I saw a thread on Above the law today about debt consolidation and thought I would talk about this a little since I'm in the thralls of paying back at least part of my massive debt. As far as where I stand personally on the debt spectrum, I'm probably less than most but more than some. Figure that if you go to a three year law school program, you'll be taking about $120,000 out, and four year programs will tack on another 40k or so.
As I have written several times, law school (and other professional schools for that matter) is not cheap. And, to give Loyola2L some credit, unless you're in one of the top schools, you've got your work cut out for you. But even if you are, that doesn't guarantee a sweet six-figure job after graduation either. So, for 96-99% of law school graduates, you're graduating with a highly practical degree that gets you in as much debt as buying a house. Granted, things will work out over time, but unless you've got some sugar source, most of us will be in debt for a pretty long time.
The thread on Above the Law regarding this simply echoes my point. Consolidation is great, but it's a case by case basis. Citibank sucks, as do many private lenders. In the end, I find it more disturbing how shielded the whole process is, even from those who are borrowing more money than they can realistically be expected to make. So, is the problem the schools, the students, or something else all together? That is something I don't have an answer to at the present time.
Monday, January 14, 2008
Law school debt
Monday, November 05, 2007
Legal rumors and some thoughts about hourly pay
First, I've heard multiple rumors now of a NY bar result listing coming by the end of this week (based on last year's results posting) and another that says they won't be out until December because of the computer related issues discussed earlier this summer. I will stick with my belief that the results will be out before Thanksgiving, as vague as that may be.
I have a couple of other topics I may or may not have time to write about this week; namely they involve the importance of law review and first semester grades in the clerkship process. In case I don't have time to write about it, I reemphasize my assertion that law review is probably the most important thing for you to have on your resume for BigLaw or BigClerkships. While it's not necessary, I think that you are necessarily handicapping yourself if you aren't on a law review.
Granted, if you're at Harvard, NYU, Yale, and maybe a couple others, you can probably graduate last and still do okay. Everywhere else, I think you need to be closer to the top 50%. And even that is probably being generous outside of the top 20 or so schools. As I have stated numerous times in this blog, if you aren't in the top of your class (with a sliding scale as to what is the "top" depending on your law school) and if you aren't on a law review, you are struggling to find good work (more on salary considerations below).
Also, while I'm at it, if you're not on the top law review at your non-top 10 school, I want a good explanation as to why not, if it comes up in an interview. More on other interviewing tips (do's and don'ts) from the perspective of a clerk in another entry.
One new tip though; you should assume that I was editor-in-chief of my law review (even though I, admittedly, was not) and have a good idea of what your position does. I would argue that anyone with a board position knows what every type of board position does and associates those positions on their law reviews with the people that were in them. For some positions and in some law reviews or journals, I'm sure that hurts some people by no fault of their own. Nevertheless, if you're interviewing for a clerkship, this is a fair question. And you should also assume that I am aware of the Washington & Lee law review rankings. Don't bullshit a bullshitter.
And now, my thoughts on hourly pay for BigLaw and Clerks. (By clerks, I also include small firm salaries that are in the, say, $75k to start range, even though that may be generous). Second, I recognize that statistics are easily manipulated to prove a point.
Let's say that a Biglaw firm requires 2000 billable hours a year, which, assuming a 50-week year (2 weeks vacation), is a 40 hour billable work week. Assuming that all rumors of an average of 80 working hours/week is true, the numbers wind up getting tweaked a little. I think (based on my friends who are currently at big firms), a 60-80 hour/week isn't that unrealistic. So I'll go for three estimates. One uses a conservative multiplier of 1.3 working hours for every billable hour. That would give you a 52 hour week, or 2600 hours. The second will use a 1.5 hour multiplier, giving you a 60 hour week, or 3000 hours. The second will use the 80 hour week, or 4000 hours. I would suspect that on average, the real number is somewhere in the middle of the middle.
Now let's say that the big firms pay $160k, even though I know that isn't representative of the entire BigLaw market. Now, not taking out deductions for IRA, and assuming federal, state, and city taxes chomp away about 50% of your base salary (exclusive of bonuses), you are going to clear about $100,000 after Uncle Sam takes his cut. Assuming this is correct, and in my 2500 hours/year working week, you are making almost $40/hour. In my 3000 hour/year working week, you are making $33 an hour, and in the dreaded 80 hour work week, you are making a whopping $25/hour. And keep in mind, this is the New York scale, and obviously different markets are lower.
Now, say you took a government or small firms job, which purports to work you only about 50 hours a week on average. If you're starting salary is between $60 and 75k, you are probably pulling in around $50k after taxes. Unlike the big firms, I think you are more likely to be closer to the 52 or 60 hour work week (2600/3000) on average rather than an 80 hour week, but you could also be in the 45/hour week on average if you don't have billables (e.g., public defender or prosecutor). If you work 2600 hours/year (the 52 hour workweek) for $50k, that works out to about $20/hour. At 3000 and 4000, your time is worth only $17 and $12.50, respectively.
What I find interesting with this perspective is the close intersection with the BigFirm 80 hour weeks ($25/hour) and the small firms typical 52 hour week ($19.23/hour). So, one way to evaluate your time is that your big firm value is only $5/hour more than small firm value. I think Above the Law had a similar thread on this a while back, but the point is the same. Just based on time, your value as a lawyer at a BigFirm and at a small firm, is essentially the same.
Now, obviously, at a big firm, you are working many more hours, and you are getting paid far better for the time that you work. In that sense, it's a numbers game. In another, I just wonder if your free time becomes that much less valuable and how much weight that should be given.
Regardless of whether my math is right, or whether you agree or not, my point with this exercise isn't with the money at all. It is that this whole exercise will never happen for 99% of law school graduates. This is the much bigger problem, especially given the staggering numbers of bar-exam takers being churned out by the 180 or so ABA schools and however many non-ABA law schools there are (and LLM's are another category all together).
I can't tell you how many people (clerks and current law students/non-lawyers) that are under the delusional perspective that people are graduating with these BigFirm options. To be certain, they are not. It's one reason law review is that much more important nowadays. And good grades. And creating opportunity for yourself if you were initially handicapped by a bad LSAT and aren't at Harvard, Yale, NYU, Columbia or the rest of the so-called top 20.
This is going somewhere, but I've had enough of this ramble for now. I have to watch tv and destress that way rather than by writing more on work stuff and next year's considerations. Fortunately, I will be trying to balance the $25-40/hour jobs with my rigid television schedule.
Sunday, September 30, 2007
Student loans spell trouble for those without the high price firm jobs
I may write a longer article on this at some near point in the future, but the gist of it can be begun here. The AP, today, released a rather disturbing article about the student loan rates and loan problems for graduate students generally. See High Priced Student Loans Spell Trouble. For disclosure purposes, I first saw this on the Yahoo news wire, under the title Explosion in High-Priced Student Loans Sow Seeds of Trouble for U.S. Economic Growth but since Yahoo news links expire after a few days, I am providing two more permanent links instead. Either way, the article focuses primarily on law school debt, but it rings true for both the legal and medical professions (who chose not to participate in the military's Health Profession Scholarship Program). Graduate school debt is steep and the financial value a professional is given for this academic and career pursuit is, for the vast majority, minimal. Since my background is obviously legal, I will focus on that side of it with complete acknowledgment that my medical school counterparts are in the same boat.
As I have constantly written about, most of those who graduate from law school are in a financial nightmare. The top 1-2% in the country, regardless of tier, are the ones securing the jobs at BigFirms. The rest, unfortunately, are scraping for jobs which pay, on average, $40-50k/year. Although I quietly defer to the fact that this clerkship will likely lead me to a much higher paying job, for the time being, I am in the same boat as most everyone else. Like most of my colleagues, I have about $85-90k in debt. With my grace period quickly coming to a halt, my interest payments are figured to be about $600/month (mainly because I consolidated my first two years' government loans with the 4.7% interest rate). So, with the current rates in flux, it is unclear exactly how much my monthly payments will change, but I figure that $600 in interest will be pretty steady. Add in rent, utilities, and food, and that leaves very little at the end of the month to save for much more, such as a house. I can't be the only law clerk who thinks about these things, or blogger, and I know I'm not the only law school graduate.
More disturbingly, however, is how this level of debt is having a major impact on public service. This, I submit, is the bigger problem. The federal Stafford loans cover less than half of tuition, except for perhaps a couple of public schools. So, not only do you have to borrow $18,500 a year from the federal government, most of us are forced to borrow at least an additional $20k from private loans (namely, Citibank). And I'm not even going to touch the private loan scandals that are rocking the nation right now. Tuition is a mess.
Congress, at least, is attempting to try and help the problem, but an extra couple thousand isn't even going to put a dent in the debt percentage (although I certainly appreciate the effort). I think the time has come for the states to step up and create their own Stafford program. The cost is going to be high up front and is going to have to come from somewhere, but its necessity will only become more glaring in the next few years. Maybe states could model it after the military grants where if you agree to work in public service, they will forgive some of your debt. This, too, has problems with equality, but I think these are secondary to the larger issue. Obviously I have more to say about this issue, but I'm going to have to hold off until football season is over. Go Cowboys!
