How the "Million Dollar Law Degree" Study Understates Risk (Part I)

In my last post, I argued that Michael Simkovic and Frank McIntyre’s study, “The Economic Value of a Law Degree” (new title), substantially overstates the value of a law degree. Their article challenges my argument in Failing Law Schools that getting a law degree today can be financially risky, especially for students who attend expensive low ranked law schools. As Simkovic writes, “we disagree with [Tamanaha’s] conclusions about the riskiness of a law degree because data on law degree holders does not support his conclusions.” Their study proves, they say, that even law grads at the bottom quartile stand to obtain “hundreds of thousands of dollars” in net lifetime earnings above what they would have earned had they not gone to law school.

Here are a few statistics behind my position. Graduates of the class of 2012 of Thomas Jefferson had average debt of $168,800. Nine months after graduation, only 28.8% had landed full time jobs as lawyers lasting at least a year. At California Western law school, the same numbers are $167,867 and 43.8%; at Phoenix law school, $162,627 and 43.6%; at New York Law School, $154,647 and 39.6%; at Southwestern law school, $147,976 and 44.1%; at Whittier law school, $143,536 and 34.1%. And so on. Because interest on law school loans begins to accrue immediately, another $15,000 or so is added to these amounts by graduation day. (These numbers do not include undergrad debt, which averages more that $25,000). The majority of grads who do land lawyer jobs work in small firms, which typically pay $60,000 or less, far below the amount necessary to manage standard monthly loan payments on debt this large. They will even struggle to make monthly loan payments on the extended 25-year plan (which adds a huge amount of interest). They will have little choice but to enter IBR, a government sponsored debt relief program, which has negative consequences of its own.

We can skip all the analysis and cut to the heart of the matter with a simple question: Would Simkovic and McIntyre recommend to a friend (who was not admitted to a better school, and who would end up with debt levels this high) that she should go ahead and enroll in one of these law schools (or others like it)? Would they tell their friend that she would likely come out ahead by “hundreds of thousands of dollars” even if she does not land a job as a lawyer after graduation?

Or would Simkovic and McIntyre express reservations, try to talk her out of it, tell her about the financial risks, warn her that she will be paying back the debt for twenty years or more, tell her that perhaps she should keep working in her current job and maybe retake the LSAT in the hope of getting a better score?

If they give the latter response, then they do not in fact disagree with my position.