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Sub-prime education

I looked into going back to school recently. I might still do it some day. In some ways it’s hard to see a financial benefit. Cost = ($30,000 annual tuition x 2) + ($40,000 in annual salary foregone x 2) = way more than the benefit I’d gain from Master’s-level government employment (Oh, didn’t you hear? Private sector job growth during the last decade was negative).

Still, I wonder if the current wailing and gnashing of teeth over the expense of undergraduate and graduate education fails to account for details. Take college. The average debt from a four-year degree is now $23,200. That’s either a little or a lot. It’s a little if you studied engineering at MIT. It’s a lot if you majored in Christian Studies at Hillsdale College.

Same with, for example, law school. People gasp about $140,000 debt incurred in the hallowed halls of the Ivy League. However, that cost is neither surprising nor excessive considering it gives one access to six-figure Biglaw salaries. If one doesn’t mind settling for a normal (probably government?) salary, it’s not too difficult for a reasonably intelligent person to get good LSAT scores, get scholarships to a decent law school, graduate with debt that’s not overwhelming, and go on to have a nice local career.

The problem is that Americans are making the same mistake with education as they recently made with real estate. We justify massive borrowing by blindly assuming that the investment will always maintain its value and pay a return. While this was perhaps true for education during the last several decades, it no longer is. Students must now make good choices to get good value.

4 Comments

  1. Omar Uddin wrote:

    Definitely–Its especially a problem with grad school, where many people utilize it as a means of forestalling critical decisions regarding their career. I will never, *ever* cease to be amazed at the amount of people who blithely apply to graduate programs without a concrete, specific idea of what they want to get out of it. They view it as some type of gateway to elite status that will, in the long term, end up justifying the massive expenditure of time and money.

    Once upon a time, I would have agreed with your take on the law school route (and I would definitely be interested to hear Ona’s opinion about this), but the assumption that admission to an elite law school is a path straight to BigLaw is increasingly erroneous. The old rules simply don’t apply anymore. More and more, BigLaw is recruiting only the very top students from these prestigious schools. Its no longer an automatic assumption that once you get in to, say, Northwestern, your can write your own ticket. It certainly helps to get in, but the landscape is so competitive that admission alone is not enough.

    As for your other contention, I can tell you from first hand experience that that is not the case. The law school application rates are so freaking through the roof these days that even reasonably intelligent people are finding it tougher and tougher to gain admission to even decent law programs. Believe me when I tell you that people with incredibly sound educational and professional backgrounds are getting LSAT scores that fifteen years ago would have gotten them admission at a top 25 school like the University of Illinois–now that gets them offers only from a smattering of Fourth Tier institutions. And even the competition for scholarships at these lower rated private institutions is so fierce that the debtload at most of these schools ends up not that much less than at the Ivy League. And job prospects are bleak, no matter where you graduate from. Starting salaries are being slashed (my first law firm job paid me less than $40,000), hiring freezes have been in effect at a lot of places for years.

    I just think people really need to weigh the costs and benefits of a decision like this. You are dead on when you posit the analogy with real estate. People need to start thinking in nimbler terms of education. Set specific goals for what you want to get out of your grad program. Recognize that a graduate degree is an investment, not a one way ticket to six figure salaries and intellectual nirvana.

    Wednesday, January 13, 2010 at 12:45 | Permalink
  2. pjk wrote:

    The lower tiers are that crazy competitive? Shit. Now that I think about it, a few other of my lawyer friends would probably corroborate that. Ona and I were talking about it the other night – why do so many people think they can be lawyers? I’m guessing it’s because:

    1. There’s no math;
    2. The only explicit educational prerequisite is “be smart”
    3. It’s a hell of a lot easier than being a doctor
    4. Television

    Add 10% unemployment, and you’ve got yourself a generational lawyer bulge.

    Wednesday, January 13, 2010 at 13:03 | Permalink
  3. Omar Uddin wrote:

    Peter, I think those four reasons are absolutely spot-on. Over time, I have come to think of law school as basically finishing school for liberal arts majors who fancy themselves “smart,” and “ambitious,” but have no concrete ideas in terms of what they want to get out of their Bachelor degrees. The media glamorizes the profession, and people come to think of it as a haven for intellectually serious, elite individuals. But its a bunch of bullshit. The overwhelming majority of private sector legal work is not intellectually rigorous; its monotonous document review and glorified stenography, at an increasingly pathetic level of compensation.

    Its a huge problem. The American Bar Association has been routinely criticized for operating way too many law schools (there are around 200 nationwide and counting, to say nothing of the fly-by-night, non-ABA approved schools) and not making entry barriers high enough. At least with the medical profession, the entry barriers are intense enough (MCAT, rigorous classes, board exams, resident match process) that by the time one graduates from med school, there is almost a one to one ratio of supply to demand in the marketplace. But the law is an entirely different beast. The end result is that the profession is essentially creating a new breed of white collar underclass: heavily indebted, sporadically employed, poorly paid, lacking benefits, stuck in dead end temp jobs that pay lower hourly rates, ect.

    I also always laugh when people automatically assume that having a law degree on your resume makes you immensely attractive to potential employers in non-law related fields. “Having a law degree must give you lots of flexibility!” Um, no. From what I hear, potential employers usually just end up wondering why someone with such credentials wants to work in a different field. They end up assuming that there is something terribly wrong with you. Its not an asset.

    It is a bad scenario, and unless the ABA takes drastic action (or potential consumers heed your advice and wise up about their grad school route) I think it will only continue to get worse.

    Wednesday, January 13, 2010 at 14:11 | Permalink
  4. John wrote:

    Peter, that’s why you have to find a grad program that PAYS you to attend classes–a fellowship. That way you don’t have to go into debt, AND you get to bow out of the job market for a few years. Fellowships are out there. In fact, that’s why we moved to Austin…

    Friday, January 15, 2010 at 11:27 | Permalink

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