Law Schools, Money, Student Loans

Back In The Race: Are Average Student Loan Debt Figures Misleading?

Columnist Shannon Achimalbe warns against relying on the debt numbers of the law school marketing arm colloquially known as the U.S. News rankings.

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resume girlThese days, more prospective law students are mindful of future student loan debt and are thus paying close attention to cost of attendance at their prospective schools. U.S. News and World Reports, as part of its annual rankings, publishes the average student loan debt of each law school here. For some strange reason, even though the post is titled “Which law school graduates have the most debt?”, U.S. News did not rank schools based on debt burden. But Matt Leichter was kind enough to do it here.

Law schools report average student loan debts ranging between $24,000 to over $170,000. But these reported numbers do not match up with the schools’ advertised tuition cost and estimated living expenses. In most cases, if a law student paid full sticker (including living expenses) through student loans, then his post-graduate balance would be at least double the reported average.

Now I realize that every student’s financial situation is unique and personal responsibility and hard work comes into play. But today, I want to argue that U.S. News’s average debt ranking does not reflect reality in most cases.

To illustrate, let’s look at the law school with the highest average student loan debt at $172,726: Thomas Jeffers… oh, never mind. I’m not picking on this school anymore. Whenever I conduct even the most basic research on the risks of attending law school, this school (along with another punchline of a school in western Michigan) comes up multiple times on the first page of every search engine. It’s just too easy.

So instead, let’s focus on a more prestigious school: Harvard Law School. Now before I go on, I should say that I have nothing but the highest regard for HLS. All of their students have near-perfect credentials, most have successful careers after graduation, and a few of them end up being competent attorneys.

The group Reclaim Harvard Law published an open letter to Dean Martha Minow and the Harvard Corporation demanding the end of tuition at HLS. They claim that the high cost of attendance and resulting student loan debts will hamper students’ career options, which disproportionately affects minorities and those who do not come from money.

According to both the HLS website and U.S. News, the Class of 2015 graduated with an average student loan debt of $149,754. While a $150,000 student loan debt is soul-crushingly high for regular people, it should be manageable for most HLS grads, who are expected to obtain and maintain six-figure jobs after graduation. So if a prospective law student was to rely only on HLS’s reported average debt figure, then it is reasonable for her to attend HLS thinking she will fall within the average and pay off the debt in a few years.

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But the math doesn’t add up. HLS’s tuition for the 2015-2016 school year was $57,200, with total cost of attendance estimated to be $85,000. Next year, the total cost of attendance will increase to $88,600. The year after that, assuming costs rise at the same rate, the total cost of attendance for the 2017-2018 school year will be about $92,200. Taking interest accrual and capitalization into account, it is safe to assume that a fully debt-financed HLS education will result in a minimum $300,000 student loan bill at graduation. And this does not include outstanding student loans for undergraduate and other degrees.

Law School Transparency reports that a Harvard Law grad with no scholarships will have a student loan bill between $297,548 and $322,348, with a total repayment of between $400,000 on a 10-year plan and $550,000 on a 20-year plan.

But what about scholarships and discounts? According to Harvard’s ABA Standard 509 report, 48.2% of its students received some kind of grant and 14.3% received at least half-off the sticker price. In other words, over 50% of HLS students are paying full price to attend. But Harvard’s own website claims that no students are offered tuition-free admission. And from what I have heard and read on the internet, very few people are offered any kind of support.

So this means that the average debt of $149,754 reported by HLS and US News may be misleading. I suspect that most of their graduates have much higher loan balances.

So how did HLS come up with the $149,754 average figure then? I think the school averages the students with high debt with those with low debt together.

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That raises another question: how do some HLS students have low student loan debt? I’ll assume that HLS provides substantial financial aid to some of its students. And a few are insane disciplined enough to minimize costs by cutting coupons, skipping dinner regularly, sharing their two-bedroom apartment with eight others, and working 40-hour weeks while maintaining a full class schedule.

But I think the real reason why the average is so low is that a significant number of HLS students are rich enough to pay the cost of attendance or a big chunk of it.

So if you are fortunate enough to be accepted to HLS (or its equivalent), don’t think that you will graduate with the school’s published average student loan debt. Unless you have rich parents or relatives or are willing to live very frugally during school, you are likely to graduate with a $300,000 to $400,000 student loan bill. Assuming a 5 percent interest rate, you will be paying $1,250 to $1,666 per month in interest. At that level, even with a Biglaw salary, it will take several years before you can pay it off. And if you prematurely leave Biglaw, you may end up being an IBR lifer, even with a Harvard degree.

In the final analysis, the above is the same advice I and others have given for the last few years. Don’t rely on the numbers of the law school’s marketing arm colloquially known as the U.S. News rankings. If prospective law students are aware of what their true post-graduation student loan debt will be, some may decide to do something else and others will take steps early on to avoid becoming perpetual debt slaves.

Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached by email at [email protected] and via Twitter: @ShanonAchimalbe.

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