Law School Bubble Close to Bursting?

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Andrea is stuck in a stressful present because of a previous decision to ensure her future in law. As a concern for her future job leads, Andrea decided against using her real name in this piece from the ABA Journal. Andrea has been laid off from jobs twice since graduating law school back in 2009. One of those positions was a small law firm that paid her $20 per hour, where she was practicing as a licensed attorney. Andrea is 29 and has supported herself since college. She feels that the investment in law school was the worst of her life, even though she earned a degree from a second-tier law school.

“I deferred my loans because of economic hardship the first time,” says Andrea, who borrowed nearly $110,000 to finance her education. “After that,” she falters, “they might be in forbearance … accruing interest … I just don’t know.”

  

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In 2010, 85 percent of law school graduates from schools accredited by the ABA spoke of an average debt of $98,500. This is according to data collected by the U.S. News & World Report from law schools across the country. The debt amount exceeded $120,000 at 29 of those law schools. Sixty-eight percent of those graduates claim they have employment in positions that require a JD only nine months following commencement. Just under 51 percent of those graduates were able to find employment in private law firms.

There were 44,258 graduates in 2010, according to the American Bar Association, which adds to an influx of graduates into the legal field. This influx will cause repercussions that will reverberate for decades because of the decreasing job market.

Close to 75 percent of the payroll is sucked up by the top 35 legal markets in the country. In 2004, the number of law office jobs in private practices peaked at 1.23 million.

The country’s young lawyers are in danger of being consumed when it comes to their future earnings and livelihood because of heavy loans. According to the Law School Admission Council, there were over 87,900 candidates vying for 60,000 seats at 200 ABA-approved law schools this year. According to preliminary numbers for 2012, there are just over 78,900 applications for those seats.

Bleak job prospects, youthful optimism, and more universities entering the legal education field have helped to cause some of the supply and demand imbalance for entry-level lawyers.

There are critics who have studied the role of the federal government using its student loan policies when it comes to creating a law school bubble that could be close to bursting. Many experts compare this bubble to the mortgage crisis that hurt the economy in 2008.