Legal Education ROI


[UPDATE: As with last year, it appears the ABA took down the employment spreadsheet by late Friday afternoon, making this post … an exclusive. There may be substantial revisions to come.]

At last, something to write about! (And time to do it too!)

On Friday, the ABA updated its Employment Summary Report Web site, which provides employment data for each law school class going back to 2010. Many if not all law schools have uploaded their individual reports, and some intrepid researchers have already dug into them, but I prefer to wait until the easy-to-use spreadsheet comes out. Note: There may be revisions to these data, but this first, preliminary cut gives a good sense of the class of 2015’s employment outcomes. Also, I diligently account for all accredited law schools, so researchers should recognize that Concordia Law School must be inserted manually. Indiana Tech has no data.

39,423 people graduated from 204 ABA-accredited law schools outside of Puerto Rico roughly between September 1, 2014, and August 31, 2015. The employment information is good as of about March 15, 2016.

Here’s the employment status distribution.

Class of 2015 Employment Status Distribution

Surprisingly, many of the employment status categories’ percentages are identical to last year, even though the absolute numbers have fallen. I almost thought I was looking at the 2014 data by mistake. Notably, the employment status tables added a section for “Employed – Law School/University Funded” jobs. It’s probable that a good chunk of these jobs were classified as “JD Advantage” until now, further clouding the validity of that category.

The display tables appear below the fold to conserve blog space.



CBO: $1.3 Trillion in New Federal Student Loans by 2026

Each year the Congressional Budget Office (CBO) provides its baseline projections for the federal student-loan program. The projections include the total amount of new federal student loans that the office believes will be issued, future interest rates, and subsidy costs, i.e. whether the government will make or lose money on the loans. This year, the CBO projects that the government will lend an additional $1.3 trillion to students between FY2016 and FY2026. The figure is largely unchanged since the 2014-2024 period, discussed here.

Subsidy Rates

The CBO uses an accrual-accounting methodology to determine the present value of federal loans. This essentially means discounting the estimated cash flows of student loans against government securities with the same maturities. If student loans make more money than buying government debt would, then the loans are valuable. Accrual accounting does not include the market risk that a private lender would consider when making a student loan, which is why many people advocate fair-value accounting. It’s a surprisingly contentious issue, which I elaborate in the student debt data page, because under fair-value accounting, the government loses money on student loans.

Under accrual accounting, the CBO projects negative subsidy rates for federal student loans; that is, it sees the government making money on its lending. All student loans made in 2015 will make an estimated 13.9 percent return. Of interest to law-school watchers: Unsubsidized Stafford loans and Grad PLUS loans issued in FY2016 will make 19.2 percent and 18.9 percent returns, respectively. Oddly, Parent PLUS loans appear to be the most profitable for the government.

CBO Table 2This year, however, the CBO included fair-value estimates of federal student loans. Under these, the government loses about 12 percent of its investment on student loans every year until FY2026. Unsubsidized Stafford loans and Grad PLUS loans lose about 5 percent in 2016, but the losses increase over the decade. Parent PLUS loans remain profitable.

Note also that the CBO believes the net number of loans will rise during the decade. It’s already evident that federal-student-loan borrowing is declining.

CBO Table 6Under accrual accounting the student loans will net the government $85.2 billion; under fair-value accounting the government will lose $145.1 billion. This isn’t a lot of money for the government, actually, but it could obviously be redirected to better uses.

Interest Rates

A crucial variable affecting subsidy rates, for both accounting methodologies, is the CBO’s projection of future interest rates. Two years ago, the office believed interest rates would rise from less than 2 percent in 2013 to 5 percent in 2018. This year, the CBO estimates that interest rates will rise to only 3.4 percent in 2018 and 4.14 percent starting in 2022.

CBO Table 4I believe the current interest-rate predictions are more plausible than the office’s estimates two years ago. The interest rate on 10-year government bonds has been falling this year, so the CBO may be overly pessimistic again for FY2016.


In all, I think the CBO is overly pessimistic with these assumptions. Student borrowing is declining, and there isn’t much of a reason to believe interest rates will rise. This doesn’t mean the government won’t make bad loans, or that the skills and knowledge they pay for will make the workforce more productive, but it’ll probably be less than $145.1 billion.

Current Circumstances Cast a Shadow on Past Decisions

Put positively: Current circumstances illuminate past decisions.

I guess it works.

I flipped through Access Group’s and Gallup’s jointly produced report, “Life After Law School” (pdf), which surveyed a panel of 7,000 recent and not-so-recent law-school graduates of some Southeastern law schools. I don’t have much time or interest in picking apart the study, but I observe that the seven schools it chose are a pretty broad range, from older, established Vanderbilt to recent Elon. There aren’t any for-profits though.

I thought I’d illustrate some of “Life After Law School”‘s tables. There are times when tables are helpful, e.g. lists of law schools, and times when we prefer charts, like when we want to see trends. “Life After Law School” is a time for trends.

Here’s how graduates answered, “If I could do it again, I’d still get a law degree.”

If I could do it over again

“These results could reflect the lack of time more recent graduates have had to realize the value of their law degree or their greater difficulty in finding a good job after graduation.”

You can see growing dissatisfaction with law school among recent graduates.

And here’s, “My degree from LAW SCHOOL was worth the cost.”

My law degree

Again, growing dissatisfaction over the decades. I’ll not chart the report’s debt table because it doesn’t break the numbers down by approximate graduation year. Time is what we’re talking about.

So here’s a question: Do graduates become more satisfied with law school over time, or is this a phenomenon unique to recent grads? Predictably, Access Group believes the former; it says so in the introduction. “While [metrics of near-term earnings and job placement of recent graduates] have merit, they do not provide a holistic view of graduates’ lives or the broader benefits that legal education provides.” If the long-term picture looks good, then we can discount the experiences of recent graduates.

Alternatively, factors outside law schools and law degrees affect people’s job outcomes and happiness. For example, if demand for legal services stagnates, and universities keep opening law schools, and the costs rise without quantified benefits, then we should expect more people to be dissatisfied with law school.

Thus, “Life After Law School” echoes the After the JD study, whose own authors misinterpreted their results, treating survey responses as evidence of legal education’s value rather than the respondents’ perception of their legal educations’ values. Current circumstances feed into perceptions of past decisions. As always, the question is, were there better alternatives to law school when people chose to attend. Recent graduates’ jaundiced perception of law school indicates they believe there were better alternatives in hindsight. But that’s a question Access Group won’t ask.

LSAT Tea-Leaf Reading: December 2015 Edition

The LSAC was oddly slow putting up December LSAT data, but that’s okay because I have little to say about it. The number of LSAT takers has grown for five consecutive testing periods, but things slowed down this time.

No. LSAT Takers, 4-Testing Period Moving Sum

29,115 people took the LSAT in December, up a mere 1.9 percent over last year. The four-period moving sum grew a mere half a percent to 105,940.

I have no insight into whether this slowdown means anything or is just a blip. I’ll speculate after the February or June administrations.

Full-Time Students Paying Full Tuition Fell ~5 Percentage Points in 2014

Once upon a time, more than half of law students at the typical law school paid full tuition.

But that fairy tale is now over. Behold:

Percent Full-Time Law Students Paying Full Tuition

I’m astonished. Now, only about a third of law students at the average law school pay full tuition. These schools must be hemorrhaging money given how much they’re fighting over applicants.

At the average private law school in 2014, there were more students who received less-than-half tuition grants than there were students given a full bill. It appears that in a couple years, even the half-to-full-tuition crowd will outnumber the full freighters—and this is last year’s data!

No. Full-Time Private Law School Students Per School by Grant Received

Speaking of hemorrhaging money, in 2014, full-time law students paying full tuition only contributed $1 billion to private law schools. This year, it’s probably less.

Aggregate Revenue From Full-Time Private Law School Students Paying Full-Tuition

Finally, here’s what tuition discounted by the median grant looks like at private law schools by the mean of their full tuition quintiles. The idea here is to set full tuition as the independent variable and let the discounted tuition float.

Full-Time Private Law School Tuition and Median Discounted Tuition by Tuition Quintile Mean

Percent Private Law School Students Receiving Median Grant by Full Tuition Quintile Mean

Last year, the mean discounted tuition among law schools in the second full-tuition quintile was lower than the third’s, meaning second-quintile schools are discounting much more than schools that nominally charge less. I think it’s trivial, but it indicates pricing competition.

That’s all for now.

Full-Time Law School Tuition Still (Slowly) Rising

…But it’s certainly debatable how much students are actually paying.

Here’s the dispersion of stated law-school tuition for full-time students in constant dollars as of the end of second quarter 2015. (I’m not hugely into non-resident tuition.)

Full-Time Law School Tuition Dispersion (Excl. P.R., Constant $)

The law school at the median charged about $1,300 more than last year. Inflation has been so low that real tuition fell last year, but that’s been reversed.

There has been talk recently (I forget when specifically, and I’m too lazy to look it up right now) of law schools cutting their nominal tuition, but from the above chart it’s obvious that these are isolated cases that have not influenced any trends. In fact, I did a quick check and none of the private law schools that cut their tuition in the last two years (La Verne, Brooklyn, Elon, Ohio Northern, and Roger Williams spring from my spreadsheets) saw any increase in full-time applications. Certainly there’s something to be said about the elasticity of demand for law school, but I’ll consider that later.

Still, full-time private law schools’ tuition increases are slowing, but this year they hiccuped upward.

Dispersal of FT Private LS Tuition Price Increases (Current $, excl. PR, Zoomed In)

In each of the last three years, at least 10 percent of tuition increases among private law schools was 0 percent or less. I don’t think this year’s hiccup means anything.

Finally, here’s nominal tuition increases by tuition quintile mean.

Full-Time Private Law School Tuition Increases by Tuition Quintile Mean (Current $)

As with last year, the weight of tuition increases is still on the costlier end of law schools. Surprisingly, Columbia remains the only law school that charges more than $60,000 per year. (Cornell was 19 bucks short. *clap* … *clap*)

In closing, I want to extend my thanks to the law schools for not omitting tuition information from their 509 reports. Some didn’t last year, which is bizarre to me.