Ivey Files

May 6, 2011

Advice to Law School Applicants on Sunk Costs, Merit Scholarships, and Transfer Plans

It's unfortunate, as Dean Zearfoss of Michigan Law School points out, that the recent NYT exposé about conditional merit scholarships ("Law Students Lose the Grant Game as Schools Win") was published a day *after* law school deposits came due.

In case you missed the article, it profiled the plight of law students who had accepted scholarships that would be renewed after their first year only if they maintained a certain minimum GPA. In other words, students who had accepted those scholarship offers risked losing -- and many in fact do lose -- those scholarships after the first year, and so they ended up having to pay full fare in years 2 and 3. They might even have turned down a higher ranked school in order to accept a scholarship that turned out to be worth only X (for one year) instead of 3X (for three years). The schools they accepted turned out not to be as big a bargain as these students had expected.

I have to confess I'm not as scandalized as the New York Times, because no one should go to law school assuming he is going to be an academic superstar. No one. Not even people who were academic superstars in college.

Schools could offer all the disclosure in the world about their grading curves and what percentage of the class has an XYZ GPA at the end of the first year, but no amount of disclosure and fair warning will protect you if you assume in advance -- despite elementary probability theory -- that you are going to defy the odds and be a superstar in law school. You don't even have enough information at this point to know whether you're going to meet the average. (As Lake Wobegon reminds us, half the class will fall below average. Insert picky and accurate retort here about the difference between means and medians, but the point remains.)

This leads me to a couple of recommendations:

1. If a school offers you a conditional scholarship, ask hard questions about those conditions. What percentage of the 1L class clears that GPA at the end of the year? What about the end of the second year? What percentage of recipients lose those scholarships at the end of years 1 and 2? Even if you've already put down a deposit, it's not too late to ask. Slide a copy of that NYT article across the virtual table and see what they say, and then think long and hard about whether you should still move forward (see point #2, below). And if they don't give you that information, walk away, because it's too risky an investment, unless money is no object now or when you graduate. (If they're not straight up with you about this, they're probably not being straight up with you about lots of other important things either, like job placement.)

2. Don't accept a conditional merit scholarship UNLESS you are willing to pay for years 2 and 3 should you find that you don't meet the conditions. If the school isn't attractive or valuable enough for you to justify paying for two out of three years, don't go.

3. If you have just accepted a conditional scholarship and then have an epiphany that it doesn't make sense for you to risk paying for years 2 and 3, it's OK to change your mind. Really. There's a common cognitive trap called the fallacy of sunk costs, which basically leads people to think: "I invested all this money already, and I now regret that investment, but I have to follow through on it because I already spent all that money." That deposit money is spent whether you follow through or not, so the ONLY analysis that remains is whether that law school is a good investment for you *going forward*. If not, walk away. You're better off writing the deposit off as a bad investment now rather than chaning your mind

(a) after you've already started classes, because if you decide to back out after you've started classes, that will complicate your future law school applications if you decide to give it another go. Applying to law school as someone who has already attended law school in the past -- whether you attended for one day or one year -- creates its own separate application hurdles. If you back out before you officially register and show up for your first class, you've only lost your deposit, not "previously attended law school" (which is a disclosure you would have to make and explain on future applications).

(b) after your first year, when the sunk cost fallacy is going to mess with your thinking even more powerfully, and you'll fear having to explain to people why you "dropped out" of law school (vs. changing your mind during the summer before law school, which nobody considers "dropping out"). Even after your first year, you might still be better off leaving law school than throwing good money (and good years) after bad, but that's a situation you'd be better off avoiding now.

(c) after you've graduated from a law school that you already knew before you started was not a good investment. After you've graduated, your sunk costs are orders of magnitude larger, and there is no more future investment left to salvage. You are now stuck with an expensive turkey of a degree.

4. The same reasoning applies to aspiring transfers.  Here's a common trap:

"The best law school I can get into right now is School X. But I don't actually want to have to graduate from School X, because School X doesn't make sense for me in the long run. So I will settle for School X for my first year and make sure I have the grades to transfer to a better school afterwards."

Same logical fallacy, same overconfidence, same willful blindness about probability. If you wouldn't be willing to *graduate* from School X, do not accept an offer from School X. That's too risky an investment as well.

It sounds as if I'm discouraging you from going to law school. And in fact I am, *if* the law school you're saying yes to is not a good investment for you. For a number of reasons, you should have that coming-to-Jesus talk with yourself now rather than later. And that's advisable whether they offer you a scholarship for the first year or not.

Want to call me a curmudgeon and a wet blanket? That's OK, go ahead -- please do so in the comments -- but think about the possibility that we could both be right. And then ask yourself whether you would still make that deposit today vs. a week ago. If not, be smart about what you do between now and when school starts. These are high-stakes decisions for people, so if you have wisdom or thoughts to share, please do!

 

Former Dean of Admissions at the University of Chicago Law School and a recovering lawyer, Anna Ivey founded Ivey Consulting to help college, law school, and MBA applicants navigate the admissions process. You can read more admissions tips in The Ivey Guide to Law School Admissions, recently updated and available as an e-book, and find Anna on Twitter and Facebook.