Easy Money & Graduate School
What if you need Graduate study to complete your career plans? Borrowing for Graduate School is becoming a fast track to enormous debt and financial challenge. The original article, published in the Wall Street Journal on 8/3/2021, is worth hunting down for a long read. Today, I am sharing selected relevant segments.
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Law school was once considered a surefire ticket to a comfortable life. Years of tuition increases have made it a fast way to get buried in debt.
Recent graduates of the University of Miami School of Law who used federal loans borrowed a median of $163,000. Two years later, half were earning $59,000 or less. That’s the biggest gap between debt and earnings among the top 100 law schools as ranked by U.S. News & World Report, a Wall Street Journal analysis of federal data found.
Graduates from a host of other well-regarded law schools routinely leave with six-figure student loans, then fail to find high-paying jobs as lawyers, according to the Journal’s analysis of the latest federal data on earnings, for students who graduated in 2015 and 2016.
When Miami students asked for financial assistance, some graduates told the Journal, school officials often offered this solution: Take more loans.
“I had no work experience, life experience, anything like that before I signed on to this quarter-million-dollar loan,” said Dylan Boigris, a 2016 Miami Law graduate, who began his career making about $45,000 as a public defender. “I thought I would come out making much more than I did.”
A law professor at the university, Anthony Alfieri, said law schools “foster this kind of cruel optimism” in students, letting them think six-figure salaries are attainable, when in reality, those high-paying jobs are largely reserved for students at only the top-ranked law schools.
“Law schools encourage a kind of magical thinking in order to keep the lights on,” he said.
Lesson #1 - Graduate School is ALSO very expensive unless you have a realistic plan. Your grades and your efforts must result in a solid income that supports that debt. Do the research about that income BEFORE you commit your money and your time.
In recent years, brand-name private schools have been saddling graduate students with upward of $100,000 in debt despite their limited earning prospects, in fields such as film and theater, the Journal has reported. The data suggest graduate debt is emerging as a new trouble spot in the student debt crisis. The law-school numbers in particular show how the problem extends even to professions reputed to be more lucrative.
Only a dozen of the nation’s law schools leave students earning annual salaries two years after graduation that exceed their debts, according to the Education Department data covering roughly 200 programs. Among them are Harvard University, Stanford University and the University of Pennsylvania.
Lesson #2- This problem is NOT limited to law school. Dental school graduates are unable to get bank loans to open up their own practices when they graduate. Some must work for national chain dental practices to pare down their huge debt before even THINKING about buying a practice.
Between 1985 and 2019, the average annual tuition at private law schools nearly tripled to $49,000, adjusted for inflation, according to data from the nonprofit advocacy group Law School Transparency, which has pushed law schools to provide more detailed information on job prospects.
Law-school attendance plummeted after the recession as law firms laid off junior lawyers and other entry-level job openings constricted. Though enrollment began to rebound in 2018, fewer students are choosing law school than a decade ago, according to American Bar Association data.
Law school deans say costs have increased as schools create more hands-on clinics to better prepare students to practice law and devote more money to scholarships to attract top students, which improves their rankings.
Ms. White said Miami urged students to borrow less for living expenses, but that students tend to be unsophisticated borrowers, with many taking out the maximum every year. “They don’t know how to manage money in large numbers,” she said. “And so, over a relatively small period of time, [borrowing] got out of control.”
Starting lawyer salaries generally fall into two clusters: $45,000 to $75,000 for public service and small-firm attorneys, and around $190,000 for large firm jobs, according to data from the National Association for Law Placement.
More experienced associates at large law firms can earn upward of $250,000—far more than their peers at small firms or in the public sector. But more than half of entry-level jobs at high-paying firms have gone to graduates of just top 20 ranked schools, according to an analysis of American Bar Association data by Law School Transparency. ( bold highlight added )
“There are only a handful of schools that can offer a guarantee that if you’re a member of your class and you graduate you can walk into a high-paying job,” said William Bratton, a University of Miami senior lecturer.
Lesson #3- Re-read the above paragraph. It applies across the larger landscape of graduate education. Graduate Study Loans, because they cover living AND study costs, add up very quickly.
Paying off a student loan over 10 years, once considered standard, is difficult for many law-school graduates with six-figure debt. Roughly two in three recent law-school graduates hadn’t repaid a dime of their principal balance within two years, or had suspended payments altogether, the Journal’s analysis shows. If the graduates don’t pay down interest—often topping 7% in recent years—their balances will grow, not shrink.
Just 15% of recent University of Miami Law graduates had begun repaying their student loans after two years—the lowest rate among law schools at elite private research universities, as defined by categories the Education Department uses.
At only 14 law schools with published repayment data were the majority of graduates repaying principal within two years. That is partly because many law-school graduates enroll in income-driven repayment plans. In those, recent graduates can tie loan payments to the prior year’s pay, which may not reflect a full year of work.
Kyle McEntee, who co-founded Law School Transparency, said many people borrow too much because they want to attend schools that are prestigious, and they think any debt taken out for higher education is worthwhile. “And that’s just not true,” he said.
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Final Lesson- Don’t be “wooed” into excessive Grad School debt. Just because you can, should you?
Yes- some of your students should go to graduate school for their well-defined career plans, which include realistic income that will support their investment. Just remember who is borrowing the money and who is getting that money to “keep the lights on.” Take the time to realistically review the financial outcomes for the work you hope to do. When you invest in yourself, do it wisely. Don’t go because some professor in your major says it is a good idea or because they profit from their recommendations directly. Ask them how long it took to pay off THEIR grad school debt, how much and WHEN they incurred it. Their response, whatever it may be, will be illuminating.
Next week, we start an important series using the book, Restoring the Promise, by Dr. Richard K. Vedder. You don’t want to miss what this University professor is saying about all things college & university.
Until Next Time,
All My Best,
Bonnie Burkett
