Is Your Law Degree Still Worth Anything?

onSeptember 29, 2008 at 4:06 PM

Given the economic Armageddon happening right in front of our eyes, you might think that even your investments in your own education are depreciating faster than the Congressional approval rating.

But you’d be wrong. According to Karl Okamoto over at the Conglomerate:

Is law school a good value? That’s the question I ask my students to figure out, hoping to teach them a bit about finance. Using crude numbers, the answer looks like a resounding “yes.” As they say in the investment business, it looks like a “three bagger.” Even if you have to put $230,000 in, you get over $700,000 back!

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That’s a cool $470,000 in net present value — a much better return than any American bank is likely to offer you this lifetime. The methodology is based on the Department of Labor’s statistics:

[T]he Wall Street Journal reported recently on salary statistics. While the median salary for persons holding just a BA has slipped to $47,240, those of us with professional degrees have gone up to $89,602. Even better, recent Labor Department numbers show the median salary for lawyers at $106,120. So, as I say to my students, think of your law degree as an annuity. It represents a payment stream that lasts for a career (say 40 years) that equals the spread between what you would have earned without your law degree versus what you can with it. Using the median salary numbers, that spread is almost $60,000. Discounted at 8%, the annuity has a present value of over $700,000. The present value of three years of tuition (at $40,000 a year), books and foregone salary (at the median) is about $230,000. So, as your stockbroker used to say about Lehman bonds, a “no brainer!”

Nice. Of course, that median salary is largely dependent on top firms paying their lawyers large salaries, based on the huge fees charged to wealthy clients.

Should a major economic collapse send the American economy back to the antebellum period, wealthy corporations might not be able to afford… well, everybody here understands ~~we’re totally screwed~~ the worst-case scenario.