Law Prof's Hypothetical Students Lose Money Acquiring JDs; 'Also Ran' Outpaces Top Performer

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A Vanderbilt law professor who examined the value of a law degree for three hypothetical students has reached a surprising conclusion: The value of law school as an investment may be better for an “also ran” student than a “hot prospect,” though neither made a smart choice.

Tax law professor Herwig Schlunk outlined his conclusions in a draft paper entitled, “Mamas 2011: Is a Law Degree a Good Investment Today?” TaxProf Blog has the study highlights.

In all three of Schlunk’s hypotheticals, the students lost money by attending law school. His hypothetical Also Ran student had a nonmarketable major and low-paying job prospects outside of law school, while his Top Performer could have done fairly well without a law degree.

Schlunk’s hypothetical Also Ran paid about $210,000 for a degree that is actually worth about $174,000; Solid Performer paid about $228,000 for a degree worth about $137,000; and Hot Prospect paid about $252,500 for degree worth about $196,500.

In other words, the expected loss is about $36,000 for Also Ran, about $90,500 for Solid Performer, and about $56,000 for Hot Prospect. The differences are partly attributable to the salaries the hypothetical students gave up by attending law school, their likely salaries after graduation, and differing tuition costs.

Also Ran and Hot Prospect both had a 31 percent chance of earning a sufficient starting salary to justify their law firm investments, while Solid Performer had a 20 percent chance.

Schlunk made these assumptions when creating his hypothetical students:

• Also Ran had a relatively nonmarketable major from a middle-of-the-pack college; in a nonlegal job he could have made $35,000 a year. He is admitted into a third-tier law school and has about a 5 percent chance of landing a job in one of the nation’s 250 largest law firms.

• Solid Performer had a more marketable major from a better institution; in a nonlegal job he could have made $42,500. He is admitted into a second-tier law school and has an 8 percent chance of getting a job in BigLaw.

• Hot Prospect had good grades and a relatively marketable major from a highly ranked undergraduate institution; in a nonlegal job she could have made $50,000. She gets into a top-tier law school and has a 25 percent chance of attaining a BigLaw job.

“Law school is a very risky (and expensive) investment; it should not be entered into lightly,” Schlunk writes. “However, as I have already mentioned, and worth repeating again, each potential student’s calculus will be based on a host of factors unique to him or her. For some, like an English major (relatively low opportunity costs) who gets some scholarship assistance (somewhat lower out-of-pocket costs) to attend Harvard Law School (relatively high pay-off), the investment in a legal education is almost surely a no-brainer.”

Law degrees may also open up more avenues of potential employment, something that is not part of Schlunk’s calculation. “And lastly, of course, a law degree is a professional degree; it confers considerable prestige,” Schlunk adds. “But alas, as I first pointed out two years ago, you cannot eat prestige.”

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