Calculator for figuring out if law school is worth it Forum

[porkbraiser]

I'm a 2L at a Top 20 law school. I have often heard people saying it was a mistake that they left their previous job to attend law school. In order to help potential law students figure out whether law school is financially prudent I have developed a calculator that will help you see what the future will be like financially.

Input your loan amount, interest rate, previous salary, future salary and the calculator will allow you to compare the net earnings you would have made if you stayed at your old job with the net earnings of taking a loan, going to school and then getting a job.

The main limitation of the calculator is that it does not take into account your cost of living. So if you enter a loan amount that includes your cost of living, realize that the no law earnings will be overstated.

I hope this tool can be useful for you, and please give me any suggestions or changes you'd like to see.

--LinkRemoved--

[Flanker1067]

I guess I appreciate the effort but this is meaningless. This requires an assumption on growth, which is simply unpredictable with the common and frequent career changes and inconsistency of salary growth across industries.

Edit: Ok, maybe not meaningless; if you come from an industry that happens to have salary growth at common "lock step" growth rates AND you get biglaw then it's effective.

[porkbraiser]

I agree that there are some big assumptions involved with using the calculator, but that is inherent in any quantitative analysis. I still think the calculator is a useful tool to get an idea of when going to law school begins to be more profitable than staying at your old job.

If you could suggest a better/more realistic way to model growth, I would love to hear your thoughts.

[Aqualibrium]

I agree that there are some big assumptions involved with using the calculator, but that is inherent in any quantitative analysis. I still think the calculator is a useful tool to get an idea of when going to law school begins to be more profitable than staying at your old job.

If you could suggest a better/more realistic way to model growth, I would love to hear your thoughts.

Not really. This calculator is presumably meant to be used prior to entry to law school. For the great majority of law students, there is no way to know how much if anything you'll be making until August of 3L year at the earliest. For those who get a six figure job, the decision to attend law school will nearly always be worth it. For those who don't, there really is no need for a calculator to reinforce the point that nearly anything would have been better than 200k in debt and no way to pay it off.

I mean, it's a nice thought though...

[porkbraiser]

I didn't make this thinking that it would make your law school decision for you. It's intended to help with one piece of a comprehensive analysis.

Plugging numbers in and getting a feel for what that means in the future should be helpful to those who are wondering what the financial ramifications of going to law school might look like.

If you have any suggestions as to how I better model the uncertainty your talking about, I would definitely love to hear it. I think it could be helpful to the TLS community.

One idea was to use combinatorics to find a value for your future salary (ex. 25% making 160k, 30% making 60k, etc.). This would only give an avg, so while it might be useful from a broad level, it wouldn't really be practical for individual decision makers.

[CreativityKing]

You need to discount future earnings for this to have meaning, without considering the other assumptions that have been pointed out.

[minnesotamike]

Cool. But Excel says this is protected and is asking for a password before letting me edit any of the cells. Anyone else have this issue?

[porkbraiser]

Hey Mike, I locked all the cells with formulas in them so you don't accidently break the calculator.

The variables you can change are the ones in green.

If you want to play around with the worksheet and make some improvements the password is casio

[minnesotamike]

Excellent. This spreadsheet is a great idea. Thanks. I am surprised by how quickly I break even after law school (assuming biglaw, of course and that I wouldn't have gotten promoted at my old job).

Also, (lol) speaking of breaking it:

When the Loan Outstanding value goes to zero (i.e. if I reduce the loan repayment period), the Interest Payment, Principal Payment, Loan Outstanding and Law Net Earnings break (show the #NUM! error) in every following year. I tried to do an error-trapping thing but my Excel skills were no match for the error. I'm going to give it another shot after the gym.

Also, you could place the user-input information in a different sheet and then just protect the sheet containing the calculations, so people can play with the numbers without risk of breaking the calculations.

[porkbraiser]

Updated the calculator to discount future money to present value

--LinkRemoved--

[Rorassy]

This spreadsheet adds zero, absolutely zero, useful information. What the spreadsheet tells you is that law school is worth it if you get biglaw and stay in it forever. But that was obvious. (And a fantasy for the vast majority of those lucky enough to get biglaw; see all of the grads pushed out after a few years some of whom are now at the AALS meat market desperately trying to get a TTT law school teaching position). The spreadsheet also tells you that law school is not worth it if you got a $40k job, but that too was obvious. Another thing the spreadsheet tells you is that for every law school, there is a precise salary figure that makes law school worth it, but that figure is so contingent on unknowns that someone guessing a number out of thin air could do as good a job as this spreadsheet.

However, it does add some incorrect information, namely the idea that "worth it" is purely a matter of money when in fact many other factors go into that conclusion. Not to mention its assumptions.

No useful information + incorrect information = a really bad contribution.

[BLS07]

If I become president, leaving my job in the senate was a good idea. A spreadsheet told me so.

I work in finance. Excel, or any analytical tool, in the hands of the untrained is dangerous (see e.g., Countrywide). You are assuming things that you intend to prove.

If you get a good job coming out of law school, you are generally better off financially than if you stayed at a less good job and did not go to law school. Duh.

Will you get a good job? Will you keep it? Will house prices keep rising? . . .

[porkbraiser]

Well you guys really don't seem to find this calculator useful.

One question I guess I would ask is, how did you analyze whether or not going to law school was a good decision? What factors did you consider? How did you weigh your options? Did you figure out the future financial ramifications? In the face of such uncertainty did you carefully consider possible scenarios or did you sign up on blind faith?

[blazinswordofjustice]

FWIW, i thought this was useful! Thanks!!

and obviously, you can't predict your job prospects after law school (too dependent on LS grades/other random factors) and you certainly can't predict promotions/pay increases/national economy/ability or desire to stay in biglaw/etc...but as a tool for getting a rough idea of different possibilities, this is useful...

[blazinswordofjustice]

However, it does add some incorrect information, namely the idea that "worth it" is purely a matter of money when in fact many other factors go into that conclusion. Not to mention its assumptions.

it wasn't meant to be some be all, end all calculator or anything, just another tool for people to look at future finances...no need to be so negative!

[swc65]

You need to discount future earnings for this to have meaning, without considering the other assumptions that have been pointed out.

why? The sheet is comparing two streams of income that should have the same discount rate. So wouldn't discounting both of the at the same rate has the net effect of 0.

Also it is useful. Plug in the avg starting salary or the salary you're most likely to get from your school/probably class rank and it shows you how much of a losing financial proposition law school can be.

[CreativityKing]

You need to discount future earnings for this to have meaning, without considering the other assumptions that have been pointed out.

why? The sheet is comparing two streams of income that should have the same discount rate. So wouldn't discounting both of the at the same rate has the net effect of 0.

Also it is useful. Plug in the avg starting salary or the salary you're most likely to get from your school/probably class rank and it shows you how much of a losing financial proposition law school can be.

One stream of income (non-law) starts now; the other starts in three years. You can't just add those streams across time.