Tuition at elite private law schools is approaching $40,000. Add another $15,000 a year in expenses, and the cost of a law degree exceeds $150,000 (not counting opportunity cost). Students who borrow to cover their education pay much more. Despite this expense, getting a law degree still pays off handsomely for anyone in line for a corporate law job. For a $150,000 investment, a graduate can earn $800,000 to $900,000 in the first five years alone, and much more over time. Given this expected rate of return, it seems likely that tuition at elite institutions will continue to increase at a solid clip.
This way of thinking, however, forces graduates to take the corporate law firm route, at least for a few years after graduation, as a means to finance the cost of law school. Indeed, this factor probably already contributes to the high percentage of elite graduates currently going to corporate firms. Many students come into law school with different aspirations, and later decide to go to law firms to pay off their hefty loans. Loan forgiveness programs help alleviate some of this (only selected positions qualify), but the financial pressure is still formidable.
...A few words can be said about the losers in this system.
Judges are not doing well. They do not work the insane hours of associates, but most work hard nonetheless, under trying circumstances. Many are highly accomplished. They play a central role within the system. When evaluated by just about any measure other than hours billed for corporate clients—merit, knowledge, value, experience—it is bizarre that leading judges earn less money than first year associates at corporate law firms.
Many students at non-elite law schools are not doing well. As indicated earlier, only the top 5% to 10% of graduates from non-elite schools obtain the choice corporate law jobs (with a much lower percentage at many schools). The remaining 95% of graduates will earn substantially less initially (many in the $50,000 to $70,000 range), and over their careers. These lawyers mainly serve individual clients or work in government positions. When adjusted for inflation, their pay has decreased in the last couple of decades (see Heinz, Urban Lawyers 2005), while loan payments have gone up. Tuition increases at non-elite schools have kept pace with elite schools—lagging by a few thousand—so non-elite graduates pay almost the same amount for a law degree but have significantly lower expected earnings. Law school may still be a sound investment for these graduates, but not necessarily for those who had a solid earning potential before entering law school, and not for older students. There is another nasty twist. Many of the top students at non-elite schools—the ones with a decent chance to land corporate law jobs—get substantial scholarships (which schools use to lure highly credentialed students to boost their rankings), while those lower in the class often pay full price. As a result, the students who are likely to earn far less subsidize the education of the students who will earn a great deal more.
The general perception among members of the public is that to obtain a position as an associate at a high-powered law firm is to join the ranks of the elite of the legal profession. This is a fairly accurate perception, and many who enter law school with the idea of acquiring wealth and influence set their sights either on joining a top-tier law firm or opening a practice of their own (or joining a successful practice) and eventually winning large settlements in mass tort cases. But as Tamahana tells us, accomplishing either is becoming a dicier proposition, at least for those law students who do not occupy the upper ranks of their classes at the top-tier law schools. Of course many enter law school not with the primary goal of acquiring wealth and influence, but with the goal of having a satisfying and fulfilling career in the law, working in their own small practice, becoming a prosecutor or a public defender, working for the federal government, and so on. I don't quite agree that judges are "losers" in this system, as their pay is quite considerable compared to salaries in non-legal professions and they are accorded a great deal of respect by those both other lawyers and the general public. But for those who enter law school with the goal of joining a top-tier corporate law firm, a dose of realism might be in order depending on which school they manage to gain admission to and how well they do in their studies.
UPDATE: The news is doubly bad if you want to do estate planning at a big firm:
With profitability a top priority at Sonnenschein Nath & Rosenthal, one practice group is under the microscope: trusts and estates. Four T&E partners at Sonnenschein in recent weeks have either left or announced plans to leave the 660-lawyer firm.
* * * T&E may be vulnerable because it is a low “leverage” practice — fewer junior lawyers generally are needed, say, to draft a will than to complete a merger agreement.
Robert Cockren, the new chair of Sonnenschein’s T&E practice, says the firm remains committed to T&E and still has about 28 lawyers in the practice across seven offices. But he acknowledges that it is “difficult for T&E practices to meet the same sort of” profitability and productivity targets that other practice groups may achieve.
Because individuals, and not corporations, pay T&E lawyers’ bills, it’s often more difficult for them to raise their billable rates. “You can charge a company whatever you want but if you do the estate planning for a CEO he’ll look at every line charge,” said a T&E partner at big Chicago firm. Also, T&E clients are often fiduciaries – such as a trustee or an executor to an estate. “Those fiduciaries have obligations to the beneficiaries,” said Sonnenschein’s Cockren. “So expenses are something they have to careful about.”
The Republican dominated Congress didn't help when they passed President Bush's tax "reforms" driving the estate tax exemption upwards. Given the fiscal state of the union however, and the inevitability of tax increases to balance the budget, tax practice might be the wave of the future.