Thursday, December 20, 2012

The Increasingly Impossible Financial Mathematics of Education

Non-trads, if you are looking at law school, you are likely looking at it through the lens of positive results from your prior undergrad education and/or graduate education.  The one that wasn't too expensive on balance, that yielded good returns in the final analysis. 

OK, well, that dream has been dying in the interim:

"What does the above chart imply? Nothing more than that for the vast majority of people, college degrees are the modern-day equivalent of very, very expensive snake oil.

Yes: colleges are sold to you as the critical stepping stone on the path to wealth and prosperity, but sadly the empirical evidence demonstrates that when it comes to an actual, demonstrable income effect, only the wealthiest people actually benefit from a degree! The lowest fifth of household by income see their change in income decline by 10%, while the middle fifth sees an incremental 2.1% drop. Where do incomes rise? When you are already wealthy and belong to the highest fifth of households by income: there, going to college boosts your income by an additional 15.1%...

...And that's just it: if you are affluent, if you had opportunities, you will still and always be successful, and college will merely emphasize this. For everyone else, degrees are rapidly converting into an almost instantly amortizing piece of paper paid for with tens of thousands of student debt which, incidentally, is non-dischargeable.

Unfortunately, and just like with "gun-control", the fundamental issue at hand is not education, not even the pursuit of the American Dream (or lack thereof), but the gradual realization that the myth of American exceptionalism is just that. And in a world as globalized and interconnected as ours, breaking from the middle (or, heaven-forbid) lower classes, into the upper strata of society is becoming virtually impossible. [emphasis in original]"

Replace "tens of thousands of student debt" with "$150k+" and you have law school.  The (Boomer) Deans are on the loose, writing article after article as to how law school is the perfect snake oil for all your ailments, while applications drop and average LSAT scores for admission slide.  Again, for the well-connected, it is a winning proposition - this blog and many others have repeated this message that for a select few, the income gains far outpace the debt (if there ever was any debt at all).

For the rest of us, there's MasterCard.  No amount of chasing degrees, so-called hot fields, and STEM-is-the-answer-to-everything gets around the fact that economic class matters, period.  And for law school in particular, they need to keep the seats filled as the ratio of the unwashed masses to "your betters" is huge, and there are only so many million-dollar donations to go around.  No amount of sugar-plum-fairy, rosy-predictions and "defending liberty, pursuing justice" pep-talks removes the very real financial risk that law schools so blithely try to talk the majority into taking, as if it is no big thang.

For them, it probably wasn't.

Law is undergoing structural changes.  Full stop.  So is higher education in general, and the results and impacts are yet to be determined.

Non-connected non-trads, don't do this to yourself.  The outrageous cost of law school is not worth spinning the roulette wheel.  That is all.