Is law school really worth it? My $.02

Just over a month ago, I shot an email to BL1Y as part of his open-ended challenge to defend reasons for going to law school.1 I wouldn’t characterize his counter-argument as bulletproof, but I doubt it was meant to be — BL1Y has staked out his niche as a sardonically dismissive critic of the legal arena (“Defunct Big Law Associate” as he puts it) and he excels at it, so he’d be stepping out of character to offer anything beyond a cursory rebuttal.2

I’m comfortable letting the man own his chosen niche

But then a few weeks ago Jack Whittington over at World Wide Whit posted an entry on the non-monetary side of law school’s value. It’s a good read, and prompted a colleague to remind me of the BL1Y entry and ask me for my thoughts on the financials.

Fast forward past my weeks of slacking on the blog posts, and you get this entry

Is law school really worth it, just looking at the money involved? To borrow the title of Thursday’s entry, “Yes, but…”

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I. THE PRELIMINARIES
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Data-driven analyses like this are, in a word, pointless. There are simply too many variables involved3 to produce anything useful for more than a couple people in a very narrowly-defined set of circumstances.

Anyone that tells you otherwise is lying to you. Period.

But with that disclaimer out of the way, having the data to look at it can still provide some insights — particularly if you happen to fall in that narrowly-defined set of circumstances

For this entry, I’m using myself: a mediocre student at an unranked Tier 4 law school interested in becoming a prosecutor in the same state.

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II. THE CAVEATS
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As you’d probably expect, there are a lot of these

Here goes:

• Generally, these stipulations (and even the data itself) are intentionally focused on producing the worst-possible case for law school.4 If law school’s still “worth it” under this worst-case analysis, by default it’s “worth it” under normal circumstances.
• This is also a “cash only” analysis. On income, I’m only counting salaries and excluding benefits since they’re difficult to value.5 On costs, I’m only counting tuition and mandatory fees; optional expenses are excluded since they’re… well… optional
• All of the income scenarios assume someone starting at 18 years old and “retiring” at 55 years old.
• The starting point for each income column is based on the data sets in Section III below.
• For the diploma-only column, it assumes a +$2K/yr raise over each of the first 5 years. My rationale is that a non-degree-holder will usually get very close to their (generally low) salary limit in the marketplace fairly early in their career.
• In terms of inflation / cost-of-living raises, after the initial 5 years the diploma-only column assumes a 2% raise per year. For the BS/BA column, it assumes a 2.5% raise per year. And for the JD column, it (i) uses the 20-year step structure the state government uses for salary increases in the first 20 years, (ii) assumes no additional salary range increases during those 20 years,6 and (iii) projects a 1.1% salary increase for each year after maxing out at the top step.
• Feel free to quibble with me over the percentages  Regardless of the specific rate, each of the 3 columns would be adjusted in tandem — and since this is a differential analysis, that limits the significance of any rate changes.
• I assume the student either (i) isn’t working during the years in college and law school, or (ii) if they are working they’re putting $0 towards defraying the cost of education (e.g. you spent all of your summer associate earnings on hookers and blow ).
• On the cost side, the law school column includes an extra $21,000 per year in student loans taken to help cover living expenses in place of a job. This amount is roughly comparable to what North Carolina law students can take before maxing out under the U.S. Department of Education standards.
• The “Tuition & Fees Total” row can be considered a proxy for total required student loan debt (plus the extra $63K for law school living).
• For the student loan interest row, I’m using a 30-year repayment at 8.0% interest. This is done intentionally — revisit the first bullet point — to maximize the amount of interest that would have to be paid out. Realistically you’ll want to refinance at a far lower rate on a shorter repayment term

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III. THE DATA SOURCES
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In terms of data collection, I gathered info from a few sources:

• First, I used my own tax returns from when I had dropped out of N.C. State to help approximate earnings for someone without a college degree.
• For the BS/BA column, the starting amount was based on a survey of several of my friends who are alumni of N.C. State’s Department of Computer Science along with about a dozen other alumni from various disciplines (including the lower-paying humanities degrees common among law students).
  

  NALP salary data for 2009

• On the law column, I downloaded all of the ADA salaries in North Carolina from the News & Observer’s Data Central portal that includes a list of all state employees and their salaries. To check the reasonableness of using this data, I also grabbed one of the spiffy graphics from the National Association for Law Placement on reported salaries in the legal industry. For salaries reported to NALP this past year, 95%+ of attorneys make $40,000 and up. Their curve correlates well with the ADA salary data, which tops out around $120K for some ADAs who’ve been around for 30ish years.
• For the undergraduate cost info, I used the tuition and fee data from my last year at N.C. State multiplied by four years. For law school I did the same thing, using this year’s rates at NCCU Law and multiplying by three years. In both cases these end up producing overestimated expenses — since tuition and fees were both cheaper last year, and the cheaper still the year before — but the difference isn’t significant enough to matter.

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IV. THE EARNINGS
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Putting all of this together, here’s the chart of annual salaries over time:

The green cells are years where someone is working. The red cells are “in school” / opportunity cost years, where the student either isn’t working at all or is working to pay for stuff other than their education. And the yellow cells depict how long it would take to “pay off” the cost of education if 100% of the salary was devoted solely to paying off education-related debts.

Remember the latter item is an artificial construct for illustration only — realistically folks will be repaying student loan debts for years, not putting their entire salary toward it. And we’re intentionally using a 30-year repayment schedule to artificially inflate the cost of law school

Also remember this chart is for “providing a common starting point for talking” purposes only. It has -0- predictive value.7 We all control our own destinies; if someone’s not making enough money, they can find a way to make more — it just might involve making decisions they’re not comfortable making. But in general no one is stuck doing the same thing for 30 years if they really want to do something else

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V. THE ANALYSIS
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So now we have roughly what our hypothetical earnings would be if we worked until 55 years old with (i) just a high school diploma, (ii) a college degree in an average major, or (iii) a law degree working as an ADA in North Carolina.

Now let’s bring in the cost data and do some comparison. Here’s a quick chart showing how things shake out:

So under this model an average college graduate can reasonably expect to make an average of ~$18K more a year than someone with just high school diploma, enabling them to “pay off” their education in 3 years and 1 month. Factor in the cost of repaying that schooling and the net advantage over a diploma-only worker drops ever-so-slightly to +$17K/year, or roughly $605K over a 33-year career.

Using this same model, the soon-to-be-ADA can reasonably expect to bring in ~$409K more during his career than his baccalaureate-bearing friend — even after the 3 additional years of “opportunity cost” and the expense of paying off student loan debt that’s almost 6x more (and working 3 fewer years to boot).

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VI. SO IS LAW SCHOOL REALLY WORTH IT?
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It certainly is for me

Even with working a government job and staying there permanently, I’m looking at making at least $1,000 more per month than I would with just my college degree. And that’s making the (hopefully false) assumption I’m not competent enough to earn more. It also doesn’t include any assistance from foundations like NCLEAF, which provides $$$ for student loan repayment for lawyers working in the public interest arena.

And, as Jack noted in the post I linked up at the top, I’ll be doing something far more enjoyable to me than being a script monkey in a cubicle

But, as with all of these things, your mileage may vary. If you don’t like law but think it’s a quick way to get rich, doing law school is probably a bad idea. If you’re determined to go to an expensive law school but will be tempted by suicidal thoughts if you’re one of the majority of lawyers not pulling in $160K+ a year, it’s probably a bad idea. Etc etc etc.

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There you have it folks. I’m sorry it’s so long, feel free to commence with the TL;DR comments below

The moral of the story is, for me at least, deciding to pursue the law route was definitely a good idea — and I’ve got the data to back it up

Thanks for reading, and enjoy the rest of your weekend everybody!

1. If you’re not familiar with BL1Y’s blog, you’re missing out — agree or disagree with the content, but either way it’s still pretty damn funny. [↩]
2. Especially for a guy that ignored the same cost-benefit warnings against law school that he now doles out [↩]
3. Your law school, your grades, your interests, your work ethic, your tolerance or aversion to risk, your people skills, the people you know, the list goes on and on and on (and on). [↩]
4. Short of being totally unemployed. If you can’t find any job anywhere at all, either your standards or your risk aversion need an adjustment [↩]
5. For example, a healthy 25-year-old puts far less value on something like health insurance than an equally healthy 45-year-old. [↩]
6. Even though these range increases happen almost every year. Again, I’m trying to intentionally slant the data against law school for the sake of argument. [↩]
7. The JD column is a limited exception, since the 20-year step structure of salary increases is standard HR practice in state government. [↩]

Tags: About TDot, Damned Lies and Statistics, Money Money Money, NC State, NCCU Law, Tuition & Fees