TheGoat18 wrote:Huh interesting. What is the average time spent in BigLaw? Would 3 years be more appropriate? It would certainly change the calculation. Also, 80k with 3% raise a year seems way low to me based on what I have read. This would seem to be a below median exit outcome from BigLaw. Your model also assumes a higher opportunity cost than most - but certainly not all - law students will bear. Also, I assume your model doesn't take into account people who have no interest in BigLaw or clerking? They exist. I would add around 5% to your BL+FC rates to take this into account.
So at 10 years, even under fliptrip's pretty mediocre outcome for your legal career, which seems to draw many inferences against the student, you break even. After that your earning power is still far higher than most. I understand the many, many, reasons why the T14 to BigLaw pipeline is an awful life decision, but I have never seen anything close to convincing demonstrating that it is a poor financial decision for the average student. Obviously taking sticker at Chicago over a half scholarship at Penn is stupid but just not going? I don't buy it.
Before I address what you've said, I personally like this conversation a lot more because it's not just about how someone feels about having debt.
1. Models are more valuable the more conservative they are because confirmation bias is a real thing. I think assuming 3 years in biglaw is too much and doesn't accurately price in the inherent risks to the job (it's miserable). I actually think the model might be a tinge too aggressive in assuming the 2 years and would maybe be even better at assuming 1 year.
2. The model assumes that only 80% of a law school class is interested in biglaw, which has the effect of dramatically lowering the discount rates on the cashflows. For instance, UVA's BL+FC % is 68%, but I calculate its biglaw odds of 85%. Beyond that, my model definitely does not consider non-Big Law directed people. What they are doing is almost certain to be a negative financial investment and is pretty clearly undertaken for non-pecuinary reasons. Also, their debt service is strange...for many their plan is to not ever actually service their debt, so I'd model them completely differently.
My model is designed to move some assumptions, so let's be more optimistic and give our student differing tenures in biglaw:
Let's do one more, the rosiest of all pictures. 4 years in biglaw, along with a $125k exit and very low opportunity costs of $20,000.
Let's give even odds of the rosy and the flip special--mediocre city at Georgetown: here's your expected NPV: +7k
So, then, much depends on how long you can stay in BL and what you end up in upon exiting. There are schools for which it is a good investment at $160k regardless of which pole you end up on and there are schools which aren't.