Everyone who has been through the law school application process knows exactly where their school sits in the rankings. The general perception is that the entire legal education market is a pyramid, and if you get better LSAT scores, you go to a better school, which gets you a better job, etc. (e.g. “If I go to law school at Harvard, I will get a top job at a New York firm and make lots of money.”) The converse is also assumed to be true.
Something has always seemed fishy about this to me. Looking over the data reported to the ABA, the so-called “T-14” only produces about 4600 graduates per year, or roughly 10% of the total number of law school graduates. Are they the only lawyers to get good paying jobs? Is everyone else out on the corner selling pencils? Of course not.
So assuming most law school graduates have a job, and you know roughly how much they’re making, you can compare this with the cost of their legal education and figure out the “value” or instant return-on-investment for any law school. So here’s the formula:
Average Starting Salary/(Average Debt Burden x Percentage of Students with Debt)
[Note: Average starting salary data comes from Princeton Review as reported in National Jurist and the debt burden numbers come from U.S. News]
The resulting number suggests that for an average graduate, what you expect in return that for every dollar you invest in your legal education. The numbers are surprising:
A couple of quick notes on methodology. First, the data points I plugged into my formula are not readily available for all schools. If you have data for your school, please send it to us. Second, I’m not interested in handicapping quality of cities. I make no empirical claims about Boston being a preferential legal market and place to live than Cleveland. Third, I’m working on a second version of this that tweaks the numbers based on cost-of-living, so these might get adjusted up or down.
In trying to make sense of these numbers, I’m working on a series of follow-up posts. My initial reaction is that the conventional perception – “unless you’re going to a T-14 school you’re wasting your money” – is garbage.
Next Post: What’s the Story with Southern Methodist?
As we’ve discussed this, I’ve always thought of this as a measure of “instant value.” It offers a picture of how much instant return you receive on your investment.
To put it another way, it lets you see whether you are starting ahead of the financial curve or behind it and how far you are likely to stray either way by attending a certain school.
For instance, an SMU grad is receiving an instant 4:1 return on her investment. This means she has more disposable income thatn the typical law school grad (over and above loan payments) to save, spend, pay down debt, invest, or otherwise squander.
Is this a helpful and accurate way of looking at it?
When people are trying to determine the value of a law school eductaion, there is this perception that the T-14 are the schools that will produce value. What these number suggest is that the rankings are not an accurate barometer of value.
An SMU grad gets more for every dollar of debt accrued than a Harvard grad. So exclusivley on financial grounds, SMU would seem to be a better value than any other school in the country, because that ratio is higher.
this ranking is meaningless. the first column should be $spent not loan remaining. Perhaps a larger fraction of the SMU grads are funded by family, friends or fools.. that the other schools dont. And hence dont have big loans.
Whatanalysis,
My response to your criticism is the following:
1. You’re right that there is a coorelation between the cost of the education and the total amount of debt service. That’s why a school like George Mason — a state school with a close proximity to one of the best legal markets in the country (D.C.) — has such a good debt/earnings ratio.
2. SMU isn’t cheap however. According to their website, tuition for ‘07/’08 school year was $34,576. While it could be the case that all the trust fund babies in Dallas are going there. It could also be the case that school is well financed, and works to help students manage their debt load.
3. I have to imagine that if your theory were true, the debt load of students at places like Harvard would be a lot lower. It isn’t however, even though it has a comperable cost, and substantial aid resources that almost make you blush.