For the past year, my sights had been set on law school. I spent my time studying for the LSAT, polishing personal statements, and graduating from UCLA with an attractive transcript. It all paid off when I committed to my dream JD program this spring.
But only a week before orientation began, I made the decision to give up my seat.
The Wall Street Journal recently reported that while the financial cost of legal education continues to increase, the value and payout of the degree has plummeted, and the statistics are staggering.
Upon entering the workforce, fewer than one in four law students believe that their degree is worth the financial cost. More than 95 percent of these students take out loans for their education, and on average, they graduate with $150,000 in debt. However, as the median salary for recent law graduates is $75,000 a year in the private sector and only $55,000 in the public sector, most of these hopeful and ambitious students are unable to secure the high-paying jobs a law degree once promised.
In the past, being able to comfortably pay off student loans was a given for law students. However, the median starting salary for a private sector lawyer has stayed stagnant—and even begun to decrease—as there is an influx of lawyers and not enough demand for legal work, leaving many recent law school graduates unable to make their loan payments.
In short, for most students, law school is no longer a ticket to financial stability. For many, it’s simply not worth the cost.
The Government’s Role
What’s driving this? Government intervention in the form of subsidized loans has degraded the return-on-investment of most graduate level degrees, law included.
In 2005, Congress passed the Higher Education Reconciliation Act, which created the PLUS program for graduate students and set no limit to the amount of tuition money they could borrow. This, in addition to the Federal Reserve forcing interest rates to near-zero and the growing prospect of loan forgiveness, has made federal loans an irresistible option for incoming law students.
The unintended consequence of this seemingly generous policy was that it gave academic institutions the ability to hike the cost of their programs without sacrificing the number of students willing and suddenly able to pay the price.
Considering that the average student takes out $150,000 in loans, these academic institutions have seemingly struck gold.
Supporting this, The Wall Street Journal noted that since universities receive tuition up front, they “have benefited from free-flowing federal loan money” and “have an economic incentive to expand graduate degree programs and face no consequences if students can’t afford to pay the federal loans after they leave.”
However, the increase in tuition hasn’t deterred the number of students applying. In fact, these limitless loans have only caused a surge.
The Law School Admissions Council reported that the number of applicants in the 2020/2021 academic year was 35 percent higher than in 2019/2020, a year which had already seen an increase of 56 percent. This growth is making the application process increasingly competitive and giving law schools the opportunity to expand their programs and hike their tuitions.
As a result, the student loan bubble continues to grow. More and more hopeful students are being churned into the market with both looming debt and lower salaries, as the demand for lawyers hasn’t increased with the new, burgeoning supply.
The Cost of Interventionism
In Economics in One Lesson, Henry Hazlitt wrote that “the bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences.”
As evidenced by the current, broken system of graduate education, it’s clear that the legislators responsible for federal student loan programs failed to have foresight about the possible consequences of interfering in higher education’s market.
Hoping to make the attainment of graduate degrees more accessible, the government stepped in with limitless federal loans. However, with so many students now able to enroll in these programs, the job market can’t keep up.
In the past 10 years, there have been over 15 civil lawsuits filed against law schools for allegedly falsifying their post-graduation employment rates. The students at these mostly mid-tier universities took out loans believing they would have comfortable salaries upon gaining their degree, however, most of them have been left unemployed, working outside of law, or making less than what they were led to expect.
Meanwhile, the $37 billion owed by students annually continues to expand, putting more people further in debt while costing taxpayers more money each year. This is far from what the government hoped to achieve.
Economist Ludwig von Mises explained this phenomenon well in Human Action.
“All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which … is less desirable than the previous state of affairs which they were designed to alter.”
This is a lesson the government should keep in mind as alumni continue to cry for government bailouts and loan forgiveness.
Continuing to financially intervene in graduate education will only deepen the crisis — for future students and unwitting taxpayers alike.
While I worked hard to get into law school, and I don’t regret my efforts, the statistics I uncovered were a wake up call. What once was a promise of a lucrative career is now a promise of debt and a degree that is steadily devaluing.
At a time when less than 25 percent of law students believe their financial investment paid off, I think I’ll be happy to be putting my energy and resources elsewhere.