A Snapshot of Law Student Debt that Every 1L (and Law Professor) Should See

Brian Tamanaha

Average law school debt in 2010 was $68,827 for graduates from public schools and $106,249 from private schools. That is in addition to whatever undergraduate debt they might have accumulated. Remember, these are averages: many law students have debt in excess of $200,000. Here is a list of the twenty two law schools with the highest average indebtedness for the class of 2010 (among graduates who had debt):

1. California Western: $145,621 (88 percent of the class);
2. Thomas Jefferson: $137,352 (95 percent);
3. Southwestern: $136,569 (79 percent);
4. American: $136,121 (84 percent);
5. Catholic (D.C.): $134,133 (91 percent);
6. Golden Gate: $132,895 (89 percent);
7. Northwestern: $132,685 (69 percent);
8. Loyola Marymount: $132,267 (85 percent);
9. Charleston: $128,571 (84 percent);
10. Pacific (McGeorge): $128,495 (93 percent);
11. Chicago: $127,997 (84 percent);
12. Vermont: $127,914 (93 percent);
13. Columbia: 126,945 (77 percent);
14. Cornell: $126,000 (80 percent);
15. John Marshall: $125,806 (74 percent);
16. Touro: $125,481 (94 percent);
17. New York University: $125,169 (80 percent);
18. Pepperdine: $125,114 (82 percent);
19. San Francisco: $124,982 (76 percent);
20. Albany: $124,271 (88 percent);
21. Roger Williams: $123,338 (88 percent);
22. Atlanta's John Marshall: $123,025 (96 percent).

In total, graduates of 88 law schools, private and public, had debt in excess of $100,000 (with typically between mid-eighty to mid-ninety percent of the class in debt). A nationwide 2010 survey found that almost one third of law students expected to graduate with debt above $120,000.

Let's assume a newly minted graduate wishes to pay that $120,000 off in the standard 10 year term, and let's assume a consolidated loan rate of 7.25 percent (combining Stafford and GradPlus loans). The loan payment due each month will be $1,408. The student loan site I used to make this calculation, FinAid, advises: "It is estimated that you will need an annual salary of at least $169,057.20 to be able to afford to repay this loan....If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $112,704.80, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.1."

As an alternative, the graduate can pay back the loan over 30 years, which would allow a more manageable monthly loan payment of $818 (paying nearly $300,000 in total, retiring the debt at the ripe age of 55-60). FinAid says: "It is estimated that you will need an annual salary of at least $98,233.20 to be able to afford to repay this loan....If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $65,488.80, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.8."

Now take a look at the above list (all with average debt above $120,000) and contemplate how many law graduates can expect to earn enough to pay off their debt within 10 years, or even 30 years. Keep in mind that, according to NALP, only 64 percent of the class of 2010 secured full time lawyer jobs, with a median salary of $63,000.

For at least a half-dozen law schools on the above list, and probably more, it is fair to surmise, a majority of graduates will obtain jobs that pay less than $60,000 (with a significant number who will not find legal jobs at all). Many, many graduates face "financial difficulty." Their best way out is resort to Income Based Repayment--a federal program which allows students who qualify to pay lower monthly amounts and forgives the unpaid balance after 25 years (at taxpayer expense). That might sound like a deal, but another way to look at it is that for the bulk of their legal careers their income level qualifies them as suffering from financial hardship. Graduates who work in public service jobs will have the unpaid remainder of their loan forgiven after 10 years.

You might think that over time their debt payments will become easier to manage because their pay will increase. That will be true for some, but not for many. According to the Bureau of Labor Statistics, "In May 2008, the median annual wages of all wage-and-salaried lawyers were $110,590. The middle half of the occupation earned between $74,980 and $163,320." These numbers suggest that, at least among "wage-and-salaried lawyers," many will continue to experience difficulty paying down a $120,000 loan well into their careers.

New first-year students, 45,000 strong, are streaming into law schools around the country this week. If you know any, please send them a link to this post. (I'm sending it to all of my students.) Attending law school can be the right decision for students with a strong desire to become a lawyer. However, students who are attending law school mainly because they are unemployed and think a law degree will provide them with better opportunities down the line must seriously consider the economic consequences of taking on law school debt.

Posted 7:00 AM by Brian Tamanaha [link]