## Financial Analysis of Law School

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dingbat

Posts: 4975
Joined: Wed Jan 11, 2012 9:12 pm

### Financial Analysis of Law School

http://www.filedropper.com/islsworthit

I started building a model for analyzing the financial aspect of law school last summer. Due to rising time commitments I abandoned work on it, but it is fully functional. I figure anyone about to embark on law school might want to play with it

I'm not likely to do any work on it for the time being, though if there's enough interest I might work on it. Feedback is always useful.

Tab 1 (weighted average income) allows you to enter the employment statistics for a school and will calculate the weighted average income of the graduates
Tab 2 (is law school a good investment) allows you to enter your income if you don't go to law school, as well as the cost of law school + your income coming out of it and it will calculate the IRR (basically, if you treat law school as an investment, what would the return be)
Tab 3 (Loan Estimate) is currently blank. I didn't feel like dealing with this and haven't finished it. The idea is that this shows the impact of borrowing money to go to law school. It's easy to build, but I never got around to it.

Yellow fields can be amended (non-yellow ones can too, but shouldn't)

On the "weighted average income" you put in how many students (column C - not highlighted) are working each category of job, then put in the reported salaries (I got the data from NALP for school X; note that salaries for firms of 100 or less has been assumed to be \$0, not non-existant). This will then work out a weighted average, as well as the percentage of students whose salary is greater than the weighted average. (calculated at 25th & 75th percentile as well as mean and median). Basically, the average salary for all grads is \$106k per year, with 58% earning above average.

The "is law school a good investment tab" lets you compare how much you would make with and without law school and will calculate whether or not it's a good investment (it allows for 3 side-by-side cashflows)
It allows you to put in your earnings year by year (for law school, you would put in a negative number, as you're spending money rather than making any). Based on the tax rate inserted at the top, it'll calculate your returns, if you were to look at law school as an investment.
Note: it'll calculate 45 years after law school, but one can indicate retirement by inserting \$0 salary for those years.
This tab is purely a cash flow analysis, similar to deciding whether or not to make an investment. If the returns are too low, don't go.
I've thought about adding another version where one can create different cash flows, such as 60% chance of cash flow 1, 40% chance of cash flow 2 (e.g. biglaw v shitlaw), but it's a low priority, particularly as it requires too much guesswork and there are too many possibilities. For now, I've just created 3 potential cash flows, which the user can look at side-by side (e.g. non-law job v law school > biglaw v law school > shitlaw). the next step might be to allow the user to give weights to these different cash flow.
Note that this tool requires a lot of guesswork regarding future earnings and is purely speculative. You should research probable outcomes and make an educated guess to predict as much as possible, but, in the end, it's still guesswork

I have created a tab, but done no work, for including loan estimates. I had several different thoughts on this, but don't really know what to put in here. Loan repayment calculators are a dime a dozen, I'm more thinking along the lines of, how do loans impact the information coming from the "is law school a good investment" tab? How do I factor in repayment?
I mean, simply put, if the returns on that tab aren't greater than the cost of a loan, one shouldn't go. Beyond that, you can mimic the effect by reducing future salary by loan payments (e.g. if one assumes biglaw salary at lockstep, just reduce each year's salary by the estimated loan repayments for that year). What should be a really simple piece is complicated by figuring out what's useful or desired.

suralin

Posts: 18586
Joined: Wed Nov 14, 2012 1:52 am

### Re: Financial Analysis of Law School

This is amazing and impressive and ridiculous, in a good way. Thanks for making this.

Posts: 1419
Joined: Thu Jan 10, 2013 8:04 pm

### Re: Financial Analysis of Law School

This needs to be stickied somewhere. It sounds like you've put some tremendous thought and effort into this, kudos.

dingbat

Posts: 4975
Joined: Wed Jan 11, 2012 9:12 pm

### Re: Financial Analysis of Law School

PRgradBYU wrote:This needs to be stickied somewhere. It sounds like you've put some tremendous thought and effort into this, kudos.

Actually, I had put a lot more thought into it (which I've now forgotten) and was willing to put in the effort, but I got sidetracked, due to work commitments and impeding law school. Then I forgot about it. But thanks.

Also, the tool is only as useful as the tool using it. Keep in mind that you need to supply all the information yourself and that it's all speculative. Just plugging in numbers without real thought can give you a false sense of security.
I've had some input from people on how to improve it and may one day go dig up those old emails. If anyone else has any suggestions, feel free to add them. Maybe one day I'll finish this.

oh, before I forget, if someone has reliable employment data for a school and plugs it into the first tab, please share with everyone else, so people don't need to reinvent the wheel. If we get enough different schools, I'll consolidate them into one spreadsheet. (maybe a 0L with too much time on his/her hands wants to do this in a month or two when the new NALP data gets released?)

Justin Genious

Posts: 271
Joined: Sat Sep 29, 2012 12:01 pm

### Re: Financial Analysis of Law School

dingbat wrote:maybe a 0L with too much time on his/her hands wants to do this in a month or two when the new NALP data gets released?

All day. Quitting the FT job in a few weeks so I'll be all over it. Thanks for the resource, good sir.

sinfiery

Posts: 3308
Joined: Thu Jul 14, 2011 2:55 am

### Re: Financial Analysis of Law School

Suralin wrote:This is amazing and impressive and ridiculous, in a good way. Thanks for making this.

toothbrush

Posts: 2388
Joined: Thu Jul 05, 2012 2:21 pm

### Re: Financial Analysis of Law School

I like you for many reasons. This is one more.

guano

Posts: 2265
Joined: Mon Feb 18, 2013 9:49 am

### Re: Financial Analysis of Law School

North

Posts: 4228
Joined: Wed Mar 02, 2011 7:09 pm

### Re: Financial Analysis of Law School

Dr. Dre

Posts: 2337
Joined: Mon Feb 18, 2013 7:10 pm

### Re: Financial Analysis of Law School

North wrote:

wut happened to dingbat

dowu

Posts: 8300
Joined: Wed Mar 28, 2012 9:47 pm

### Re: Financial Analysis of Law School

Dr. Dre wrote:
North wrote:

wut happened to dingbat

RIP DB

smaug_

Posts: 2194
Joined: Mon Oct 17, 2011 5:06 pm

### Re: Financial Analysis of Law School

Shameless and pathetic.

John_rizzy_rawls

Posts: 3469
Joined: Sun Nov 18, 2012 2:44 pm

### Re: Financial Analysis of Law School

Dr. Dre wrote:
North wrote:

wut happened to dingbat

Guano happened.

guano

Posts: 2265
Joined: Mon Feb 18, 2013 9:49 am

### Re: Financial Analysis of Law School

North wrote:

it didn't work earlier. am I just confused?

jone7007

Posts: 88
Joined: Fri Jun 29, 2012 6:06 pm

### Re: Financial Analysis of Law School

Love the effort of the spreadsheet but you should check out this online grad school calculator. It will tell you most of what you are trying to do with your spreadsheet plus it will estimate your student loan payment and your lifetime earning both with and without grad school.

http://www.learnvest.com/knowledge-cent ... alculator/