Law Schools, Money, Real Estate, Student Loans

If You Want To Own A Home, Don't Borrow Money To Go To Law School

You can have a J.D. or a house but not both.

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Now that my wife and I have a baby, people keep telling us that we shouldn’t just find a bigger rental, we should buy something and put down roots. My wife, politely, laughs and says, “We’re thinking about it.” I angrily roll my eyes and say, “Why don’t you think about going and f**king yourself.”

You see, we are both law school graduates who debt-financed our educations and now live in New York. Property ownership is not something that will happen for us… unless we just want to give up and move to an oil-soaked subdivision in Arkansas.

But I am not alone. A law professor has crunched some quick numbers and determined that at least half of the class of 2011 wouldn’t be able to own a home….

A couple of years ago, we discussed a formula for going to law school and owning a home that was devised by Jim Chen, at the time the dean of Louisville Law. From the 2011 piece:

If you want to go to law school and one day be able to own a home, Chen argues you need to have a salary that is three times your law school’s annual tuition. You need to earn six times your annual tuition if you want to be a truly financially sound home owner if you are carrying three years of law school debt with you.

Chen wrote that in 2011. Now, Professor Jerry Organ of the University of St. Thomas Law has done a study on 2011 grads using a formula similar to Chen’s. The WSJ Law Blog explains the formula:

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Graduates need to be earning an annual income that’s at least two times their annual tuition — or an income that’s at least two-thirds of their law school debt — to reach “marginal financial viability,” according to the formula. Those below the threshold can’t afford to buy a $100,000 house and struggle to retire their debt.

Organ takes scholarships into account, but assumes that people borrow the rest. He counterbalances that by assuming that 2011 law graduates have no undergraduate debt. He concludes that 53.5 percent of 2011 law graduates have “less than marginal financial viability.”

Now, I know what prospective law students are thinking (especially those who are bad at math). They’re saying, “Well, d’uh, I don’t need to own a home two years after I graduate. First I’ll pay off my debts, then when I’m years out and making bank, I’ll buy a sweet house.” But try to understand the numbers: Organ is saying that if you aren’t earning at least double your annual tuition, you’re going to struggle even in paying off your debt, to say nothing of accumulating the resources needed to buy a house. And Organ has conservative estimates; Chen says you need to earn even more.

You also have to think about how your starting salary affects your long-term salary. It’s very hard to go from making $50,000 with your first job out of law school to making $250,000 while still in the legal profession. I know it happens for some people — please, spare me your stories about how you “beat the odds” — I’m talking about the motherf***ing odds.

And Organ is just looking at individual debtors. He’s not taking into account spouses: sure you might be like me and get lucky with a spouse who has a better earning potential than you do, but as law graduates you are more likely to be like my wife and get saddled with a low-rent “writer” who destroys whatever hope you had at financial security. Organ isn’t looking at having kids, or having parents who need long-term care and money. Or all of the other things life throws at you.

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He’s just looking at whether or not your expected salary can manage your debt load while also owning a home. And his answer is “NO,” for 53 percent of recent law school graduates.

You know what Mark Twain says about land: “Buy land, they’re not making it anymore.” Well, unless you have a hot tip about an underwater volcano in the Pacific that is about erupt, you might want to reconsider going to law school as a way to living the good life.

More than 50% of Graduates Aren’t Making a Living – Study [WSJ Law Blog]

Earlier: Don’t Defend Your Law School Until You’re Earning Three Times Its Yearly Tuition

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