Is Law School still worth it?

Let’s start with the legal job market. Lawyers have not been immune to the effects of the recent recession. However, they have fared much better than most workers. According to U.S. Department of Labor data, the unemployment rate for lawyers was 1.5 percent in 2010 — more than six times lower than the overall rate of 9.6 percent. Since 2009, while the overall unemployment rate has remained above 9 percent, the rate for lawyers has exceeded 2 percent only once. It is true that unemployment among lawyers has increased significantly over the last few years (it was barely 1 percent in 2007), but the increase pales when compared to other occupations....

Student loans aren’t all bad

Discussions about law school costs are often accompanied by lamentations about the extent to which students are relying on loans to pay these costs. Student loan indebtedness has skyrocketed recently — more than 400 percent since 2000. Law student borrowing has jumped 50 percent since 2001. But much of the discussion surrounding this increase is premised on an assumption that all debt is bad. Critics also seem to have a questionable understanding of the favorable repayment terms associated with federal student loans.

Before I continue, let me make clear that I’m not defending the pricing structure of legal education. Too many law school pricing structures are premised on exploiting demand for seats in entering classes, and I agree with the view that the rate of tuition increase is unsustainable. But with that said, legal education isn’t going to get cheaper, and the associated costs of attending are going to increase as well. Moreover, because most law school graduates will have careers spanning 35 years or more, judging the wisdom of attending law school based principally on the immediate costs seems shortsighted.

The fundamental purpose of debt is to allow the immediate costs of consumption to be deferred to a later date. Used wisely, debt can confer much benefit upon the debtor, particularly when the debt takes the form of an investment. Student loans make higher education possible for many students by allowing them to defer the costs of their education “consumption.” And given wage premiums associated with higher education, student loans represent one of the best investments an individual can make.

Of course, not all student loans are created equal. Federal loans are vastly superior to private loans, and fortunately, most law students are able to finance their entire cost of attendance with federal loans only. Interest rates are fixed on most federal loans, and they are much lower than rates offered in the private market. Federal student loans also come with payment grace periods, deferral and forbearance options and an array of repayment plans — the most generous of which being the Income-Based Repayment Plan (IBR).

Through IBR, debtors with low income, relative to federal student loan debt, are allowed to make reduced payments of no more than 15 percent of their disposable income (defined as the difference between Adjusted Gross Income and 150 percent of the poverty guideline). After 25 years, any remaining loan balance is forgiven. If the debtor is working in a public service job, as a prosecutor, for example, balances are forgiven after just 10 years. IBR and other repayment options help ensure that debtors don’t have to choose between basic necessities and paying their federal student loans. Moreover, the loan forgiveness aspects of these plans are essentially back-end scholarships.

Given the political obsession with the federal deficit, you should probably take advantage of these favorable options while you can. One of the cost-saving “deals” made during the debt-ceiling-debacle ended interest subsidies on graduate and professional school student loans. These subsidies went to financially needy students and were typically worth thousands of dollars. So, along with increased tuition, politics could make law school more expensive in the future....

Applicant environment is favorable

The bad publicity about legal education contributed to a historic decrease in applications for admission during the 2010-2011 cycle. Applications fell 11 percent — the largest one-year decrease on record. When applications fall, law schools tend to admit a higher percentage of their applicants. And if applications fall again during the 2011-2012 cycle, as predicted, applicants will find themselves in a very favorable environment for gaining admission. At some schools, applicants who would have been considered “borderline” just two years ago might be shoo-ins for admission this year. So the strategic benefit of applying during a string of down years is worth ample consideration.

Another benefit of the bad publicity is that law schools will likely provide more detailed employment data. The anxiety over jobs prompted a grassroots movement for more transparency from law schools. The result was a mandate by the American Bar Association that law schools provide employment data that goes beyond traditional employment rates and provides better information about the types of jobs graduates are getting. The ABA will make this information available to the public, allowing applicants to better compare schools and make better informed decisions about where to attend — or whether to attend....