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January 22, 2007

The Cost of A Legal Education is Crushing, But the Spirit of the Entrepreneur is Inspiring

The first week of my class, "How To Hang A Shingle Right Out Of Law School," the students get an assignment which kind of grounds them in their own reality.  They have to (confidentially, of course) let me know where they will be financially, emotionally and technologically upon graduation.  This provides a base to work with. Tonight I was reviewing the assignment and I was totally caught off guard.

For some reason I was unprepared for what one student wrote in stark terms.  When he graduates he will have $165,000 in student loans.  He, unfortunately, did not have wealthy parents nor was he poor enough or brilliant enough or a combination of the two to get some financial assistance or better yet, a free ride.  This was just staggering to me. 

When I went back to law school I did a cost/benefit analysis:  tuition plus loss of income vs realistic earnings upon graduation.  Back then it made sense as my student loans would be in the neighborhood of $60,000 total.  It was easy to go to law school because if I couldn't earn that type of money fairly quickly out of the chute on my own, then why bother.

But even with that mind-blowing amount of debt, he continued to write:

"Do I really want a partnership at a big firm?  Short answer, no!  I want to be my own boss.  My whole family has always been entrepreneurs and I see no reason why I should work to make others rich.  More importantly, I want to teach my kids to ski and be there for them when they are sick.  I couldn't imagine a life where I was totally and indiscriminately married to the firm, clinging to the life raft which is partnership.  I will not become someone's slave."

This is the inextinguishable spirit of the solo practitioner.  I can't wait to see his business plan.


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Chuck Newton

You know it is sad really. Back when I was practicing consumer bankruptcy law I put a lot of lawyers into bankruptcy. Bankruptcy is not about having one type of debt over another because obviously students loans contribute as much to a financial failure as do credit cards and automobile loans. However, I noted that those that I put into bankruptcy had unusually high student loans. Also, there are reports that those graduating with high student loans typically have high credit card balances as well. I certainly do not know if I will be successful, but one of the reasons that I have been struggling to put my many children through college and professional school debt free is because I want them to have options. Whether or not one has to file bankruptcy because of debt is not as big an issue as that debt destroys options. For example, you might want to open your own law firm, and take your time learning the ropes and building your practice, but you cannot because you have debt servicing issues. You might need to borrow money to launch the practice that you want (for example if you wanted to go into real estate law and needed a title plant). But you cannot get the loan or money you need because of your current debt service. That said, those who have the faith, the will and the drive to attend law school in the face of adversity typically make the best lawyers in my opinion. Why? They want it. And we in his Country are all about improving ourselves in this way. But, if you do not have access to money, how else are you suppose to do it other than with debt? Are we suppose to tell students "no" because their parents cannot make enough to keep them out of debt? It is a problem.

Christopher Johnston

I am currently an entrepreneur planning to return to college to complete my undergrad degree and then on to law school (hopefully at Tulane). I think many aspiring lawyers feel the same way as your student but don't see any other way than big law to reach their dreams. I think it is especially difficult for women who want to raise a family but have been confronted with the harsh reality that they have to choose between being partner or being a mother. I think that through technology I can create a new kind of law firm. I'm still working out the details but I have a few years to get it together.

Carolyn Elefant

The loan issue is one reason that I have typically taken the position that students who have the biglaw option should work for a year or two after law school and make as much money as they can. Earning money to start a firm alleviates the financial pressure that you have when you start out.

Having said that, I realize that solo practice after law school is sometimes the best or only option for many students. But in that case, the loan is really the cost of doing business. After all, when you think about it, if someone wanted to start a pizza parlor or a lingerie shop, they'd need to take out loans to buy inventory, rent space, finance the business, etc...With lawyers, all we need is a laptop, internet access, a business card and a bar card to get started. So debt is always a reality.

For the record, lest anyone think that I don't understand these issues, I had $70,000 in student loans when I graduated law school in 1988. While I realize that seems small, back then starting government salaries were $27,800, around half of what a GS-11 is today. But the day that I paid back the last installment of my loan was one of the proudest days of my practice: because I paid the debt with something that I created out of nothing.

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