Archive for January, 2010

Law-School Debt Loads

Monday, January 18th, 2010

In her article, “Linking Debt and Income,” Inside Higher Ed, January 18, 2010, Jennifer Epstein reports that the U.S. Department of Education recently proposed that vocational and for-profit colleges meet minimum standards for debt-to-income ratios for recent graduates.  The average debt repayment could be no more than eight percent (8%) of expected earnings in the field.  The presumptive expected earnings would be the 25th percentile of incomes in the field for which they had been trained. 

How would that work for law schools?  Going to law school is expensive, and often financed with debt.  The 2009 Survey Results of the Law School Survey of Student Engagement tells us that 29% of the students surveyed expected to graduate with law-school related debt of at least $120,000.   The following chart from page 14 of the 2009 Annual Survey of law students shows the law-school debt levels expected by current law students.

According to the May 2008 Occupational Employment and Wage Estimates of the Bureau of Labor Statistics (National Cross-Industry Estimates [.zip file]) the 25th percentile of annual income for lawyers was just under $75,000.  That would make the maximum annual payment just under $6,000.  Assuming a modest ten percent (10%) interest rate,* the maximum average school debt would be just over $45,000. 

But over two-thirds of students surveyed in 2009 by LSSSE expect to graduate with law school debt of $60,000 or higher.  According to Epstein, schools that don’t meet the eight percent (8%) of presumptive earnings could show

  1. actual-median earnings to average-debt ratios of 8% or below,
  2. a 75% loan repayment rate , or
  3. program completion and in-field placement rates of at least 70%.

The following chart from the National Association of Law Placement shows the distribution of salaries of the Class of 2008:

Class of 2008, Distribution of Salaries (NALP)

The overall median of $72,000 is just under the May 2008 25th percentile of lawyer salaries ($75,000), so there is no wiggle room there.

Should law schools start reporting salary and debt-load information for its recent graduates?

posted by Gary Rosin

*Interest rates on guaranteed student loans in repayment are now about 2.5%.  I’ll have to check on the current average for non-guarnateed loans.  In event, current interest rates are abnormally low.

First Year Associates and Big Salaries

Wednesday, January 6th, 2010

There’s an interesting article by Brenda Sapino Jeffries in a recent Texas Lawyer,Gardere Reduces First-Year Salaries and Billable Hours“.  The Dallas-based, 275-lawyer firm, Gardere Wynne Sewell is cutting first-year salaries form $140,000 to $120,000 (about 14%) and first-year billable hours from 2000 to 1700 (15%).  The rationale is that clients were starting to specify in engagement letters that no first-year lawyers could be assigned to the matter.  The associates will also get about 300 hours of training:

“I just think we are getting more focused. You understand you have an investment in these people and they get the right type of training,” [managing partner Steve] Good says, noting that training will include classroom sessions and more opportunity for the first-year lawyers to observe trials, depositions and negotiating sessions.

The problem?  Clients don’t want to pay for training:

[Stephen] Mims [Prescott Legal Search] says he has spoken to a number of general counsel who complain that many first-year associates are not prepared for the job when coming out of law school and would benefit from more training. Gardere’s plan addresses that client concern, he says.

Some have speculated that the economic downturn has accentuated the problems inherent in the traditional Big-Firm model of practice.  We’ll need to see many more swallows before we can tell if it’s Spring in Capistrano.

posted by Gary Rosin