A financial perspective on the legal education market

Cite this Article
Larry Ribstein, A financial perspective on the legal education market, Truth on the Market (November 12, 2011), https://truthonthemarket.com/2011/11/12/a-financial-perspective-on-the-legal-education-market/

Today’s WSJ offers an interesting perspective on the law school cost/student debt debate: from the folks who invest in student loans. According to the article, these guys say:

  • Law school * * * can end up a sucker’s bet in periods of high unemployment
  • U.S. has far more law schools than other professional schools, resulting in an excess supply of lawyers, argue investors and analysts.
  • In recessions, law school graduates have a harder time finding work than other graduates from professional programs and are more likely to default on their student loans.
  • Nevertheless, law students have been willing to take on even more debt for their degrees

So, the portfolio manager of one investment firm “is staying away from all student loan bonds right now.* * * “We don’t expect unemployment rates to go down for the next year or two so it’s difficult to get excited about student loans against that backdrop.””

Are law schools paying attention?  Education requires money and these guys are, ultimately, the ones who provide it. 

Remarkably, the real picture may be even worse than this article suggests. The article seems to assume a cyclical model of the law school market with an upturn after “the next year or two.” But I conclude that the decline is long-term, at least until law schools figure out how to offer students sufficient value or a low enough price to justify the student loans.