Above the Law has a very interesting post summarizing a talk given by the Dean of Northwestern Law School, David Van Zandt, at a PLI conference on law firm management – Dean Van Zandt talks about the model of law school education and tries to approximate the median starting salary for a lawyer to make legal education pay. His conclusion is – $65,000.
ATL has some discussion of that number, what it reflects and how derived, as well as other models that suggest the figure is much higher. But equally interesting is the discussion of changes in the teaching model at law schools, including the introduction of a 2 year degree, and curricular changes.
[W]hat salary would you have to earn upon graduation in order to make going to law school an economically rational decision? Van Zandt and some of his Northwestern colleagues did a study to determine the added value of a J.D. degree. They concluded that the break-even starting salary for a law school graduate is $65,000. Put another way, going to a law school with a median salary upon graduation that’s below $65,000 is not a wise investment.
Schools with median starting salaries under $65,000, which generally land somewhere in the 70s in the U.S. News & World Report rankings, are not good values. They need to either lower their cost to students and/or improve job opportunities for their graduates, according to Van Zandt.
(A break-even point of $65K seems low to [ATL], given high law school tuition, the borrowing costs associated with student loans, and the opportunity cost of going to law school when you could be earning a salary in some other industry. We’ve reached out to Dean Van Zandt to ask for more detail about the data he utilized and the assumptions he made in reaching his conclusion. Another academic, Herwig Schlunk of Vanderbilt Law, believes that the break-even point is much higher.)
Gov98 says:
A break-even of 65K does currently seem low, but it doesn’t always. When I started at Hastings tuition was $5000 a year, by the time I ended it was $10000, now I think it’s closer to 13000. (It could be 20000 but I don’t know). That radically changed the breakeven point, and the 5000 was less than 10 years ago. So going to a “Government” school, at least in the past could have been a good value proposition. Now, not so much.
February 4, 2010, 8:35 amThe River Temoc, In Winter says:
So going to a “Government” school, at least in the past could have been a good value proposition. Now, not so much.
It still seems radically less than what HLS, YLS, SLS, etc. charge. (Admittedly, the point of comparison should be what Boalt, UVA, and Michigan charge.)
February 4, 2010, 8:44 amHouston Lawyer says:
To get a break even, you need to know how much you could earn without the degree. In addition, costs for a law degree vary widely. I wouldn’t depend upon a law school dean for anything approaching an accurate estimate of anything.
February 4, 2010, 8:50 amMatt says:
Some of the debt issue depends on one’s living expenses. (This is the smaller portion, of course, but still a significant one.) When I was in law school I lived on my grad school stipend (I was in a joint degree program and so got a stipend from the grad school part.) This was about $15-$17/year, an amount one could live modestly on in the large city I was in. Many of my fellow students lived much more extravagantly- nice apartments, newer and nicer clothes, trips, fancier restaurants, etc. As they expected to make much larger salaries than I did (rightly so, for most of them) this wasn’t necessarily unreasonable, but my guess was that they were likely spending at least $10K, probably more like $15K and maybe as much as $20K more per year on living expenses than I was, with most of that being borrowed money. I expect that near some law schools one could live for even less. For many students the temptation to start living “like a lawyer” while still in law school is a dangerous one that should be avoided.
February 4, 2010, 8:51 amWidmerpool says:
There’s no “real world” salary for lawyers of $65,000 except for some government positions and slots with a vanishingly few small firms looking to hire new, non-lateral associates (most of these firms want experienced laterals due to the lack of training provided by law schools–go figger). Either a starting attorney makes well over $100,000 at a big firm or $30,000 at what is euphemistically referred to under the self-empowering slogan of “hanging out your shingle.”
So, looking at law schools based on mean (as opposed to median) average salaries is worthless. This is an all-or-nothing crapshoot, folks–with the odds weighted heavily towards snake-eyes.
February 4, 2010, 8:54 amShag from Brookline says:
What does this mean for a newby lawyer planning to go solo? Back in 1954 when I entered the MA bar, the two largest law firms in the Boston area each had about 12 partners and few associates. So many of us had to go solo and/or work with an attorney for peanuts until we could pick up a few clients. But back then, the most I paid for law school tuition was $400 in the third year while living with my parents and commuting. A summer job could with frugality scrape up enough for tuition and help towards books. No real need for student loans – that I do not recall being readily available. Today, summer employment doesn’t replace loans.
But what about those who have to or want to solo? How much more debt must they incur beyond student loans to reach the point of profit? Will society benefit from reduction in solo – or small partnership – practitioners? Or are bigger and bigger law firms better?
February 4, 2010, 8:58 amEric S. says:
Dear Gov98 — uh, if you’re talking about the law school in San Francisco, you should know that in-state tuition is currently $28,500 for in-state and $39,725 for out-of-state.
February 4, 2010, 9:07 amPubliusFL says:
Put another way, going to a law school with a median salary upon graduation that’s below $65,000 is not a wise investment.
Another factor that makes this discussion practically useless is geographical variance. A law school with a good record of placing its graduates in jobs paying around $60k in, say, Oklahoma, could be a wiser investment than a law school where you can hope to get a job paying $90k in NYC, even assuming equal tuition and living expenses at both schools. In reality, the cost of attendance (and resulting debt) will probably be quite a bit lower at schools focusing on smaller markets with lower cost of living.
February 4, 2010, 9:08 amarbitraryaardvark says:
I think the overall point is right. YMMV. Before law school I was washing dishes and driving a forklift. I was the world’s lowest paid Teamster. So my opportunity costs were low. I lived like a monk, no student loans, got a scholarship one year while my girlfriend got a full ride. Law school hasn’t been lucrative for me, but I liked the change it made in my social status, and I found law school lots of fun compared to driving a forklift.
February 4, 2010, 9:15 amjpe says:
65k is roughly what I calculated when I was looking for jobs out of law school. The caveat is that’s about the cash-flow break-even; given the energy expended during school, I’d add a 10-20k premium onto that to get to a “was it worth it” figure.
@widmerpool: there are lots of quasi-legal jobs out there that fall into the midrange between the shingle-hanging and the biglaw salary.
February 4, 2010, 9:18 amWeerapat says:
A break-even of 65K does currently seem low. I think this factor more 100K
February 4, 2010, 9:21 amProf. S. says:
Matt makes some good points about the cost of living expense. As one of my friends once said “this is Lawyer John buying Student John a beer.” Unfortunately, my experience says that the cost of living differences only further hurts students who don’t have parents or previous jobs to bankroll their education.
If you really try to cut expenses, that means not going out to “bar review” (i.e. all students going to a pre-determined bar) or other social events. That puts you a leg behind when it comes time to rely on those friends as referral sources when you get into practice.
You can also try to boost your income by working. However, there are few paying jobs for 1Ls and even 2Ls (or at least that pay enough to live on), and those that do exist seem to go to people who are children of connected individuals/clients. Had I been the son of the Fortune 500 inside counsel (as opposed to one of my friends), I would have had that high-paying 1L position, could go to all the social events I wanted, could have taken out far less in loans, and would have had more experience when I graduated.
By contrast, if law school was really cheap, you’d still have some of these issues (you’ll never get rid of family connections), but the impact of them would be reduced.
February 4, 2010, 9:22 amOren says:
Or right when getting out of it?
For those lawyers willing to take jobs in flyover country and live quite comfortably, but not extravagantly, the debt can just fly away even at lower nominal salary. It seems that instead, they pile into expensive coastal cities to the point of saturation.
Of course, there’s nothing wrong with law school graduates placing a premium on living wherever they’d like, but I’m not sure that they have all done a full accounting of what that preference is actually costing them. That is, a quick tour of what $350k for a house actually buys you Boise might remind some that a salary has to be compared with what it buys.
February 4, 2010, 9:42 amBama 1L says:
This particular law school dean is aggressively pushing a two-year program, so I actually think he has more incentive to present the three-year system as bad for students.
That’s certainly true, although you get penalized in most people’s minds for the low median salary.
I think the most pressing problem is low-ranked private schools in big cities. Students face high tuition and cost of living, meaning large debt. “Don’t worry,” they’re assured, “you’ll be making six figures right after graduation.” But they actually get low-paying jobs (if that) in the same expensive city.
February 4, 2010, 9:51 amKenvee says:
I know it’s a radical concept, but some people boost their income by working in a job that will hire them, not spending all of their time looking for a cushy summer associateship. I went to a temp agency when I needed a summer job, and I was never short of work. One of my positions was to a corporate legal division, and I was able to turn my temp position into a part-time job during the year as well that let me off-set my expenses and make a lot of contacts. Of course, saying I was a file clerk wasn’t as prestigious as saying I was looking for a summer associateship at Big Firm. But then, I had a job.
February 4, 2010, 9:52 ambrad says:
No one in Boise will hire a recent law school graduate with no solid connection to the area. They are afraid you’ll flee after a few years of gaining experience.
February 4, 2010, 9:58 amMike S. says:
Why would you only consider starting salary and not the opportunity for further income growth that is also dependent on being a lawyer?
February 4, 2010, 10:04 amChrisHo says:
What is the definition of break even here? I seem to have missed it. Does it require living at a certain means? Do lawyers assume a specific social status within society as befit their title? As in, are their heads so far up their ass they assume they deserve a certain social status upon graduation? I know a few career fields where the expectations upon leaving college are sold as very good but reality is very different. The status comes from paying your dues, popping out of the school and expecting the world at your feet is very Hollywood.
February 4, 2010, 10:05 amFantasiaWHT says:
@widmer – you must come from a very different world than me. Most of my law school friends (the ones that didn’t go 6-figure big law) in Milwaukee started out at salaries around $50-$65k.
February 4, 2010, 10:27 amBama 1L says:
Because your loan repayment starts now, and because big firms have frontloaded compensation (high starting salary, small raises). Of course, outside biglaw, it could be different, but law schools are fixated on that market.
February 4, 2010, 10:35 amCornellian says:
and I found law school lots of fun compared to driving a forklift.
Personally I’ve always wanted to try driving a forklift, but I imagine that would get old after a few days.
February 4, 2010, 10:45 amCJColucci says:
and I found law school lots of fun compared to driving a forklift.
Personally I’ve always wanted to try driving a forklift, but I imagine that would get old after a few days.
I’ve done both and was glad I did, but after a short while, driving a forklift does get old.
February 4, 2010, 10:56 amFantasiaWHT says:
My best friend started at $65k three years ago and is now making $100k+ at the same job. So yes, I think upward growth is an important consideration.
February 4, 2010, 11:02 amProf. S. says:
Kenvee — most students find summer associate jobs in September of their 2L year, so it has nothing to do with trying to find a job as a 1L or with trying to find work during your 2L year. If you don’t get one of those positions, then you can work for the temp agency. In my case, I had a job with a small suburban firm that helped me cover my living expenses during my 2L year, but was still able to locate a summer associate position with a big firm (albeit in another city, so I couldn’t continue during the school year).
My point, however, is that if I were from a connected family (instead of a low-income single parent household), I could have used connections to help get a 1L job, been more likely to land a summer associate position in my city (which I could have worked during the school year as well), and would likely have less in loans. As it is, things worked out quite well for me, but certainly cost me more than if I would have just landed a job with a firm as a 1L because I had family connections.
February 4, 2010, 11:06 amwws says:
“What does this mean for a newby lawyer planning to go solo?”
It means you better keep those Latte’s coming.
February 4, 2010, 11:09 amDave N. says:
Very true. When I was in law school, the Idaho firms looked at me with suspicion until I told them my wife grew up in Boise and we loved the area.
Of course, at least then (1989-91) Idaho salaries lagged even those in Utah, where I was attending law school, so we stayed away, anyway (for example, the Ada County Prosecutor was paying new hires $24,000 a year in 1991; my first prosecution job paid $36,000).
February 4, 2010, 11:11 amegd says:
As someone who lives in flyover country, and could have easily afforded a $350,000 house (today’s price) right out of law school, there is no way that we would have bought such a home. We’re in a home now that’s ~$250k, and have one of the nicer homes on our block, in a ‘trendy’ (for flyover country) suburb no less. There’s definitely something to be said for living in flyover country.
I am curious how the calculus changes based on undergraduate specialty, or age. What’s the break even point for patent attorneys with an engineering background? How about finance or business majors? Is it cheaper to go to law school right after undergrad (more earning time as an attorney), or after working for a few years (gaining relevant experience)?
February 4, 2010, 11:14 amFantasiaWHT says:
Yeah, my opportunity costs as a $24,000/year teacher were pretty low, hehe.
February 4, 2010, 11:37 amdjf says:
Why is the focus on starting salary? Presumably, law school graduates plan on practicing (or at least using their legal skill) for more than a few years. It’s much more meaningful to me how much a lawyer can earn within 10, 15, 20 years of graduating.
February 4, 2010, 12:39 pmKevin R says:
Depends on what you were doing/could have done without law school. If you have an undergraduate degree in underwater basket weaving, then going to law school may provide a better opportunity. My wife went to law school after getting an undergrad engineering degree, which was probably less of a net gain.
February 4, 2010, 12:48 pmjs says:
One point I would add is that many top law school pay off loans for students going into public service with starting incomes of below 50-60,000 a year (public service loosely defined as government work, nonprofit etc). I wonder if these deans/professors took that into account, as it obviously would change the math substantially.
February 4, 2010, 1:27 pmegd says:
To add to this, some quick napkin math shows that an engineer-turned-attorney going from $45k/year out of Ugrad would only need to earn ~$70k/year out of law school to break even in 10 years.
edit: that it with 100k in debt, which seems about right for the average school.
February 4, 2010, 2:02 pmbort says:
Even living like a pauper while in school, it is all too easy to rack up over $100k in debt these days. Even many state schools are charging near $40k a year in tuition alone for out-of-state students, and 20k in-state. And although many schools list median starting salaries around $65k, the results are distorted by the 10% going to white shoe firms paying $160k, while the rest start out at $35-40k. There aren’t many entry-level jobs paying $65k, and, in this economy with its glut of laid-off attorneys, there aren’t many entry-level jobs at all. Buyer beware.
February 4, 2010, 2:59 pmInnumerate says:
egd – care to show that math?
February 4, 2010, 3:04 pmInnumerate says:
What is the magic number that Prof Schlunk quotes as the break even point?
February 4, 2010, 3:05 pmTGT says:
Kevin R has it on point. Both my wife and I considered law school after college, and decided against. Based on our skills and degrees out of college, 65K after law school would have been a huge net loss for me, and a huge net gain for her. The median value is pretty much useless unless you have the job prospects of the median college grad and expected job prospects of the median law school grad.
egd is missing some factors, so he’s coming to the wrong conclusion. First, the law grad is still 60K down after 10 years: 45K*10 = 450K, 70K*7 – 100K = 390K. You need to account for the 3 years of lost productivity. So in your case, 13 years.
Also, egd is assuming no raises. I don’t know how pay works in the law profession, but I’m an engineer, so I can speak to that part. I started at 40K. After 3 years, I was at 81K, with lots more opportunity to grow. 70K a year and 250K in the hole is not going to be caught in 10 years in my field, and I started below the 45K number.
February 4, 2010, 3:06 pmKanchou says:
I would assume the engineers would have some pay raise in those 13 years.(3 years in Law School, plus the 10 years after graduation)
At least around where I am, there are certain fear of age discrimination among software “engineers” and others in the tech industry. So I know people getting MBA/JD part-time to prepare for that possibility. Or there are also people who make the career change to law after being laid-off. For some of them, it’s impossible to borrow 3 years worth of living expense any other ways. It may not works out well, but at least that delays the days of reckoning.
(Edit: Took too long to write. I see TGT made some of the same points.)
February 4, 2010, 3:17 pmAdam J says:
ChrisHo- “What is the definition of break even here? I seem to have missed it. Does it require living at a certain means? Do lawyers assume a specific social status within society as befit their title?” Um… no. Law school is a significant investment of both time and money, one should evaluate whether or not one is likely to get their moneys worth out of the investment.
February 4, 2010, 3:49 pmSteve says:
There’s no “real world” salary for lawyers of $65,000 except for some government positions and slots with a vanishingly few small firms looking to hire new, non-lateral associates (most of these firms want experienced laterals due to the lack of training provided by law schools–go figger).
My firm, a big-city litigation boutique, hires new lawyers at $65,000 and we are hardly exceptional. This statement just isn’t true.
February 4, 2010, 4:11 pmA.C. says:
What about second career lawyers? Assume someone who worked for a decade or more before law school and earned something in the $75K range. With greater opportunity costs and a shorter earning period to collect the return on the investment, what’s the break-even point there?
February 4, 2010, 4:11 pmAnonsters says:
Because law school is merely an investment.
February 4, 2010, 4:31 pmegd says:
Start at $45,000/year, assuming 5% raise every year.
After 3 years, the engineer has racked up ~140k. Add $100k for student loans, and you’re at $240,000 ($250k to make it even).
To balance out $250k in 10 years, the lawyer needs to make an extra $25,000/year, less if he’s getting the same raises.
If the lawyer starts at 70,000 in year 4, with 5% raise every year, by year 13 the difference in total income is $83,000 in favor of the lawyer ($17k short of his loans). At year 14 he’s earned over $100,000 more than the engineer.
TGT must be in a different situation than most of my engineering friends. I can’t think of any that got anywhere near a 100% increase in salary in 3 years.
edit: I take that back, some did, but they went to law school.
February 4, 2010, 4:44 pmBK says:
I love the idea of using a break-even analysis to encourage more 2-year programs. In my opinion, the point of law school is to help someone pass the bar. I’d rather not pay out the wazoo for an elective credit that isn’t going to teach me material for the bar exam.
February 4, 2010, 10:28 pmB-737 says:
I don’t think any of you guys are considering the time value of money in your calculations.
If you want to treat this question the way any corporation would examine a major investment, do a discounted cash flow (DCF) analysis with some reasonable assumptions about the cost of law school (tuition and expenses plus lost income over three years) and then estimate your cash flows over a defined period of years into the future. That cash flow stream needs to account for the net differences in annual income (hopefully a gain) that results in each future year spent working as a lawyer (rather than working as a teacher, engineer, forklift driver, etc). It needs also to make reasonable estimates of the rates at which those alternative incomes might grow over time if it is to be meaningful.
Take 20 minutes, build an Excel spreadsheet and do the math. Use your own cost of money (ie, the return you’d get on your best alternative investment) as the discount factor and then determine if the Net Present Value (NPV) of the future cash flows is greater than zero. If it is, the investment makes economic sense. If not, you might want to think again (or bet that you will be lucky and do much better than the assumptions you used).
Simple logic suggests that if your opportunity costs are high (ie, a well-paid engineer leaving a job at age 40 and picking up a lot of debt to go to law school) and the time available to practice law after graduation is many years less than it would have been if starting at a younger age, you are going to need a VERY large increase in income to make things come out positive on an NPV basis.
If you have a passion for law and don’t care that much about money, that’s fine–go for it. If you’re in it for the money and the NPV comes out negative, you’re probably making a bad bet.
February 4, 2010, 10:31 pmanonymous recent grad says:
This is directed at Matt and anyone else who wants to spout platitudes like “don’t live like a lawyer before you are one.” A lot of these law grads are in a 4br house worth of debt because that is how much school costs now. It has nothing to do with living large on borrowed money under some entitled presumption that a lucrative gig awaits. Gov98 speculated Hastings was around 13k now – try 19, and that’s for residents. Bump it to 40 if you’re foolish enough to pay out of state. Starting law salaries may be out of touch with the value of entry level attorneys, but “learned” lawyers are out of touch with the financial ruin that modern law schools demand. I went in-state with a scholarship, my share of rent was $300, and I always cooked at home. I’m in for a cool $75k. And I was far from “living like a lawyer.” Living like a lawyer. Jesus Christ. Don’t make me puke.
February 4, 2010, 10:40 pmThe Volokh Conspiracy » Blog Archive » The Break-Even Starting … | Drakz blogging Online Service says:
[...] the rest here: The Volokh Conspiracy » Blog Archive » The Break-Even Starting … Share and [...]
February 5, 2010, 1:10 amMike McDougal says:
Your focus on central tendencies is a bit misplaced. The real issue is all about the distribution. Check this out, which comes from this blog entry.
February 5, 2010, 2:17 amDavid Welker says:
The best reason to become a lawyer has nothing to do with the time value of money. It has everything to do with you WANTING to be a lawyer.
You can make a lot of money as a lawyer, but if you don’t like what you do, your not going to be happy. And vice-versa.
February 5, 2010, 4:23 ampublic_defender says:
One way to decrease the cost is to go to a law school in which you are so strong a candidate that you get financial aid. If you can get into a top ten school, go to a top 40. That may decrease your chance at a win-the-lottery job, but it will dramatically reduce the risk of not being able to pay off your debt.
On the other side, if you choose public interest work, there are more and more programs that will help you pay off high debt. This could be a major factor in channeling new graduates.
February 5, 2010, 6:17 ambyomtov says:
B-737 is right. It’s a capital budgeting problem and should be addressed with an NPV analysis. I would note that the post-law-school cash flows – earnings – should probably be discounted at a higher rate than the cost of school, because they are riskier (and it’s hard to diversify). You have to be careful about your assumption as to the length of a legal career also. All that makes the investment even worse.
Maybe the quality of some of the analyses here will convince Prof. Anderson that finance classes in law school ought to start with more basic matters than theories about financial markets.
February 5, 2010, 9:21 amEvening Student says:
I am in the evening program at a local law school. Tuition comes to just about 22k a year for four years… I work full time making about 45K a year. I’m wondering if 65K a year starting salary is even enough for me..that’s only 20K a year bump, or…less than I spent per year in tuition.
February 5, 2010, 10:58 ammalthus says:
For the typical lawyer with a BA in English, history, economics, political science and international affairs (cf. the Supremes), a starting salary of $65,000 seems generous, since their BA degrees are worth little, probably having been chosen to max out their undergrad GPA. (When is the last time a physicist or mathematician was elected or appointed to national office?)
But a new lawyer with a BA in Chemical Engineering, however, should start much higher, since the BA already placed him at a starting salary of over $65,000.
February 5, 2010, 4:02 pmaccountant says:
To B-737:
I did do a DCF analysis before I graduated from college last year. LSAT in the top 5%, great school for undergrad. I decided against law school. I’m now working for a big accounting firm, 70 hour weeks, for $50,000 . MISTAKE. FAIL. DCF lies.
February 6, 2010, 3:48 amThe Return on Investment (ROI) of Law School — Choosing Law School says:
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May 24, 2010, 7:57 amL1 Prospect says:
You are confusing median with mean. A median starting salary of $65K would mean that half of a given law school’s graduates earn a starting salary above that amount and half below it. Therefore, it would be impossible for only 10% to make above $65K (as in your example); 50% would have to be making more than $65K. However, if the figure you mentioned was an average (or mean), theoretically, you could be correct.
July 28, 2010, 5:53 pmL1 Prospect says:
A person could have a PhD in aeronautical engineering before earning a J.D., but as that degree doesn’t necessarily apply to tax law, for example, why would a firm pay her “extra”? Just because the added amount is what she could have earned working in another career? I don’t think it works like that…
July 28, 2010, 6:00 pm