While there have certainly been isolated cases of law and business school graduates having trouble finding jobs (this trend is limited primarily to graduates from less well-ranked schools), graduate school is still undoubtedly a “slam dunk” investment for nearly all potential applicants. The costs of business and law school may be substantial, but the significant, lifelong returns justify the investment for the vast majority of applicants. The numbers speak for themselves:
So says Shawn "I Have No Fucking Idea What's Going On Anywhere" O'Connor, writing for Forbes. Nevermind that the "isolated" cases of law school graduates having trouble finding jobs accounts for nearly half of recent law grads. That is, if you consider finding low-paying, part-time, temporary, and non-professional jobs as part of having trouble. If you graduate from law school and end up working as a paralegal, yeah, you had trouble finding a job. But we're not going to focus so much on that. The numbers speaking of themselves is what we want to dive in to today.
According to a Georgetown University study (the study O'Connor used), the average lawyer will earn about $2 million more than if he had not attended law school. That’s $4.3 million with the JD, and only $2.3 million without, over a 40 year career.
When you consider that a law degree only costs $150,000, getting back $2 million is a pretty hefty return. Over 1,300%. Not even Apple stock is that good.
Except, of course, that this kind of analysis is complete bullshit. You can’t look at a legal education in terms of black line/red line ROI. An education is not a passive investment, like a stock. You don’t get paid twice as much for working the same position you would have otherwise. Nope. You have to work as a lawyer to get that. Great if what you want to do is be a lawyer. Not so great if you like yourself.
But before getting to the "reward," let’s look at the actual cost of law school. The Georgetown study estimated the opportunity cost in three lost years of work for a college grad at $135,000.
We won’t add the cost of living, which could be another $100,000, because that’s a cost you incur either way. But, if you’re taking out loans to cover your cost of living, these loans will be capitalized and accrue interest.
The interest on your tuition comes out to a very conservative $60,000, and the interest on your cost of living loans is $40,000. So, combined tuition, interest, and opportunity costs, you’re looking at $335,000 to attend law school. With less generous loan repayment, you could be up to $435,000. We're not counting another 3 years of having your undergraduate debt interest capitalized, because we're not that cruel.
So now, let’s look at the benefit. $335,000 for $2 million, still a great deal!
Except that being a lawyer almost universally means working longer (and harder) hours. You can probably expect to work at a minimum 500 more hours a year being a lawyer, though at the extreme you might be working 1000 or 1500 more hours. We’ll just go with 500 though.
The pay off of your law degree is going from working 2000 hours a year at $28.75 to working 2500 hours at $43.00. Okay, not bad.
If you should be so unlucky as to have to work 3000 hours a year, you’re now working at a rate of $35.83. Less thrilling.
That extra $2 million across the course of your life time doesn’t look like the worst thing in the world, but it’s no longer a no-brainer choice, especially when you consider the conditions of those hours worked. It’s hard to place a value on having a lower stress job, less stressed coworkers, and avoiding the health complications that come from being a lawyer (weight gain, heart disease, drug abuse, depression, suicide).
…But wait, it gets worse.
We shouldn’t compare what you would have earned with a law degree and without, but what you would have earned with a law degree and without a law degree but plus $150,000 in a conservative investment. Let’s go with 4% interest.
$150,000 investment with 4% interest over a span of 40 years (we’ll forget the interest earned during the 3 years of law school, just to keep it simple) will bank you a return of $570,000.
So, rather than a law degree being added value of $1,665,000 (that’s the $2MM minus the cost of attending), it’s really an added value of $1,095,000.
Let’s go back to comparing earnings per hour. Without law school, you were getting $28.75 an hour. Now, the added value of law school is a job that requires working 2500 hours a year at $33.95 an hour. If you’re in a job that requires 3000 hours a year, you’re pulling in $27.46 an hour. That’s $1.29 less an hour. The only real benefit is getting to work more hours, and having access to a line of credit you wouldn’t of otherwise had.
…Yay law school?
If you had access to that line of credit, without the government guaranteed student loans, you’d need an interest rate of about 6.87% to recreate the same financial reward of law school (the full $2MM). Without working an extra hour. And also enjoying a much lower tax rate, since you’re getting capital gains rather than earned income.
It's probably pure coincidence, but 6.8% is the rate students pay on their Stafford loans. The payoff of going to law school is basically the same as lending to someone else so they can attend.