NPV comparisons between law schools

(Rankings, Profiles, Tuition, Student Life, . . . )
User avatar
StructuresAndForces
Posts: 34
Joined: Sat May 04, 2013 8:57 pm

NPV comparisons between law schools

Postby StructuresAndForces » Fri Jan 24, 2014 1:25 pm

Does anyone know where to find a good excel template for comparing the net present value of different law schools considering tuition costs, scholarships, etc. I've searched on these boards and online generally, and surprisingly haven't found anything too helpful. Trying to make sense of my choices is difficult when I can't see numbers and graphs. Thanks!

User avatar
Optimist Prime
Posts: 198
Joined: Wed Jan 22, 2014 6:28 pm

Re: NPV comparisons between law schools

Postby Optimist Prime » Fri Jan 24, 2014 9:32 pm

.
Last edited by Optimist Prime on Wed Mar 12, 2014 11:57 am, edited 1 time in total.

User avatar
guano
Posts: 2268
Joined: Mon Feb 18, 2013 9:49 am

Re: NPV comparisons between law schools

Postby guano » Fri Jan 24, 2014 9:59 pm

StructuresAndForces wrote:Does anyone know where to find a good excel template for comparing the net present value of different law schools considering tuition costs, scholarships, etc. I've searched on these boards and online generally, and surprisingly haven't found anything too helpful. Trying to make sense of my choices is difficult when I can't see numbers and graphs. Thanks!

http://www.filedropper.com/islsworthit
Here's one I made a few years ago

Tab 1: estimated income - Input all the employment data to the best of your ability in the yellow fields. It'll give you the weighted average income, as well as the percentage of people exceeding that average

Tab 2: IRR of law school - allows you to enter data for up to three law schools. The left column lets you enter estimated income if you do not go to law school. Make this the same for each scenario. In the right column, enter the estimated cost of attending law school (as a negative number) for the 3 years you're in law school (or more if part-time), then enter the estimated earnings upon graduation
This will calculate the IRR of going to law school. The one with the highest IRR is the best option.

As you'll see, the focus was a littel different than what you intended. If you're savvy with excel, you could convert this to calculate the NPV. It doesn't have anything built in for estimating cost of attendance, but the school should tell you, or you could figure it out on your own.

Edit: The third tab is a placeholder. I always intended to create something for working out the effects of a loan, but never got around to it. Just ignore that tab



Disclaimer: I do not give financial or legal advice. Do not rely on anything I say as financial or legal advice. The model was built for a specific purpose and might not be suitable for your purpose. The model has numerous shortcomings and may have flaws. I will not accept any responsibility for any reliance upon the model provided. Use it at your own risk.

User avatar
2014
Posts: 5831
Joined: Sat Jun 05, 2010 3:53 pm

Re: NPV comparisons between law schools

Postby 2014 » Sat Jan 25, 2014 11:53 am

Optimist Prime wrote:Because all jobs of the same type pay the same (if you don't know about the bimodal distribution of law job salaries google it) you can just look at LSN and compare the percentage who have employment outcomes that you want vs. how much scholarship $$ you will have to give up for every additional % of biglaw paying employment. I know it's not a calculator but that's the easiest way to accomplish it that I can think of.

This likely undervalues better schools. While it's easy enough to come up with the NPV of 4 years + a summer or w/e of Biglaw, it is far more difficult to figure out the career earning differential between someone who gets biglaw and someone who doesn't. It's probably well into the 7 figures over one's career and even when you discount that to present dollars and take a fraction of it to represent the difference in employment outcomes between two schools, the result is probably easily 6 figures.

That all being said, there's no real better way to do it.

User avatar
guano
Posts: 2268
Joined: Mon Feb 18, 2013 9:49 am

Re: NPV comparisons between law schools

Postby guano » Sat Jan 25, 2014 12:25 pm

2014 wrote:
Optimist Prime wrote:Because all jobs of the same type pay the same (if you don't know about the bimodal distribution of law job salaries google it) you can just look at LSN and compare the percentage who have employment outcomes that you want vs. how much scholarship $$ you will have to give up for every additional % of biglaw paying employment. I know it's not a calculator but that's the easiest way to accomplish it that I can think of.

This likely undervalues better schools. While it's easy enough to come up with the NPV of 4 years + a summer or w/e of Biglaw, it is far more difficult to figure out the career earning differential between someone who gets biglaw and someone who doesn't. It's probably well into the 7 figures over one's career and even when you discount that to present dollars and take a fraction of it to represent the difference in employment outcomes between two schools, the result is probably easily 6 figures.

That all being said, there's no real better way to do it.

No, that's a horrible way to do it. How should you value each additional % of biglaw placement?

To truly value the degree, parse the employment data to figure out what percentage of the class ends up in which job category, then assign the average salary for each. That's year one. There are a bazillion things you can do to figure out later years, but you've got to try to estimate it somehow.
Probably a fair assessment is to say that anyone who misses the biglaw boat is unlikely to have massive salary increases, so just do 3-5% per year. For biglaw the attrition rate is something like 1/3 every year (I don't remember, but you can look it up) and it's safe to assume that those who leave take on a job with a lower salary. Of the biglaw jobs, some will be on the cravath scale, most will be lower. But try to make some kind of guesstimate

User avatar
StructuresAndForces
Posts: 34
Joined: Sat May 04, 2013 8:57 pm

Re: NPV comparisons between law schools

Postby StructuresAndForces » Sun Jan 26, 2014 11:32 am

Thanks, this is very close to what I was looking for. Very useful for comparing my potential financial situations given different choices. Also interesting for comparing a potential public interest path with big law. Thanks again.

User avatar
Philafaler
Posts: 98
Joined: Wed Dec 04, 2013 12:16 am

Re: NPV comparisons between law schools

Postby Philafaler » Sun Jan 26, 2014 12:24 pm

Thanks for posting the IRR spreadsheet. I have a quick question about estimating post-biglaw earnings. So, say I want to assume I get biglaw and leave after 3-5 years. What is a good conservative estimate for the rest of the career? I assume I should drop it down to salary x and assume y% raises each year. What're good numbers for that?

User avatar
Tiago Splitter
Posts: 15508
Joined: Tue Jun 28, 2011 1:20 am

Re: NPV comparisons between law schools

Postby Tiago Splitter » Sun Jan 26, 2014 12:41 pm

Philafaler wrote:Thanks for posting the IRR spreadsheet. I have a quick question about estimating post-biglaw earnings. So, say I want to assume I get biglaw and leave after 3-5 years. What is a good conservative estimate for the rest of the career? I assume I should drop it down to salary x and assume y% raises each year. What're good numbers for that?

25th and 75th percentiles for in-house counsel with 4-9 experience are 148k-204k according to Robert Half. Lots of good data in this guide:

http://www.roberthalf.com/legal/lawyer-salary-center

User avatar
Philafaler
Posts: 98
Joined: Wed Dec 04, 2013 12:16 am

Re: NPV comparisons between law schools

Postby Philafaler » Sun Jan 26, 2014 12:56 pm

Tiago Splitter wrote:
Philafaler wrote:Thanks for posting the IRR spreadsheet. I have a quick question about estimating post-biglaw earnings. So, say I want to assume I get biglaw and leave after 3-5 years. What is a good conservative estimate for the rest of the career? I assume I should drop it down to salary x and assume y% raises each year. What're good numbers for that?

25th and 75th percentiles for in-house counsel with 4-9 experience are 148k-204k according to Robert Half. Lots of good data in this guide:

http://www.roberthalf.com/legal/lawyer-salary-center


Excellent. Thanks a ton.

User avatar
2014
Posts: 5831
Joined: Sat Jun 05, 2010 3:53 pm

Re: NPV comparisons between law schools

Postby 2014 » Sun Jan 26, 2014 2:29 pm

guano wrote:
2014 wrote:
Optimist Prime wrote:Because all jobs of the same type pay the same (if you don't know about the bimodal distribution of law job salaries google it) you can just look at LSN and compare the percentage who have employment outcomes that you want vs. how much scholarship $$ you will have to give up for every additional % of biglaw paying employment. I know it's not a calculator but that's the easiest way to accomplish it that I can think of.

This likely undervalues better schools. While it's easy enough to come up with the NPV of 4 years + a summer or w/e of Biglaw, it is far more difficult to figure out the career earning differential between someone who gets biglaw and someone who doesn't. It's probably well into the 7 figures over one's career and even when you discount that to present dollars and take a fraction of it to represent the difference in employment outcomes between two schools, the result is probably easily 6 figures.

That all being said, there's no real better way to do it.

No, that's a horrible way to do it. How should you value each additional % of biglaw placement?

To truly value the degree, parse the employment data to figure out what percentage of the class ends up in which job category, then assign the average salary for each. That's year one. There are a bazillion things you can do to figure out later years, but you've got to try to estimate it somehow.
Probably a fair assessment is to say that anyone who misses the biglaw boat is unlikely to have massive salary increases, so just do 3-5% per year. For biglaw the attrition rate is something like 1/3 every year (I don't remember, but you can look it up) and it's safe to assume that those who leave take on a job with a lower salary. Of the biglaw jobs, some will be on the cravath scale, most will be lower. But try to make some kind of guesstimate

I mean sure I agree, my point was there is no good way to value it because of how high stakes the first SA is. In the overwhelming majority of instances, it puts you on a completely different salary/career path than someone who doesn't get a SA. How can you not make some attempt to value the marginally higher chance at ending up on that salary curve that different schools give. There has to be some sort of accounting for the doors biglaw opens over your career.

User avatar
guano
Posts: 2268
Joined: Mon Feb 18, 2013 9:49 am

Re: NPV comparisons between law schools

Postby guano » Sun Jan 26, 2014 2:36 pm

2014 wrote:
guano wrote:
2014 wrote:
Optimist Prime wrote:Because all jobs of the same type pay the same (if you don't know about the bimodal distribution of law job salaries google it) you can just look at LSN and compare the percentage who have employment outcomes that you want vs. how much scholarship $$ you will have to give up for every additional % of biglaw paying employment. I know it's not a calculator but that's the easiest way to accomplish it that I can think of.

This likely undervalues better schools. While it's easy enough to come up with the NPV of 4 years + a summer or w/e of Biglaw, it is far more difficult to figure out the career earning differential between someone who gets biglaw and someone who doesn't. It's probably well into the 7 figures over one's career and even when you discount that to present dollars and take a fraction of it to represent the difference in employment outcomes between two schools, the result is probably easily 6 figures.

That all being said, there's no real better way to do it.

No, that's a horrible way to do it. How should you value each additional % of biglaw placement?

To truly value the degree, parse the employment data to figure out what percentage of the class ends up in which job category, then assign the average salary for each. That's year one. There are a bazillion things you can do to figure out later years, but you've got to try to estimate it somehow.
Probably a fair assessment is to say that anyone who misses the biglaw boat is unlikely to have massive salary increases, so just do 3-5% per year. For biglaw the attrition rate is something like 1/3 every year (I don't remember, but you can look it up) and it's safe to assume that those who leave take on a job with a lower salary. Of the biglaw jobs, some will be on the cravath scale, most will be lower. But try to make some kind of guesstimate

I mean sure I agree, my point was there is no good way to value it because of how high stakes the first SA is. In the overwhelming majority of instances, it puts you on a completely different salary/career path than someone who doesn't get a SA. How can you not make some attempt to value the marginally higher chance at ending up on that salary curve that different schools give. There has to be some sort of accounting for the doors biglaw opens over your career.

um, did you even read what I wrote?
Publicly available information will let you see how many grads get biglaw. You can also see how many get other job categories. You can then use this information, by multiplying percentage of grads getting job X by salary Y, adding this up for each job type, and getting a weighted expected income.

You can also extrapolate into the future, by using the cravath model, by using the data linked by tiago, additional sources, and common sense

User avatar
lawschool22
Posts: 3875
Joined: Thu Jul 25, 2013 5:47 pm

Re: NPV comparisons between law schools

Postby lawschool22 » Mon Feb 10, 2014 1:13 pm

guano wrote:
StructuresAndForces wrote:Does anyone know where to find a good excel template for comparing the net present value of different law schools considering tuition costs, scholarships, etc. I've searched on these boards and online generally, and surprisingly haven't found anything too helpful. Trying to make sense of my choices is difficult when I can't see numbers and graphs. Thanks!

http://www.filedropper.com/islsworthit
Here's one I made a few years ago

Tab 1: estimated income - Input all the employment data to the best of your ability in the yellow fields. It'll give you the weighted average income, as well as the percentage of people exceeding that average

Tab 2: IRR of law school - allows you to enter data for up to three law schools. The left column lets you enter estimated income if you do not go to law school. Make this the same for each scenario. In the right column, enter the estimated cost of attending law school (as a negative number) for the 3 years you're in law school (or more if part-time), then enter the estimated earnings upon graduation
This will calculate the IRR of going to law school. The one with the highest IRR is the best option.

As you'll see, the focus was a littel different than what you intended. If you're savvy with excel, you could convert this to calculate the NPV. It doesn't have anything built in for estimating cost of attendance, but the school should tell you, or you could figure it out on your own.

Edit: The third tab is a placeholder. I always intended to create something for working out the effects of a loan, but never got around to it. Just ignore that tab



Disclaimer: I do not give financial or legal advice. Do not rely on anything I say as financial or legal advice. The model was built for a specific purpose and might not be suitable for your purpose. The model has numerous shortcomings and may have flaws. I will not accept any responsibility for any reliance upon the model provided. Use it at your own risk.


Is this file still available? I click on the link but it just takes me to the file dropper homepage.




Return to “Choosing a Law School”

Who is online

Users browsing this forum: Google [Bot], MSNbot Media, Thelaw23 and 4 guests