Current supply & demand of lawyers

Parents Forum
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<p>This issue with student debt is that people rarely accurately understand how much it really costs. </p>

<p>Many fail to properly account for the impact of interest, hence many of the “the new legislation is great it will lower my payment” comments. Given the typical size of law school debt such lower payments could actually put someone in a negative amortization situation where they write a check every month and every month they owe more than the month before. </p>

<p>However even if one thinks about interest they often fail to understand the opportunity cost associated with loan repayments–in other words what else could have been done with that money.</p>

<p>Consider the following:</p>

<p>A $150k loan with an average rate of 6.5% will require a payment of $1,306 every month for 15 years–that’s more than many people’s mortgages considering today’s low interest rate. After those 15 years this person will have spent $235k to repay the original $150k that was borrowed. This is a very conservative calculation considering the current rate on Grad Plus loans is 7.9% not 6.5%.</p>

<p>So what’s the opportunity cost? Let’s assume that someone else without the loans applied that $1,306 to a retirement saving plan (401k and IRA). Assuming a conservative average return target of 6.5% at the end of the 15 years they would have saved Just over $400k. Without any further contribution after another 25 years by the time the person in question is ready to use that money in retirement it will have grown to a bit over $2 million. This is also a conservative calculation considering 6.5% over many decades would be a low return. </p>

<p>The cost of the $150k loan is not $150k… It’s somewhere around $2 million + over the length of ones career.</p>

<p>Now of course the education resulting from the loan can increase ones lifetime earnings and thus offset some or all of this cost… but that’s a big hole to fill. </p>

<p>For something like med school the financial picture is ugly for quite some time, but there is a reasonable expectation of high income down the line that can be used to battle back a mountain of accumulated debt. </p>

<p>However in many other scenarios like law school that reasonable expectation of future income simply doesn’t exist. Taking on that level of debt is a huge gamble even for top students.</p>

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<p>Yes, it is a lot of debt. It seems that the kids who are easily getting jobs (friends) are the engineers and kids with technical backgrounds. I believe Bill Gate’s father’s law firm, main, huge office in Pittsburgh is worldwide.</p>

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<p>The law school my son is at, was his top choice (outside of NYU and Columbia both of which he was not admitted), and while not top ranked nationally overall, the school(Cardozo) is highly ranked in the field of intellectual property law… His undergrad degree is in Physics which gives him the science background important for this type of law…still no job offers:(</p>

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<p>Kirkpatrick & Lockhart, which was based in Pittsburgh took over Preston Gates many years after Gates Sr. stopped practicing law. He has no affiliation with K & L Gates.</p>

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<p>Absolutely, rocketman. It isn’t enough to accept that $150,000 in debt is manageable, an idea which I find pretty ridiculous for law grads. It’s a matter of knowing how much a student is actually going to end up paying for that $150,000 debt upon graduation and how it will impact the life of that grad for years and years to come.</p>

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<p>Word from attorneys I’ve worked with is that specialty rankings don’t matter a whole lot when it comes to hiring in biglaw firms…even IP/patent heavy ones. </p>

<p>Preferences tend to be oriented toward overall ranking of the law school and the ranking of the law student under consideration. </p>

<p>In IP/patent, another possible factor is the specific STEM major being undertaken. Physics isn’t going to have as much IP/patent law demand as say…those related to engineering, CS, biotech, etc. Even that…some like biotech have strong preference for those with grad-level degrees…including PhDs.</p>

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<p>Well, as I have said before, S has his mind set, the question now is how to find the right balance between debt and future job prospects. He already has an acceptance at T-3 school, so “if everything else fails”, he will go there, bust his behind and try to become a success at his chosen profession, earning enough money to pay his loans. There is a possibility of some need-based aid too, as we are not a high-earning family.</p>

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<p>First, keep in mind that law schools tend not to give out as much/any need-based FA as undergrad. Most aid tends to be in the form of merit scholarships…and most of those only cover a portion of law school expenses. </p>

<p>Some questions/issues he should consider:</p>

<ol>
<li><p>Does that T3 have a strong reputation locally in terms of local area law firms actually hiring their graduates? Don’t take the law school’s word for it as most have been known to massage their employment numbers. Go to several random law firms, attorneys, and the local bar association and get it straight from their mouths. </p></li>
<li><p>Is it possible for him to work another year and retake the LSAT for a higher score? This will not only help him with getting into higher ranking law schools…but also possibly increase his chances of earning more scholarship money or even a free ride. He may also find a better channel for his passions that may not come at the cost of $150-200k worth of educational debt and uncertain job prospects. </p></li>
<li><p>What are the conditions of any scholarships that are offered? Most tend to require a law student remain a minimum GPA/class rank standing. This is much harder because all classes are strictly curved, students are going to be much more competitive than undergrad, and law schools…especially lower ranking ones tend to place all scholly students in the same sections to ensure the vast majority lose their scholarships after one year due to the grading curve. After all, most students are going to be in the middle and bottom of their respective law school classes and one cannot predict where one would end up even if they graduated at/near the top of their undergrad graduating class and/or scored high on the LSATs.</p></li>
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<p>Sorry, cobrat, I was not clear. By T-3 I meant Top 3, not Tear 3. They don’t give merit scholarships, only need-based. I put “all else fails” in quotes, but probably should have put a smile next to it. :slight_smile: S will wait for all his acceptances and see what financial offers he has before deciding to forgo any merit money and deal with a small need-based amount of aid.
To be honest, the amount of debt involved scares the heck out of me and H, but we can only advise, S has to make the decision himself.
Everything you said, by the way, is right in my opinion. S did a lot of research already, and will continue to look for guidance everywhere he can. And we will cheer him on and hope for the best. :-)</p>

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<p>^ ^ </p>

<p>Actually, if your S was accepted in the top 3 and he’s set on going to law school…he should take those offers unless the merit schollys cover the vast majority(75%+) of tuition AND have none of the onerous conditions(i.e. maintain rank within top 50%, top 1/3, top 10% or minimum GPA above mere acceptable academic standing). </p>

<p>If it is top 3…the employment/cachet may be such that it may be worth risking paying more to attend…especially if you consider some of their IBR programs which tend to be much more generous than other T-14 law schools…and far more so than lower ranking ones. I’d compare IBR repayment programs…including tax implications in weighing the decisions. </p>

<p>Even then…I’d weigh the debt issue carefully and not count on need-based FA covering everything. </p>

<p>Good luck to your son. :)</p>

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<p>More so than even a STEM degree for IP law, I have heard that an undergraduate engineering degree is nearly essential. I know of a graduate of a tippy-top honors state flagship with a CS degree followed up by a Top 20 law school turned away from the likes of Microsoft and Apple, even when the going was good, for failure to have the engineering degree.</p>

<p>Loan forgiveness programs, at least for medicine, are not all that great unless the primary motivation is working for the military or in an under-served area. The remuneration is significantly lower and you can more easily just service your loans with a higher paying job. Classmates that went the military route were uniformly disappointed in retrospect since the military reserves the right to use you at any point in your post-graduate training. Say you want to be a trauma surgeon thinking the military will surely let you do that training first and take you for 4+ years in your chosen field. Much to your surprise they take you immediately to be a general medical officer on a base doing pap smears and well-baby exams.</p>

<p>The analysis, however, of a $150K debt = $2MM in savings at career end is sobering.</p>

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<p>Thanks you cobrat!</p>

<p>The acceptance was quiet a surprise, so S( and his shocked but happy parents) is just starting to weigh all the particular pros and cons. We don’t count on much aid, but any amount would be of help in this case. :slight_smile: Fortunately it’s rather early in the cycle, so S has enough time to dig into the intricacies of FA, loan repayment and so on.</p>

<p>If only we could see the future… :-)</p>

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<p>“The analysis, however, of a $150K debt = $2MM in savings at career end is sobering.”</p>

<p>YaleGrad, I’m sorry, where did you get this figure? If I use the new payback formula, which is ten percent of income, forgiven after 15 years, I get closer to $500,000 paid, and I realize one can’t be exact because the salary will vary. I also would figure, (which I didn’t when I did the calculation when it was first announced) refinancing the loans at today’s much lower interest rates,. And it may be 20 years - I haven’t been to the IB0 site
recently. </p>

<p>Also, even using the full payback formula, I don’t see how you are getting $2 million dollars.</p>

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<p>A lot of misinformation regarding IP law.</p>

<p>First IP law is not the same as patent law. IP law is much broader and includes copyrights, trademarks, in and out-licensing. Most IP attorneys are not patent attorneys. </p>

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<p>He was not applying for a patent job. Most companies including Apple, Microsoft, Google or IBM do not prosecute their own patents. patents are always handled by outside counsel. It is just too specialized to be done in-house. IP counsel within tech companies is not composed of patent attorneys and they are hardly ever trained as engineers. They deal mostly with licensing issues. </p>

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<p>That is also false. Physics is the basic science behind most mechanical and electrical inventions. It is actually one of the most flexible backgrounds for patent attorneys. I have an applied physics undergraduate degree and a CS graduate degree and I have worked on inventions in automobile, medical devices, nanotech, greentech, software, even chemistry…Relatively few patent attorneys are actually trained as engineers.</p>

<p>It is true that in certain field like biotech, most patent attorneys are PhDs, in large part because there is no way to acquire the required understanding of the field as an undergraduate. In theory at least, any patent attorney can work in any STEM field although they typically tend to specialize after a while. </p>

<p>A law degree from a T-1 school is not at all required. Law schools provide zero training in patent law anyway. The differentiating factor is the actual experience in the IP field and for starting attorneys, the scientific background is most important. A strong STEM background and second-tier law school will beat an average STEM background and top law school anyday!. It is not unusual for patent attorneys to have gone to law school at night while they were still holding on to their day jobs. That is what I did. Some companies will actually pay for their scientists law training. </p>

<p>The very big money in patent law is with litigators who make well over $500K on average. Obviously, one does not start in litigation and many started in patent prosecution. Patent prosecution (writing) can also be very lucrative especially in fast growing areas such nanotech and software. Biotech has gone through booms and busts and right now internet related patents are the craze. The revenue for patent attorneys in these areas is subject to the same ups and downs. For these reasons, I have avoided these fields. </p>

<p>Most patent attorneys work for boutique IP firms not Biglaw. I have always preferred working on my own leveraging contacts I have in the industry. Right now, I have much more demand than I can handle and will soon add another partner. I don’t see the demand dropping anytime soon especially with Japanese and Chinese companies applying for US patents in greater and greater numbers. Patent prosecution cannot be outsourced. </p>

<p>In regards to the current demand for patent attorneys:</p>

<p>[Patent</a> Lawyer Demand Rises Following U.S. Legislative Overhaul - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

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<p>Out of 1.2 million licensed attorneys in the US, less than 20,000 are patent attorneys. Over 500,000 new patents are filed annually and that does not include provisionals, reissues, reexams or international patent applications.</p>

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You’re only considering the direct cost of the loan payments. You also need to consider the opportunity cost–what else could have been done with that money if it wasn’t going towards loan payments. </p>

<p>If, in place of a loan payment, that money is applied to a reasonable appreciating asset such as retirement savings the opportunity cost of the loan payments ends up being huge. </p>

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That’s a lot more difficult that it may seem. The gov’t backed loans, especially for grad school, have much higher interest rates than you could get for say a fixed rate mortgage with good credit. The only reason a private bank is willing to give such low interest rates for a mortgage is that the loan is secured (against the property being purchased/refinanced). </p>

<p>The current rate for government backed Grad Plus loans for graduate school is 7.9%. The current rate for a fixed rate mortgage for someone with good credit has dipped below 4% in many markets. There’s no free lunch here… getting a loan without having any meaningful collateral to back it up with (government secured or not) comes at a high price.</p>

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<p>^^^^Thanks Rocketman08. I was thinking that a parent could do the refinancing - there also is the option of rolling the loans and mortgage into one thirty year mortgage. Of course it would take a willing parent and some creative financing.</p>

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<p>“Creative financing” is always an option, but one needs to be extremely careful to avoid some big pitfalls. </p>

<p>In today’s lending climate and for the foreseeable future it seems unlikely that a parent would be able to perform the refinancing unless they have sufficient home equity to roll it into a home equity loan. You simply can’t get a loan for that amount these days unless it’s properly secured. </p>

<p>Also I’m not a tax expert, but I would imagine there are some interesting tax implications involved in such a situation. </p>

<p>The parent “refinancing” for the student essentially mounts to the parent writing the child a huge check, funded by a loan the parent takes out–unless the parent had cosigned in the first instance in which case it was always their loan too. In short, the parent is essentially giving the child the $150k or whatever the figure is. Normally you can’t just gift someone $150k like that without some hefty taxes. I’m sure there might be some creative routes around such issues (e.g. the parent formally ‘loaning’ the child money complete with all the necessary legal paperwork), but it’s probably not very straightforward.</p>

<p>Also, there are some horror stories out there about parents that got tied up in a student’s loans and then something happens to the student–not something one wants to think about but it does happen. If the parent gets financially linked to a child like that in any way its prudent to ensure sufficient life insurance is in place to fully cover any debts should something happen to the child. There are stories of parents that co-signed for a child’s student loan, something happens to the child and the parents are still left paying for decades on the loans.</p>

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<p>In the end the decision to go a private law school is justified on a ROI basis if the law school graduate can expect to make approximately **$20K a year more in income ** than he would without the law degree. For many college grads with liberal arts degrees the return will be significantly greater. This is why law still attracts nearly 25% of a typical Ivy league school class, more by far than any other field by far. Many may not even end practicing law, but will end up in government, business or politics. Law school has become another triage station just as college used to be a generation ago. </p>

<p>We hear anecdotes about law school grads unable to find permanent positions doing contract work at $30/hr. That still beats being a barista at Starbucks for $10/hr.</p>

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<p>Cellerdweller:</p>

<p>“I have much more demand than I can handle and will soon add another partner.”</p>

<p>Should I have my son send his resume?:)</p>

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<p>“We hear anecdotes about law school grads unable to find permanent positions doing contract work at $30/hr. That still beats being a barista at Starbucks for $10/hr.”</p>

<p>My d. makes $30/hour after graduating in three years with an undergraduate degree in business (emphasis in accounting). Why go to law school? (At this rate, she’ll be a partner by age 29, or so her boss says.) And she’ll have no debt. Every dollar that would have gone into paying for law school debt will go into savings/investment/house. It would take a LONG time for most law school grads to catch up.</p>

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<p>[KPMG</a> tax shelter fraud - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/KPMG_tax_shelter_fraud]KPMG”>KPMG tax shelter fraud - Wikipedia)</p>

<p>[RedBedHead:</a> KPMG - Helping Tax Dodgers & Corporate Fraudsters Everywhere](<a href=“http://redioactive.blogspot.com/2011/07/kpmg-helping-tax-dodgers-corporate.html]RedBedHead:”>RedBedHead: KPMG - Helping Tax Dodgers & Corporate Fraudsters Everywhere)</p>

<p>[Oil-for-Food</a> Programme - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Oil-for-Food_Programme]Oil-for-Food”>Oil-for-Food Programme - Wikipedia)</p>

<p>Everybody knows about Anderson and Enron, so no need to put a link to them</p>

<p>However, why is it that your wife (nurse), daughter (auditor), etc. need to be the role models for the rest of the world, or the CC readers?</p>

<p>My guess is a small amount of people aspire to those types of jobs, the dropout rate is high, and for some reason you need to push them upon others (it seems) to provide some type of validation for their choices.</p>

<p>Finally, kids go to law school and all other types of jobs because that is what they like to do.</p>