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The Law School Trap

Massive student loan debt, with few prospects of repaying it
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Noam Scheiber writes in The New York Times:

By most measures, John Acosta is a law school success story. He graduated from Valparaiso University Law School — a well-established regional school here in northwestern Indiana — in the top third of his class this past December, a semester ahead of schedule. He passed the bar exam on his first try in February.

Mr. Acosta, 39, is also a scrupulous networker who persuaded a former longtime prosecutor to join him in starting a defense and family law firm. A police officer for 11 years in Georgia, Mr. Acosta has a rare ability to get inside the head of a cop that should be of more than passing interest to would-be clients.

“I think John’s going to do fine,” said Andrew Lucas, a partner at the firm where Mr. Acosta rents office space. “He’s got other life skills that are attractive to people running into problems.”

Yet in financial terms, there is almost no way for Mr. Acosta to climb out of the crater he dug for himself in law school, when he borrowed over $200,000. The government will eventually forgive the loan — in 25 years — if he’s unable to repay it, as is likely on his small-town lawyer’s salary. But the Internal Revenue Service will probably treat the forgiven amount as income, leaving him what could easily be a $70,000 tax bill on the eve of retirement, and possibly much higher.

Mr. Acosta is just one of tens of thousands of recent law school graduates caught up in a broad transformation of the legal profession. While demand for other white-collar jobs has grown substantially since the start of the recession, law firms and corporations are finding they can make do with far fewer in-house lawyers than before.

Read the whole thing. I knew things were not great for law school grads these days, but damn, not that bad. It’s almost like they were holders of journalism degrees, or something.

UPDATE: Brian Leiter of the University of Chicago Law School cries foul, and provides evidence that actual peer-reviewed studies find that for most people, law school still makes financial sense.

UPDATE.2: A reader writes:

Your comments section keeps messing up on my tablet so I wanted to email this…

I graduated from a third tier law school in 2012 in the bottom ten of my class. Not ten percent, bottom ten. There were no plum job offers for me, obviously. And my student debt upon graduation was easily in the $200,000 range. If it wasn’t for income -based repayment I would’ve explored bankruptcy years ago. (NB: Student loans are virtually impossible to discharge in bankruptcy.)

But here’s the funny thing…I did pass the bar on my first try, and I got an entry level job in an industry where my law license is definitely an advantage. I work 40 hours a week, enjoy full benefits, and get two weeks paid vacation plus accrued sick time. And four years out of law school I make a salary that’s right around where it is for the rest of my classmates.

The vast majority of my classmates (~75%) had to hang out their own shingle right after graduation and become solo practitioners. They hit the ground running doing DUIs and divorces for 80 hours a week. For the most part they’re doing the same thing four years later, unless they got lucky and caught a personal injury case or two (if you can call that luck). Even the small handful of students who got big law firm jobs don’t enjoy the benefits or normal work hours that I do.

The worst story I know of was a classmate who graduated in the top 10% of my class and had to take a job and the mall and donate plasma to make ends meet. That’s the extreme case, but I know several classmates who bartend and substitute teach just to pay the bills.

I would do it all over again for the sole reason that I met my wife. But for the 99% of students who dream of an upper-middle class lifestyle or becoming the next Jack McCoy, they’re falling for a lie.

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