A financial perspective on the legal education market

Larry Ribstein —  12 November 2011

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.

Larry Ribstein


Professor of Law, University of Illinois College of Law

2 responses to A financial perspective on the legal education market


    I agree with the comment above. Law school does indeed seem to be a sucker’s bet. The problem, however, as I suggested in a different post, seems to be that law school is the least demanding graduate program available, and so students who can’t find anything else to do with themselves after graduation (which is increasingly common) typically consider law school as a way to postpone the inevitable job search. Law school, unlike nearly every other graduate program, requires absolutely NO mathematical skills, and that is largely why people with bachelor degrees in philosophy, political science, history, and english enter the law school program. So the problem is really endemic and systemic. An english major could always get a PhD in English Literature, but that is usually a 5-6 year commitment and then the only real option is teaching, which is inimical to people with no intellectual curiosity. Law school is a much safer (and easier) bet.

    And, law schools, of course, contribute to the problem by admitting around 150-300 students each year. Aside from law school rankings, there is nothing to stop them. Now, most law school’s recognize that they will never be in the top 50, and so they have very little incentive to develop curriculum changes and enrollment techniques that will make their graduates more competitive in the job market. Consider a school like, for example, The Appalachian School of Law. This law school will always be a Tier-4, and so there is no reason to suppose that they will ever stop admitting around 150 students a year and charging each around $40,000 for tuition. After all, they have tons of law school faculty members to pay (who each teach only 2 classes a semester), as well as a large library staff, admissions department, and career services department. What their students do after graduation really is not a problem for them because they will never rise in the law school rankings. So, why not continue raking in the bank by charging students with zero job-prospects 40 K a year?

    I am fortunate due to my family connections and the fact that I don’t have to take out loans. But if I had to finance my own education, and had absolutely no family connections in the legal market, there is NO way I would ever consider going to law school. My impression is that most kids go to law school because they can’t do anything else. So these law schools are really just feeding off the desperation of kids who don’t know what else to do. It is a great disservice to these kids. My parents have called law school “One Giant Scam.”


    You don’t need to be a quant to understand that law schools are sucker’s bets. There are simply too many schools, churning out graduates in a market with a declining demand for young lawyers (http://kowalskiandassociatesblog.com/2010/07/25/what-if-they-built-a-new-law-school-and-nobody-came/ ), while legal work is increasingly handled by Internet based providers of legal services (http://kowalskiandassociatesblog.com/2011/08/11/are-law-firms-going-to-be-replaced-by-internet-based-providers-of-legal-services/ ) and offshore legal project outsourcing companies (http://kowalskiandassociatesblog.com/2011/10/12/lpo%e2%80%99s-have-become-legal-project-outplacement-firms-they-are-outplacing-legal-work-from-traditional-law-firms/ ).