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The Key to Handling Law School Debt: Make it Worth it

There are a lot of studies done in social psychology that analyze the way that we analyze risk. They’re pretty interesting if you’re into that kind of thing; if you’re not, I’ll cut through all the charts and control groups for you. One of the underlying discoveries is that people can’t legitimately conceive of the risk of things that are very likely to happen and very unlikely to happen, so we compress those things to be much closer to our average idea of ‘risk’ than they actually are. For instance, you’re very, very unlikely to die by being struck by a meteor; however, the chance is so astronomically (see what I did there?) small that almost everyone thinks it’s much more likely than the reality because we just don’t have a strong grasp of how uncommon it is.

The same goes for money, especially when you’re 21 years old and looking down a barrel at that $160K of law school debt. It’s a lot of money, but most people don’t realize exactly how much it is.

“It’s an investment in my future!” a lot of you will say, and it definitely is. But investing with Bernie Madoff was an investment in the future for some people – that doesn’t mean it was a good one.

I know plenty of people who are carrying a lot of debt from law school. Even those who are working full-time at top firms (where market rate is $160K/year) feel the weight of that amount of debt, and it becomes much more of a reality when you start sending out $1000 of each paycheck to pay it down.

So am I trying to say law school is a bad investment? Not necessarily. While you certainly can invest unwisely in your education, there are also ways to make sure that you don’t end up ~$200K in debt, which almost requires you to hold out for a job that pays $160K/year (and which may not materialize for a few years in your career, if ever).

For instance, check out US News’ rankings of the top law schools that lead to the most debt. You can see that there is very little correlation to rankings. Northwestern is the only T14 law school that is on there. There are several unranked and third tier law schools on the list, which, despite the numbers they might report, don’t send a majority of their graduates onto jobs that pay six figures (at least, if recent law suits are to be believed).

So should you skip law school? Or at least these law schools?

As with all things, the answer is maybe.

I would not recommend taking on $150K+ of debt to go to a law school that isn’t a first-tier law school. At that point, it’s more important to find a school that is going to offer you a decent scholarship (with no strings attached – see next paragraph) than to attend a school that is highest in the rankings. Even in the first tier, I’d be uncomfortable suggesting over $100K in loans for most schools outside of the T14; at that point, you really feel the pressure to have a six-figure job right out of school, which decreases your options significantly. In short, with very few law schools being the exception, go someplace that’s offering you scholarship money over a law school with a higher ranking that isn’t offering you a significant scholarship.

Now what’s this about scholarships with strings attached? Some schools out there give out scholarship funds like candy, with the 1L class paying very little tuition. Then, they put stipulations on the continuation of that scholarship; you must be in the top 10% of the class, for instance. Do the math: if everyone is on scholarship, but only 10% can keep it, how many people are going to lose their scholarship, a year of their life, and possibly a large chunk of change that the scholarship didn’t cover? I know you think you’re going to be in that 10%, but law school grading can be capricious, and you never know what might happen in your life that will negatively affect your grades.

I’m going to close this article with an apology for scaring you, but you need to be a little scared before taking on $100K+ in debt. The law schools aren’t going to say this, as they want you to pay tuition. The lenders certainly aren’t, since the debt isn’t dischargeable and they’ll own a part of your paycheck for the rest of your life if need be. And, honestly, most of your parents have a hard time realizing what $100K of debt will do to you and how hard it will be to find a job that will allow you to comfortably service that debt after law school.

So I’m going to be the bad guy. Scholarship money should weigh heavily in your decision of which law school to attend. You shouldn’t take on hundreds of thousands of dollars of debt without a solid plan of how you’re going to pay it off. And, finally, unless you’re at a top school, the plan of getting a job at Wachtell and paying it off in a year or two just isn’t realistic.