Law School R.O.I.

The current economic recession, which according to the National Bureau of Economic Research is soon to enter its third year, has had two significant effects on law students.

1) Law school admissions have increased, as prospective students seek the shelter of an ostensibly secure profession.

2) The profession of law may not be as secure as it once was, with all reports showing decreased hiring and the postponement of new associate hiring (and even an instance of a law school asking incoming students to defer their start date.)

With that in mind, the New York Times' Economix column featured a recent research paper written by Vanderbilt professor Herwig Schlunk measuring the return on investment for a current law school education.

In general, the paper looked at what kind of salaries law students could have been pulling in if they weren't in law school, factored in some time value for that period, and added tuition to that "opportunity cost" to arrive at a number that needed to be surpassed by earnings as a lawyer.

For the group of law school applicants deemed Hot Prospects (those who would have made $80,000 a year without a law degree), the paper concluded they'd need to earn a starting legal salary of slightly more than $198,000 to break even on their law school investment.

Unfortunately, according to the ABA Journal:

"...top BigLaw starting salaries paid to a small fraction of the nation's graduating law students are now around $165,000. Even many major firms, however, are paying significantly less, and a number of law graduates are having difficulty finding legal work even at much lower salaries due to the economic downturn that hit the legal profession hard last year."

So, the cautionary note to prospective law school applicants is to run the numbers on your investment first. And an MBA might help with that.