Financial Risk of Law School

There have been numerous articles about law schools in the past year. Most of them focus on the difficulty of finding a job and digging out of debt. Too many of the examples however, are about students who foolishly graduated from bottom of the rung law schools, paid sticker via loans, and aren’t able to get jobs. The unfortunate truth about becoming a lawyer these days is that even top graduates at well-respected law schools can’t dig themselves out of the huge debt they incurred while studying to become lawyers.

Law school is a tough gamble for a variety of reasons. There are many good law schools; ones that are well-respected and have a history of churning out successful lawyers and future leaders. However, with the advent of all these new law schools and the economic decline known as the Great Recession, there are just too many qualified people going to law schools and not being able to get jobs because simply put, there aren’t any.

Many law schools will give scholarships but even this leaves students with $150,000 or more in debt, especially if they lose the scholarship after 1L, which is common. Lots of ambitious and optimistic students, who don’t know the realities of the legal market will gladly take out loans for the cost of attending a good law school, which could end up being over $210,000 and with interest, could be as high as $320,000 over a standard ten year repayment period.

These students at one point could dream about landing that biglaw job starting at $160,000 to pay off the debt. The only problem is that these jobs aren’t as plentiful as people think. In law, it tends to be $160,000 (or market) or something in the range of $40,000-$60,000. There are salaries in between but that’s not really the norm. Considering there are thousands of new JDs graduating every year from elite schools, imagine the difficulty that someone from a top 50 school might have finding a job period. Elite schools are supposed to have the best students so in this economy, firms are going with what are supposed to be safer bets.

Recently, top firms like Orrick, have started to ditch $160,000 salaries for certain lawyers and instead offered them a career associate position paying roughly $60,000 to work in smaller markets outside their main big city locations. Orrick is a great firm and if a recent grad needs a job to pay off his loans, why wouldn’t he go to Orrick and take the career associate position. He’s probably thinking that it’s a great opportunity to put some hard work in and hopefully things will turn out. Unfortunately for this optimistic associate, $60,000 might not be enough to pay off his loans if he took out $210,000. He needs to pay roughly $32,000 a year and it’ll be tough to make it work.

Unless a student is from a wealthy family or has serious biglaw connections, it’s really a tough decision as to whether or not he should go to law school. Scholarships are not as stable as most may think and the legal market doesn’t look like it’ll get any better anytime soon. In fact, more top firms may start to follow Orrick’s new career associate model. So before going to law school, students must ask themselves if they are willing to truly take all the risks associated with law school. If these risks apply to top students at good schools, imagine what the situation will be for the others who can’t even get that $60,000 job or a job period.

References:

http://www.finaid.org/calculators/loanpayments.phtml

http://www.nytimes.com/2011/05/24/business/24lawyers.html