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/)