HELPING STUDENTS

UNDERSTAND THE FINANCIAL

ASPECTS OF LAW SCHOOL

MAPLA Conference – October 25, 2013Assistant Dean Cari Haaland and

Professor Jerry OrganUniversity of St. Thomas School of Law

(Minn.)

OVERVIEW OF PRESENTATION Description of law school costs Sources and types of financial aid Loans and loan repayment Conditional scholarships Differential affordability Importance of financial literacy and

frugality

DIRECT COSTS, INDIRECT COSTS AND COST OF ATTENDANCE Direct costs generally consist of tuition

and fees Indirect costs include books, insurance,

transportation, room and board, other discretionary spending

Cost of Attendance encompasses direct costs and indirect costs and represents the “maximum” amount a student can borrow over the course of the year.

TUITION AND COST OF LIVING VARY ACROSS THE COUNTRY Resident public school tuition ranges

from $12,000 to more than $50,000 depending upon the state

Non-resident public school tuition ranges from $23,000 to more than $50,000.

Most private school tuition tends to be from $30,000 to $55,000

The cost of living that gets added to the Cost of Attendance can vary from $10,000 to $25,000 depending upon locale.

TOTAL COST OF ATTENDANCE When one combines tuition and cost of

living and multiplies by three years, the total package can vary significantly: from roughly $80,000 for residents at lower

cost public schools in lower cost regions to more than $200,000 for students at

expensive public or private schools in more expensive urban areas.

For a large number of students at private schools or non-residents at public schools the three-year cost of attendance will be $130,000 to $160,000

SOURCES OF FUNDING Federal loans Federal work study Private loans Institutional merit-based aid Institutional need-based aid (very

limited) Local, state, regional scholarships Working during school

WORKING AND WORK STUDY Full-time law students are allowed to work

20 hours per week during the semester. Assume that is at $10 or $15 an hour – that

could be $800-$1200 per month to help defray costs.

Summer employment – even if not legal employment – can help reduce borrowing.

Work study is part of financial aid package If student gets $3000 in work study, that

means $3000 less in terms of loans. Work study can still be advantageous for

some public interest jobs.

LOAN PROGRAMS Federal Direct Unsubsidized Loan

$20,500 maximum every two semesters $138,500 cumulative borrowing limit Fixed interest rate of 5.41%; 1.051% orig. fee

Federal Direct Graduate Plus Loan Simple credit check (not credit-score based) Fixed interest rate of 7.9%; 4% orig. fee

Federal Perkins Loan Fixed interest rate of 5%; 0% orig. fee Very limited availability for law school

Private Loan

LOAN REPAYMENT Federal loans have standard repayment of 10

years Depending upon circumstances, options for

graduated or extended repayment IBR and PAYE – Income based repayment and

Pay as You Earn are options for extending payment with loan forgiveness after 25 years (IBR) or 20 years (PAYE) (although loan forgiveness is a taxable event)

Public Service Forgiveness Program – If in qualified position, reduced payments and forgiveness after 10 years of payments.

MERIT-BASED SCHOLARSHIPS

With the approval last year of the revised ABA Standard 509, all ABA-accredited law schools have to publish data regarding retention of conditional scholarships.

“Conditional scholarships” are scholarships that have some renewal condition other than maintaining good academic standing

NUMBER OF LAW SCHOOLS WITH CONDITIONAL SCHOLARSHIPS

For the 2011-12 academic year, there were 145 law schools with conditional scholarships or non-renewable one-year scholarships and 49 law schools that did not have conditional scholarships.

Since 2010, a number of schools have switched or will be switching to non-conditional scholarship programs.

For the 2013-14 academic year, of the 194 law schools on which I was gathering information, there will be 130 law schools with conditional scholarship programs and

4 law schools with non-renewable one-year scholarships (69%),

3 that only offer need-based scholarships (1.5%), 57 law schools with good standing/guaranteed

scholarships (29%).

NUMBER AND PERCENTAGE OF STUDENTS WITH CONDITIONAL

SCHOLARSHIPS For the 140 law schools with conditional scholarship

programs in 2011-12, the average retention rate was 69%.

In total, 12,681 students who began as first-years in fall 2011 and continued into their second year at the same law school entered with conditional scholarships and 4,332 students lost those scholarships, a retention rate across all individual students of 66%.

For the 194 law schools on which I compiled data, the fall 2011 entering first-year class totaled 46,388 Roughly 27.%3 of the students in the Fall 2011 entering

first-year class were on conditional scholarships Roughly 9.4% failed to retain their conditional scholarship.

CONDITIONAL SCHOLARSHIPS BY RANKINGS QUARTILES – 2011-2012

Top 50 Law Schools

Law Schools Ranked 51-100

Law Schools Ranked 101-146

Law Schools Ranked Alphabetically

# 50 50 46 48# (%) w/Conditional Scholarship

20 (40%) 40 (80%) 36 (78.3%) 44 (91.7%)

Total 1LS at These Schools

13,109 11,592 9,293 12,394

# (%) of 1Ls w/Conditional Scholarships

1,656 (12.6% of all 1Ls in top-50 schools)

4,179 (36% of all 1Ls in schools 51-100)

2,803 (30.1% of all 1Ls in schools 101-145)

4,043 (32.6% of all 1Ls in alphabetically-ranked schools)

# (%) NOT Retaining Scholarships

186 (11.2% of conditional scholarship recipients and 1.4% of 1Ls)

1,452 (34.7% of conditional scholarship recipients and 12.5% of 1Ls)

1,069 (38.1% of conditional scholarship recipients and 11.5% of 1Ls)

1,625 (40.2% of conditional scholarship recipients and 13.1% of 1Ls)

less than 40%

40%-49%

50%-59%

60%-69%

70%-79%

80%-89%

90%+05

101520253035

812

23

30

2319

25

Number of Law Schools with Conditional Scholarship Reten-tion Rate within Defined Deciles

(n = 140)

Number of Law Schools

Retention Rate

CLUMPING – BY RANKINGS 19 of the top 25 law schools in the U.S. News

2012 rankings do not have conditional scholarship programs -- nearly 40% of the 48 schools without conditional scholarship programs in 2011-12.

Moreover, of the six law schools ranked in the top 25 with conditional scholarship programs four had retention rates of 90% or better.

This suggests that competitive pressure among these top ranked schools has moved the scholarship market toward a model in which scholarships are not conditional or where the conditions are very likely to be satisfied

CLUMPING – BY GEOGRAPHY

The Midwestern states of Indiana, Illinois, Iowa, Wisconsin and Minnesota have a total of 21 law schools. As of fall 2013, 13 of these 21 law schools will NOT have

conditional scholarship programs, and one that does, Minnesota, had a 100% retention rate for 2011.

If you add the two schools in St. Louis to the “region,” you end up with 15 out of 23 law schools NOT having conditional scholarship programs.

In the mid-Atlantic region -- Maryland, District of Columbia, Georgia, North Carolina, South Carolina, Tennessee and Virginia – 15 of the 32 law schools do not have conditional scholarships.

In Massachusetts, New York and Pennsylvania 12 of the 30 law schools do not have conditional scholarships.

These three areas represent roughly three quarters of law schools without conditional scholarships

DIFFERENTIAL AFFORDABILITY ACROSS LAW SCHOOLS

The affordability of legal education differs for different populations of students across schools.

There is some geographic difference in affordability based some states generally having higher tuition and some states generally having lower tuition levels.

I have estimated net tuition for first-year students at all law schools for 2011 accounting for each law school’s base tuition along with its percentage of students with full scholarships, half to full scholarships and less than half scholarships, and its likely pattern of scholarship distribution in the context of each school’s LSAT profile.

DIFFERENTIAL AFFORDABILITY

Because most scholarships go to students with higher LSAT/GPA profiles, legal education is much more affordable for applicants with an LSAT of 156 or higher than for applicants with an LSAT of 155 or lower.

This is in inexact science. First, the scholarship percentages reported in the

ABA-LSAC Guide are for the entire student body, not for first-year students.

Second, the analysis is based on the assumption that law schools awarded scholarships strategically to support a law school’s US News rankings by awarding the largest scholarships to those with the highest LSAT and working down the LSAT scale.

ESTIMATED NET TUITION FOR FALL 2011 FIRST-YEAR STUDENTS

<$20000 $20000-$30000

<$300000

2000

4000

6000

8000

10000

12000

14000

11500

9000

5500

3800

6100

10000

LSAT of 156 or moreLSAT of 155 or less

Net Tuition

Number of First Years

DIFFERENTIAL AFFORDABILITY

For students with LSATs at or above 156, the estimated average net tuition was roughly $23,000 to attend law schools with an average ranking in the 60s.

For students with LSATs at or below 155, the estimated average net tuition was roughly $30,000 for law schools with an average ranking in the 130s.

DIFFERENTIAL AFFORDABILITY WITHIN A LAW SCHOOL

The LSAC’s correlation studies make it clear that those at or near the bottom of an entering class profile – those most likely paying full tuition – also are least likely to end up with grades placing them in the top of the class.

The average LSAT “spread” – the difference between 75th and 25th - is growing.

That means correlations likely will get stronger. It may not be advisable to pay full tuition at the

highest ranked law school to which one is admitted. It may make more sense financially and

competitively to go to a law school at which the student’s profile suggests the student can be successful, particularly if there is scholarship assistance.

DIFFERENTIAL AFFORDABILITY AND EMPLOYMENT OUTCOMES If one were then to overlay employment

outcomes data on top of this net tuition data, one would see that across law schools, many of those paying the most for law school, who are attending lower-ranked law schools, are doing so with little hope of landing one of the more remunerative jobs following graduation.

FINANCIAL LITERACY Many students have little knowledge of

budgeting or financial planning Many students have not considered how

educational debt may impact their future Financial strain can impact studies, place

stress on relationships during repayment, limit other financial opportunities

Students should not be thinking about borrowing all of Cost of Attendance just because they can.

Students should be frugal in establishing budgets and borrowing

IS LAW SCHOOL A GOOD INVESTMENT? Students considering law school need to

be thinking about minimizing costs Perhaps a lower-priced school (tuition plus

cost of living) Perhaps school that offers scholarship

(determine whether scholarship is conditional)

Students need to be cognizant of realistic employment scenario and realistic salary range

Employment opportunities will be improving as a result of fewer graduates