Think you want to apply to law school? It might be time to rethink your application decision. While law school admissions are at an all-time high, law jobs are disappearing. Maybe forever.
Signs of a law school application bubble
The concurrent trends of increasing legal education cost, decreasing legal employment, and strong debt insulation are setting the law school market up for a crash.
Sam recently published an article on MinnPost titled, “The Law School Bubble is About to Burst.” In that post, Sam makes the case that law school admissions may be experiencing an irrational exuberance that can only lead to collapse.
Cost of legal education is rising uncontrollably
According the ABA, the cost of law schools has been increasing consistently by about 6% per year for the past two decades. Student debt loads have been increasing at similar levels, with average private law school graduates owing over $90,000. Neither inflation, nor average legal salaries have been increasing at anywhere near this rate.
Law firm jobs are disappearing permanently
It is no secret that the legal employment market is in the midst of a crisis. What is less talked about is that the current economic crisis has revealed, but not caused, some major trends in legal employment.
As Sam points out:
“Even before the recession began, going to law school was a dicey proposition. Although law schools trumpet average or median starting salaries of about $80,000, most lawyers make between about $40,000 and $60,000, according to the National Association of Legal Professionals, and have for many years. Only a few lawyers get those gravy-train, six-figure salaries…[D]espite the 90-percent-plus employment figures touted by most law schools, most graduates will not get jobs as lawyers in law firms…
“There are high-paying jobs for — maybe — the top 1 percent of law school graduates. And the rest? Many will pick up low-paying temp work doing document review. Many others will never practice law. Those who remain will have to evolve.”
The moral hazard of law student debt-financing
The concept of moral hazard holds that people often make poor decisions when they are insulated from the risks associated with their actions. In the case of law schools, our current student loan system—which can often extend the cost of law schools out over 20 or 30 years of payment—insulates prospective law students from a real understanding of the enormous, life-long financial risks their education’s costs place on them. For instance, I still have trouble wrapping my head around the quarter-million-dollars in student loan debt that my wife and I had after we graduated (and from public law school at that!)
The moral hazard problem is not only applicable to prospective students. Because long-term student loans finance such a huge portion of law schools’ budgets, deans and faculty have almost zero incentive to reign in the cost of legal education or to provide more value for the tuition dollar. Just think how quickly law schools would change their staffing, teaching, and community involvement if they had to personally collect loan payments from their alumni for 20 years.
Do you need to join the legal profession?
The law is still an honorable profession. Attorneys have a unique role in supporting justice, improving our civil society, and maintaining the rule of law. There will always be some need for talented legal professionals. There will always be opportunities for innovators—whether at big firms or as solo practitioners. At the moment, however, there are too many licensed attorneys for the demand of their services.
Even in the midst of a law school bubble, the legal profession is still the right choice for the handful of people who truly belong in the profession.
To those prospective law students applying to law schools as a fallback in a bad economy, or because you want three more years to figure out what to do with your life: please save yourself time, money, and a huge amount of stress; do not apply to law school.
(photo: http://www.flickr.com/photos/circulating/2533948028/)
Aaron Street is the Publisher of the law firm marketing and practice site Lawyerist and the legal humor site Bitter Lawyer. He is an attorney and entrepreneur in Minneapolis, working with tech start-ups to help them grow strategically.
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Despite my debt and fears about my family’s financial future, I am (as of this minute at least) glad I went to law school, because I enjoy doing the work. But I think many law students are in school for very different reasons, and wind up miserable, even if they do find work. I agree with Sam in that we are going to see a “lost generation” of lawyers who marched, with the encouragement of law schools, right off a cliff. Any law school faculty member with a conscience cannot be sleeping well these days, particularly in Minnesota.
When I was in law school at the University of Iowa, I asked the Asst. Dean (now the Dean), what are some of the primarily factors that influence how many law students the school accepts every year? I had assumed – or hoped – that she would tell me that the job market played some, albeit minor, role in this decision. I was so very young and naive. Her response? “The size of our building.” (I understand this is not unique to law school; most, if not all, grad schools function in this manner.) I suppose the idea is that the market will ultimately regulate the number of people who apply to law school, but during transitionary times like the one Aaron and Sam write about, there is always a lag time before the market will impact admissions. And with that lag time there come new law school grads who suddenly need to find new careers – and a way to pay off the debt of their previous “career”.
It’s a well written post, but I think you need to take a broader view. There are no law jobs? There are no jobs anywhere, and students hardly have a choice.
When we graduate high school we are told we have to go to college because the job market for high school graduates is pitiful. Manufacturing jobs are disappearing by the boatload. So we go to college, oops! thanks to federal subsidies everyone else is too. So when we graduate, our 4-year degrees are barely worth the paper they’re printed on. So we’re pushed into graduate school. MBA? Riskier than law. Medicine? Screwed if we didn’t take pre-med. Social sciences? A joke. So what else are people to do? Law school! There are over 220 law schools, and admissions are a breeze for the bottom hundred or so.
Bottom line, students will go to law school because they have no where else to go. Something has to give. We have to stop these “everybody should” policies. Everybody should go to college… everybody should have a house… everybody should have health care. That, combined with printing money to pay for it, jacks up prices and creates bubbles. Our economy needs a MAJOR structural change, and popping the law bubble is only the tip of the iceberg.
I passed the bar after graduating a T2 school in 2003 so I’ve been practicing for a little over 6 years now. I graduated with about $177k in law school (and undergraduate) debt. My first job, which I was lucky to have, paid $35k a year. I made $45k the following year, the $55k, then $65k, then about $70k for 06-09. I bill about (and collect) about $225-$250k a year for my firm but I can’t get them to pay me anymore. I would like to earn more but I don’t know where else to go and my own firm has financial problems so they’re not going to give raises (or bonuses). My boss said his own compensation is down 30% from last year and even more from 2007.
In the ensuing time, I married a wonderful woman with a law degree. She’s about 5 years out and she has a non-traditional legal position reviewing and drafting contracts for a hospital. It’s not a counsel position but it pays about $54k a year and has great benefits. She spends about 5-10 hours a week on the side working for my busy firm as a contract attorney paying about $37.00 an hour for an extra $12k a year or so gross.
Over the last five years I’ve managed to pay off about $55k in student loans, $10k in car loans and $2k in credit card debt. I feel grateful that I have paid off a chunk of my debt but the prospect of repaying an additional $122k in student loans is daunting.
I rent a 2 bed / 1 bath vintage apt in a large midwestern city. My wife and I use one used car. We make most of our own food, including lunches. I eat lunch downtown maybe once a month. I live very frugally. I of course could be cheaper but that would mean eating more rice and beans and putting off other reasonable and necessary purchases. I don’t have cable television and our home computers are between 5 and 10 years old.
Furthermore, the jobs I have are stressful and require between 50 to 60 hours per week, every week, with no more than 2 weeks vacation. I have court everyday, sometimes 4 or more times a day and I meet with a dozen new clients a week. I also am required to handle everyone’s court appearances because the firm doesn’t want to hire any new attorneys.
The firm I work at has 5 partners and 8 or 9 associates and 2 of counsel attorneys. Every firm I’ve ever worked at has a tense feeling and there’s always a partner going through a bitter bitter divorce. Many of them have drinking problems. Currently we have a partner with both a drinking problem and a divorce which is threatening his ability to keep our firm’s largest client happy. This directly effects me in that the client (Who is insane) could call us up and fire the firm on a moments notice, removing a $1,000,000 in revenue a year from the firm…and my job. If we lost that client I wouldn’t bother coming into the office the next day.
I have little prospects of becoming partner, and even if I could, I don’t think I would want to. The partners are middle aged, stodgy, alcoholic, racist, and a host of other terrible white man attributes. I look at them and I think, Wow, I don’t want to be in their shoes, even if they are pulling down in the mid-$200′s a year. Which by the way, comes from the sweat off my back.
In conclusion, this has been my lawyer experience. Not the greatest but still better than some people’s lot in life. I’m happy I have a legal job, I made a decent salary and I don’t have to work more than 11 or 12 hour days, 5 days a week. I generate enough revenue to keep the partners happy, I have a lot of freedom, and, I’ve paid off over a third of my debt in about 6 years time (actually about 4 years because those first two years were rough making less than $50k a year with $177k in law school debt).
The other saving grace is that my minimum monthly loan payment has reduced significantly because of the reduction in interest rates and paying off my loans. My total monthly was $1,100 in October 2004 to about $545 today. Yet, even with those reductions, I still pay anywhere between $1,800 to $2,100 per month (plus tax refunds and any bonuses) to my student loans. I’ve held off doing so the last few months b/c I need to ‘keep my powder dry’ if my firm loses this client due to my bosses’ alcoholism and and general inability to focus on work, but that still doesn’t change the fact that I’m putting aside the same amount of money, just in case.
I think we all can agree that the law can be a wonderful profession, that the legal market is entirely broken in its current condition, and that many prospective law students would make a better choice by not going to law school.
I take the LSAT in two days. Going to law school would lead to my second career, after graduating in 2006 with a Public Relations degree and realizing that I absolutely hated the job. I’m not looking to get myself into another career I am going to hate and the ONLY chatter I am finding on the Internet is DO NOT GO TO LAW SCHOOL. Well, okay then… what are some other alternatives?
You say to reconsider going to law school because I will graduate with a ton in student loans and then have a hard time getting a job, and an even harder time getting a well paying job. With the exception of the student loans, that’s EXACTLY where I am right now — I can’t find a job, much less a well paying one. So, why not add on more education that could lead to more job opportunities?
It’s easy to blame the economy, but doesn’t there have to be some understanding that the difficulties faced by recent law school graduates are also being faced by every other job seeker?
How will it improve your position to be exactly where you are now (no job), but with another $100,000 or so of debt?
I agree with you completely that law school enrollment is currently in a bubble – and to the great detriment of law students. More on this can be read here:
http://thelegaldollar.blogspot.com/2009/11/law-school-enrollment-bubble-law.html
Also, with regard to the maral hazard, encouraging potential law students to go to school right now seems morally questionable, especially from the point of view of the law schools. More here”
http://thelegaldollar.blogspot.com/2009/11/on-nature-of-evil-encouraging-law.html
Sorry, Aaron, but I can’t agree, at least in this sense: the legal market is not broken, as markets, if they are in fact free, meaning open, cannot break. They can, however, be manipulated by those with excessive influence until they become closed. The current law licensing system supports and defends a closed legal market. The simplest way to achieve a free and open legal market is to eliminate the law license requirement altogether, and let a free and open market determine who succeeds and who fails at providing quality legal advice at a competitive price. I’d be happy to compete in such a market.
@Andy: I agree that the market is not broken, or destined to collapse. Predictions of the collapse of law schools, big law firms, network television, greedy banks, etc., tend to be greatly exaggerated.
But I don’t see how eliminating a license requirement would help anyone. There are already enough marginally-competent or dishonest lawyers that harm other people. And if there’s anything that’s wrong with the legal markets, it’s that there is no price competition despite the high demand for less expensive lawyers and the high supply of underemployed lawyers. Deregulation would only pave the way for additional fraud, clog the court system with unprepared lawyers, and drive legislators to try to regulate the legal profession. No thanks.
Let the bubble burst. Its a necessary process.
Ha. Andy Mergendahl, you’ve got to be kidding. The market is already oversaturated because the licensing requirements are laughable. And many law schools can scarcely be called so. And many lawyers can scarcely be called so. The licensing that does exist is to attempt in some small part to protect the pulbich from gross incompetence and malpractice. Would you also support a system where anyone can perform plastic surgery with no license and no medical training to speak of?
While I agree that law school is expensive, the problem with most attorneys is that they go to school and graduate with a false sense that money will just flow like water and that hard work will reap benefits. Well guess what people, while it may happen for some, the world just isn’t fair.
Every male in my family for 4 generations worked in a coal mine. In fact, I worked a few summers in the mine to help pay for college. I’m glad to be making 60k a year working somewhere that doesn’t require I carry a breathing apparatus. I just get sick of hearing all of you self-entitled “intellectuals” cry that partner X keeps passing you over. Do your job, quit whining, quit being envious of others, and realize that being alive and healthy is a great reward.
I wish you had put the last section first. Many people do not think about whether they want to actually practice law or work in the legal profession before applying and attending law school. For some, it is impossible to realize that until they actually attend law school, but not all of them.
Admittedly, I am an idealist. If you want to go to law school, and really want to practice law, an opportunity will present itself–or you can make an opportunity for yourself. It’s tougher in this economy, but it is still doable, you just need to work hard at it. If you are not willing to work hard, you are in wrong profession.
@Eric: if the current system doesn’t keep incompetents from practicing law, there are two solutions. Either make it even harder to get a law license, or eliminate the license system and let those who want to give legal advice go ahead and try it. The lack of real price competition is mostly due to the fact that law school costs so much. And the courts are already clogged with unprepared lawyers – they are pro se litigants and defendants.
@ Realist: (perhaps you could tell us your real name?) your analogy is not instructive. Practicing law is to performing surgery what performing Shakespeare is to balancing your checkbook. Your solution is to close all the law schools that you are/were too brilliant to attend. Sorry, I’ve seen plenty of bad lawyering from U of M graduates too.
@ Andy – Amen. I love when lawyers compare themselves to surgeons, as if being a lawyer is somehow like performing surgery. What a joke.
@Andy:
I’m entirely perplexed by your argument.
I said the legal market is broken.
You said it was impossible for it to be broken, then proceeded to describe one way in which you think it is broken (a reason I disagree with, but a reason nonetheless).
So are you conceding that the market is broken, or no?
@Andy:
Additionally, market efficiency theory (which I find lacking), doesn’t hold that a free market can’t be broken in the short term; it holds that in the medium- and long-term a free market will self-correct. (If markets were perfectly efficient in the short-term, crashes could not exist).
I think we agree that the legal services market is not purely “free”, and I think you would have a hard time arguing that we aren’t in the midst of a “correction” phase. As such, this market (by a theoretically-flawed-definition, or not) is broken.
@Aaron:
I’m not an expert on market theory and its terminology. For the purposes of this discussion, I’ll agree with you that the market is broken, with “broken” meaning, “failing to provide a setting for supply to efficiently meet demand for the benefit of provider and consumer.” My point is that the legal market isn’t open, and I think it should be. I’ll also agree that the market as it now functions is trying to correct itself, by creating very high unemployment for attorneys. But that won’t fix the real problem, which is the licensing system itself, which exists to serve the interests of lawyers and law schools, and not (as many who benefit from the system claim) consumers. That’s the discussion that interest me.
I think I agree in part with Andy: I’d like to see the licensing requirements changed, but instead of eliminating them, I would like to see them re-embrace an apprentice-approach as a legitimate way of learning the law. People could see what the practice of law is really like, ideally, without incurring a quarter of a million dollars in debt. Firms would get their cheap labor. I also think part of the problem is the current dominant view of lawyering as a service industry rather than as a profession, but that’s a loooong argument for another day . . .
Being a lawyer is not about the money. It is about being a good lawyer. There is always room at the table for lawyers who make a difference.
I went into law in 1980 to be a small town lawyer, as were many of my friends (I had been a farrier for some time: a horse-shoer). Unemployment was higher in the early ’80′s then it is now, and the recession was deeper. Turns out their community was a rather closed shop and I did not qualify (I did not graduate high enough in my class), so I tapped my network of contacts outside of our little community. Ended up at Kraft & Hughes, Wall Street, for a few years. Then Prickett Jones, Wilmington, DE. Then I started my own firm representing the men I had met over the years, and I still represent them, their sons and their network of friends. I was having so much fun being a lawyer my bride decided she wanted to go to law school. She is now General Counsel for a public pharmaceutical company and has been general counsel for several other companies….
There will be lean years and flush years, just as with our clients.
We will have difficult partners and firm break-ups: been there with every firm and on several occasions I have been appointed by the DE Sup CT to counsel/negotiate/manage the break-up of other DE firms (for one side). Such is practice.
My two children are completing undergraduate this next term. They both want to work for a few years before the decide if they want to go to law school. Just as their parents did, though for different reasons. They have not debt from undergrad.
@John:
My question is: What advice are you giving your college-aged children about how to decide whether law school is the right choice for them?
This is fun, isn’t it?
The law students are defending their decision to matriculate
The recent graduates are pissed at the dearth of opportunity
The young lawyers think that it was too hard to get a job
The older lawyers think it’s too easy to join the profession
Aaron Street is discussing the efficient markets hypothesis
Not that any of it will make a difference, but at least we’re talking and thinking about these issues. Who knows? Maybe someday one of us will actually do something about it.
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