school, her place is likely on the left-hand bell curve.

The worse news, according to Henderson, is that the kind of work that highly paid young associates used to get (that is, the right-hand-side bell curve) is going to dry up. For one thing, sophisticated clients are willing to shell out big bucks for older partners, but not for junior associates. They know they can get good work from smaller firm, contract lawyers, or in-house folks for a fraction of the cost. In addition, according to Henderson, "the supply of 'brand name' legal talent globally -- the very employers who set salary expectations and absorbed thousands of law school graduates annually-- now meets or exceeds the demand." So, more bad news if you're hoping for the right-hand-curve-range salary.

In addition, predicts Henderson, under the changing financial-- and technological-- environment, "law firms in the years to come will be evaluated less by the pedigree of their lawyers and more by the quality and cost-effectiveness of their service."

There are two important factors to note here: first, recent past performance is a better indicator of quality of legal work than is the ranking of one's law school. Second, the real crux of law school rankings is "not a measure of academic quality," but a coordinating function within the legal job market: the entering credentials of the law student body indicate where the smart, motivated talent can be found.

Combine that fact with recent studies showing that law school grades are more important than the identity of one's law school in post-graduation employment, and the fact that regional law schools produce more big-firm partners than elite national schools, and the picture of the best use for one's educational dollars becomes much clearer.

When I decided to buy that new car, I had ruled out walking and buying a used car through a pretty rigorous process. I evaluated my chances of future employment realistically. I calculated the cost. If I had seen a graph that showed me what my odds were, I would have considered it carefully. I'm glad I bought that new car in 1987, but I haven't bought one since. We paid it off easily, but the value for our dollar just wasn't there, and going into debt wasn't worth it in the long run.

For me, the bottom line for the prospective law student-- like the car buyer-- is stewardship. I've said all of these things before, but they bear repeating.

1. In evaluating the gifts and talents that God has given you, don't assume there is only one way (e.g., go to law school) to be trained to use them. Explore your options. If you have a doubt, wait.

2. In evaluating your resources, consider your financial condition. If you can't afford to go to law school, DO NOT GO. (Of course, what one "can't afford" in the current easy-debt culture is a matter of some dispute, but do not assume that going into debt is the best way to pay for your education.)

3. Remember that going to a law school you can afford, and doing well, is better than going into debt to attend a "better" law school and ending up with a lower-paying job, anyway.

4. Realize that the legal job market is volatile, and you will likely have job prospects that pay in $45,000 to $70,000 range. It's a good living, but if you are going to law school to make money, DON'T GO.

5. If you believe that God is calling you to law school, do your homework and don't think more highly of yourself than you ought.

If you go to law school, go with your eyes open. They're not making you go, and it's not "a ponzi scheme." It shouldn't be a news flash to anyone who has taken the LSAT that law school isn't for everyone and that tough financial times make for tough job markets. Don't presume on the future.

The folks blaming law schools are pointing their fingers in the wrong direction.

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