Will law school really provide a good return on your investment? Six years after graduating from law school, I’m more in debt than ever. Yup, after making payments for six years I owe approximately $60k more than I did when I graduated. Isn’t interest grand?
Anyway, while I may have left the practice of law, I did work in a job that utilized my degree for four years. So why am I seeing such a negative return on my law school investment? Is it just me? Or does law school just not provide the best return on investment?
The Goal of Education Should be a Positive ROI
The goal of going to college or any other higher level of learning is to improve yourself and your earning ability. If you are paying for something, you want to see a return on that payment. Education is supposed to be an investment in your future.
This should be true even when you have to take out student loans to pay for that education. The idea is that eventually you will see a positive return on your investment. You’ll earn more than you would had you not gone to school. And overtime you want and should in a perfect world see your investment grow.
So what about those of us seeing our investment grow in the wrong direction? Is there a particular reason for this?
When You Graduated Matters
Timing is everything in life and personally, I got screwed timing wise. It doesn’t mean I’m precluded from seeing a positive return on my law school investment. It just means I’m starting at a bit of a disadvantage. I graduated college in 2008 the height of the recession. Then I finished law school in 2011 just in time for the recession to finally hit the legal market.
Graduating into a recession means you see a large loss in initial earnings that can take up to ten years to overcome. You are dealing with difficulty finding a job. Additionally, because the market is saturated with people looking for jobs, employers know that you will accept a lower salary. This takes a lot more effort to overcome later on. Particularly if a new employer is aware of how much you made at your previous job.
When it comes to law school grads, there is a sad but true joke, go to law school, rack up debt, make $62k a year. Now for a lot of careers $62k may be good money, but when you are $150k in debt it’s really not great.
The Cost of Law School
Now, you could argue that part of the problem is where law students chose to go to school. Since some schools are of course more expensive than others. However, the overall cost of law school even for public law schools is still high. The average cost of tuition for an in-state public law school is over $26,000 and could be as high as $56,000 per year. That is after and in addition to already paying for a four year degree.
However, where you go to law school matters. A top tier school may cost more but it can also lead to a higher income after graduation. So faulting someone for where they chose to go to law school isn’t entirely fair either. You try to go to the best school you can get into to give yourself the best opportunities come graduation.
We’ve talked about the cost of attending law school, now it’s time to take a look at how much attorney’s make. It’s probably not as much as you think. While starting salaries have certainly increased since I graduated, for 2015 graduates the median private sector salary was just over $68,000.
However, once law school is over, you think you’d be done incurring debt for your profession. You’d be wrong. There is also the cost of the bar exam and any bar exam study courses you want to take, plus the cost of continuing education and regular bar dues. Sure some employers will help to cover the cost of CLE and annual bar dues, but not always.
While the starting salary is low compared to the amount of debt incurred, lawyers can just like any other profession expect to see their income grow over time. According to the Department of Labor the average salary of all attorney’s is $118,000 per year.
Let Me Do Some Math for You
Let’s assume you graduate law school with $108,000 of debt ($78,000 to cover tuition and fees + $30,000 to help cover living expenses). Let’s also assume an interest rate of 6.5%.
You are average, so your starting salary is $68,300. Your take home pay, after taxes is about $49,000 or $4,083 per month.
The standard repayment plan on your student loans would require a monthly payment of $1,226. But, you would qualify for REPAYE with a monthly payment of $418.
However, to ensure your loan balance doesn’t continue to grow, you would need to make a monthly payment of at least $585 to cover the interest that accrues each month. Otherwise, you will see the balance of your loans growing.
Assuming your salary continues to increase, you would eventually get out from under all the debt but it would take a long time and things would (unless you paid extra) get worse before they got better.
The ROI on Going to Law School is Debatable
If you graduate from a top tier law school and make the big bucks right out of school you would very likely see a positive return on your investment within ten years depending on how you choose to manage your finances.
However, if you are average from a lower-tier law school, it could be a very long time before you ever saw a positive return on your degree, if you ever did. Obviously there are a lot of factors to consider, where you went to school, when you entered the market, and your starting salary. This doesn’t even touch on the forgiveness programs that are offered for working in the public sector.
Whether or not you’ll see a positive return on your investment in law school depends a lot salary, timing, and where you went to school but it also depends a great deal on who you are, where you are, and what you choose to do with that degree.
Wrapping it Up with a Bow on Top
Overall, if you graduate middle of the pack from a middle of the pack law school, you could very well end up seeing a negative return on your investment in law school. It’s not to say it’s impossible to see a positive return, it will just take longer and require more work.