1. Lawyers all make lots of money.
Well, certainly some do. However, check out this graph from the National Association of Legal Placement. The majority of graduates are making considerably under $100,000 a year. Other observations:
This list includes Harvard, Yale, Stanford, etc. These top schools skew the numbers greatly.
Also, all these stats are self reported. Could grads making lower salaries be reluctant to respond to salary surveys. . .
2. Public law schools are cheap.
"Cheap" is always relative. Many public schools cost $15,000 to $20,000.
3. Federal loans are cheap.
6.8% cheap? Would you borrow money to invest at 6.8%? Maybe, but you'd be careful.
More updates to come including some personal updates.
Tuesday, October 14, 2008
Monday, October 13, 2008
Welcome Carnival Visitors
Welcome Carnival Visitors! I really appreciate Greener Pastures selection!
As you can see this site is still pretty new. My quick advice - law school can be worthwhile (fun and profitable) but make sure you know the cost first. If you have any questions please comment.
As you can see this site is still pretty new. My quick advice - law school can be worthwhile (fun and profitable) but make sure you know the cost first. If you have any questions please comment.
Sunday, October 12, 2008
3 Financial Aid Tips for Law Students
It is easy to conclude that law school is not a good idea. Hopefully my posts are not reinforcing that idea. I believe that in many cases going to law school is a great investment. But one has to think of it as exactly that, an investment. Below are some tips for maximizing your investment:
1. Take out only federal loans. Currently you can take out a maximum of $20,500 in subsidized and unsubsidized Stafford loans per year for a total of no more than $138,500. The interest rate is locked at 6.8%. Your credit score is not a factor in obtaining this loan. As long as you are attending an ABA accredited (either fully or provisionally accredited) law school you are eligible. These loans are distributed directly to your law school with any remaining money then distributed to you for living expenses. The majority of public law schools can be financed via these loans. I recommend signing up directly for these loans with the Department of Education instead of with private lenders such as Sallie Mae, Nelnet, etc.
Still need more money for tuition? Don't turn to a private lender! Grad Plus loans are federal loans of 7.9% or 8.5% of up to the annual cost of attendance at your school. (Minus Stafford loans.) Your credit will be checked but based on anecdotal evidence as long as you are not in collections you are okay.
2. Calculate your money payment before you enroll. I made a big mistake here. I was keeping track of my overall debt but not aware of how much I would have to pay each month after I graduated. Luckily there are many calculators available online to estimate payments:
Finaid.org
Many different calculators are available. I linked above to the basic calculator. Add in number of years to repay, and interest rate and it gives you the monthly payment.
Bankrate.com
Little more sophisticated calculator. Shows the full repayment table, the effect of extra payments, and gives the exact date of repayment.
College Board
Truly the Cadillac of student loan calculators. Step by step process for adding in undergraduate and estimated graduate loans. I should have used this calculator when I was 18.
Short mine-jarring example:
According to the American Bar Association in 2007 the average amount borrowed at a public law school was $57,000 and $87,000 at a private law school. For shock value let's use the 87k figure (and most law schools are private).
Under a 10 year payment plan 87,000 at 7%, a conservative number and not including any fees, is $1010 a month! According to finaid.org:
1. Take out only federal loans. Currently you can take out a maximum of $20,500 in subsidized and unsubsidized Stafford loans per year for a total of no more than $138,500. The interest rate is locked at 6.8%. Your credit score is not a factor in obtaining this loan. As long as you are attending an ABA accredited (either fully or provisionally accredited) law school you are eligible. These loans are distributed directly to your law school with any remaining money then distributed to you for living expenses. The majority of public law schools can be financed via these loans. I recommend signing up directly for these loans with the Department of Education instead of with private lenders such as Sallie Mae, Nelnet, etc.
Still need more money for tuition? Don't turn to a private lender! Grad Plus loans are federal loans of 7.9% or 8.5% of up to the annual cost of attendance at your school. (Minus Stafford loans.) Your credit will be checked but based on anecdotal evidence as long as you are not in collections you are okay.
2. Calculate your money payment before you enroll. I made a big mistake here. I was keeping track of my overall debt but not aware of how much I would have to pay each month after I graduated. Luckily there are many calculators available online to estimate payments:
Finaid.org
Many different calculators are available. I linked above to the basic calculator. Add in number of years to repay, and interest rate and it gives you the monthly payment.
Bankrate.com
Little more sophisticated calculator. Shows the full repayment table, the effect of extra payments, and gives the exact date of repayment.
College Board
Truly the Cadillac of student loan calculators. Step by step process for adding in undergraduate and estimated graduate loans. I should have used this calculator when I was 18.
Short mine-jarring example:
According to the American Bar Association in 2007 the average amount borrowed at a public law school was $57,000 and $87,000 at a private law school. For shock value let's use the 87k figure (and most law schools are private).
Under a 10 year payment plan 87,000 at 7%, a conservative number and not including any fees, is $1010 a month! According to finaid.org:
It is estimated that you will need an annual salary of at least $121,216.80 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 0.7. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $80,811.20, but you may experience some financial difficulty.This corresponds to a debt-to-income ratio of 1.1.3. Do not use your credit card in law school. Should be common sense, but so easy to forget. I ran up at $10,000 debt on my card during school. Ironically much of this expense was not for frivolous "stuff" - car insurance, food, etc. It can be tempting to try to borrow unrealistically low living expenses from your federal loans, but trust me repaying at 6.8% is much better than 20-30% on a credit card.
(bold added.)
Saturday, October 11, 2008
Immature - Sallie Mae Death Watch!
I owe 18k to Sallie Mae via a federal loan. (see my first post for more details). And I take responsibility for this loan and am paying it back. Unlike some people. . . cough cough Alan Collings cough. I can't resist a little fun, so I've set up a Sallie Mae Death Watch. Their stock has been plummeting in recent months and is now trading under $10.00 from a high of around $60.00.
I know I will still owe the money even if Sallie Mae goes bankrupt or is sold (unlikely as I imagine it will swiftly be nationalized.)
I'll just be leaving that on the side of the blog.
I know I will still owe the money even if Sallie Mae goes bankrupt or is sold (unlikely as I imagine it will swiftly be nationalized.)
I'll just be leaving that on the side of the blog.
Financial Aid. . Lies?
The National Jurist, a magazine for law students, recently published an article listing the most generous financial aid packages. (The article is on page 23, I can't link directly to it.)
The top five winners are:
- Thomas Cooley: 93.9%
- Toledo: 61.4%
- Liberty: 51.2%
- Northern Kentucky: 50.4%
- La Verne: 49.0%
On the surface these numbers look amazing. I'm a little suspicious just by looking at the variation in numbers. Cooley's aid package is twice the total of the number five school. Cooley, Cooley, Cooley. That makes me wary. I think one has to look at what is not being said in this article:
How many students are getting financial aid grants? I could give 20 students out of 1000 a huge scholarship and get to the top of that list. Yep, that's right this article is meaningless! Cooley is apparently giving out full scholarships but for the median to be so high it is likely that there are far fewer other scholarships gives and/or few overall. I need to know how what percentage of students receive grants!
Secondly (haha, classic English I transition sentence), I need to know what the financial aid package is for 3 years not for incoming students. Are students receiving more aid in future years? Are scholarships lost? No idea.
Finally, the article gives no mention of the tuition of these schools.
Toledo's tuition is 8k instate and 13k for out of state. Affordable.
Liberty's tuition is 27k. Very expensive! (Includes fees)
So even if I receive no grants from Toledo, it is still more affordable than receiving the median grant from Liberty. Many examples from public law schools will quickly make a mockery of this list.
For additional analysis on this article see the TaxProf Blog.
Friday, October 10, 2008
University of Miami
But Anonymous how can you mock law school as a huge financial gamble? I've read the median salaries listed in U.S. News and World report (here, latest numbers are not available on the free USN website.)
Okay, well let's use the University of Miami School of Law as an example. They recently listed a median salary of 103,000. Not too shabby. Certainly worth investing six figures in. And hey that's only the median salary! I'm sure I'll graduate at least the middle of my class!
Unfortunately this statistic is a lie. And an easily disproved lie. Heck, UMiami (to their credit) isn't even trying to hide it. See page 23 of their viewbook for more details. Let's count the tricks they use to inflate their salary:
1. No response percentage. We can see that 6% of graduates went solo but there is a "n/a" for salary of solos. More importantly there is no response percentage for ANY of the categories. 33% of the class entered a small firm (2-10) attorneys. Since small firms pay the least, who wants to bet that students were reluctant to brag about their low salary? Exactly. And the students making the six figure salaries were likely the most eager beavers to send back the salary survey. Probably 90%+ of $100,000 graduates send back the form, while 10% or 20% of under $50,000 graduates return it.
2. Wonky math. Public interest range is between 38,000 and 50,000. Okay, fair enough. It takes guts to admit to a 38,000 salary and I applaud UMiami for not hiding this statistic. I'm sure whales need to be saved or something. However, the problem appears when one looks at the median salary for public interest - 38,000. And the mean - also 38,000. Where is the 50,000 coming from ?
3. Business and Industry - n/a. So no one in this sector listed their income? And 7.0% of the class went into business and industry. 7% isn't huge, but it is large enough to say. . . inflate a school's median salary to 6 figures. (Just a random example.) And "business and industry" is such a vague category. I could be making lattes at Starbucks or waiting tables, or doing any job where a JD isn't required and be in "business and industry".
4. Employment rate doesnt' require a JD. Employment rate is a pointless term. All law schools can , and do, list 90%+ rates of employment. Starbucks, Burger King, the exact same job you had before law school all count as employment. This is meaningless!
5. List of firms that hire UMiami. There is an impressively weeded list of employers that hire UMiami grads. Of course this list is from "recent years". Hmmm, could UMiami have selected the most prestigious employers from the last decade to fill out this list?
My point is not that UMiami is a bad school. However their numbers are lying. What is the real median salary? I don't know. The data is incomplete. There is not a representative sample. $50,000? $60,000? Lower? Of course it is possible to achieve a great job from UMiami. The highest salary listed is a top tier $160,000 and their are many $100,000 graduates. As a consumer you should be wary that your chances of getting one of these jobs are far slimmer than US News numbers lead.
Okay, well let's use the University of Miami School of Law as an example. They recently listed a median salary of 103,000. Not too shabby. Certainly worth investing six figures in. And hey that's only the median salary! I'm sure I'll graduate at least the middle of my class!
Unfortunately this statistic is a lie. And an easily disproved lie. Heck, UMiami (to their credit) isn't even trying to hide it. See page 23 of their viewbook for more details. Let's count the tricks they use to inflate their salary:
1. No response percentage. We can see that 6% of graduates went solo but there is a "n/a" for salary of solos. More importantly there is no response percentage for ANY of the categories. 33% of the class entered a small firm (2-10) attorneys. Since small firms pay the least, who wants to bet that students were reluctant to brag about their low salary? Exactly. And the students making the six figure salaries were likely the most eager beavers to send back the salary survey. Probably 90%+ of $100,000 graduates send back the form, while 10% or 20% of under $50,000 graduates return it.
2. Wonky math. Public interest range is between 38,000 and 50,000. Okay, fair enough. It takes guts to admit to a 38,000 salary and I applaud UMiami for not hiding this statistic. I'm sure whales need to be saved or something. However, the problem appears when one looks at the median salary for public interest - 38,000. And the mean - also 38,000. Where is the 50,000 coming from ?
3. Business and Industry - n/a. So no one in this sector listed their income? And 7.0% of the class went into business and industry. 7% isn't huge, but it is large enough to say. . . inflate a school's median salary to 6 figures. (Just a random example.) And "business and industry" is such a vague category. I could be making lattes at Starbucks or waiting tables, or doing any job where a JD isn't required and be in "business and industry".
4. Employment rate doesnt' require a JD. Employment rate is a pointless term. All law schools can , and do, list 90%+ rates of employment. Starbucks, Burger King, the exact same job you had before law school all count as employment. This is meaningless!
5. List of firms that hire UMiami. There is an impressively weeded list of employers that hire UMiami grads. Of course this list is from "recent years". Hmmm, could UMiami have selected the most prestigious employers from the last decade to fill out this list?
My point is not that UMiami is a bad school. However their numbers are lying. What is the real median salary? I don't know. The data is incomplete. There is not a representative sample. $50,000? $60,000? Lower? Of course it is possible to achieve a great job from UMiami. The highest salary listed is a top tier $160,000 and their are many $100,000 graduates. As a consumer you should be wary that your chances of getting one of these jobs are far slimmer than US News numbers lead.
Wednesday, October 8, 2008
Introductions and Aims
First a little introduction about me. I'm an anonymous 2007 law student questioning both my decision to go to law school and the business of law schools. One of the first things to know about me is to know about my debt:
$50,000 in subsidized and unsubsidized Stafford loans. Split about 50/50. Currently consolidated at 4.75% for 30 years. This results in a monthly payment of $299.00. Or as I like to call it "the difference between driving a Toyota and driving a Lexus".
$18,500 in sub/ubsub Stafford loans. Again about 50/50 split. Quick diversion - subsidized means that during school the interest is paid by the government. Unsubsidized means that interest accrues during school. You have the option to pay it as you go or add it to the principle. Needless to say I added to the principle. The 18.5k is at 6.8%. Currently on a ten year graduated payment plan. Digression time again. Graduated payment means that during the first two years I am paying essentially only interest, then my payment rises, then rises again. Right now the payment is $114 a month. Oh and this is a federal loan through Sallie Mae.
$8,500 in sub/unsub Stafford federal loans. 6%. From undergrad. Like the above loan this is also graduated and on a 10 year repayment plan. Right now my payment is $50 a month.
Finally, $5000 through American Express. I'm reluctant to include this in my law school debt but I did charge two summer courses during law school and grad school to the card. Financial aid was only available if I took 2 or more classes and it didn't make sense for me to spend twice the money. I'm concentrating on this debt first (down from $10,000 last year!).
Aims
Unlike forums such as the infamous jdunderground.com I'm not trying to tell you that law school leads to a life of debt and misery. I'll try to both explain my experience and to break through the hype to expose the law school business. Gamed numbers, outright lies, deception. Oh it'll be a fun trip.
$50,000 in subsidized and unsubsidized Stafford loans. Split about 50/50. Currently consolidated at 4.75% for 30 years. This results in a monthly payment of $299.00. Or as I like to call it "the difference between driving a Toyota and driving a Lexus".
$18,500 in sub/ubsub Stafford loans. Again about 50/50 split. Quick diversion - subsidized means that during school the interest is paid by the government. Unsubsidized means that interest accrues during school. You have the option to pay it as you go or add it to the principle. Needless to say I added to the principle. The 18.5k is at 6.8%. Currently on a ten year graduated payment plan. Digression time again. Graduated payment means that during the first two years I am paying essentially only interest, then my payment rises, then rises again. Right now the payment is $114 a month. Oh and this is a federal loan through Sallie Mae.
$8,500 in sub/unsub Stafford federal loans. 6%. From undergrad. Like the above loan this is also graduated and on a 10 year repayment plan. Right now my payment is $50 a month.
Finally, $5000 through American Express. I'm reluctant to include this in my law school debt but I did charge two summer courses during law school and grad school to the card. Financial aid was only available if I took 2 or more classes and it didn't make sense for me to spend twice the money. I'm concentrating on this debt first (down from $10,000 last year!).
Aims
Unlike forums such as the infamous jdunderground.com I'm not trying to tell you that law school leads to a life of debt and misery. I'll try to both explain my experience and to break through the hype to expose the law school business. Gamed numbers, outright lies, deception. Oh it'll be a fun trip.
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