Thursday, October 16, 2008

ITT: The UVA Law Blog Gang Explains Why You Might Not Want to Give BarBri/Kaplan Your Money Just Yet

So, you may have heard this from us before, but in light of all the 1Ls clammering to give BarBri / Kaplan an interest free loan to "lock in" those "low" course rates for three years in the future (and get those awesome study guides), I think it's worth throwing up on the blog.

In a sentence, we urge: think. Be careful.

The program basically works like this. You pay a fee now in the form of a deposit, which I believe is $250 for BarBri. This fee does three things. First, it counts as your deposit toward the full cost of the really expensive course. Second, it allows you lock in the current rate for BarBri, which will theoretically save you money down the line. According to my 1L section's BarBri Rep, you would, for example, save $300 if you were planning on taking BarBri in New York. Third, you get gratis (i.e. free) study materials, including access to BarBri's review lectures.

Subjective Value of the Monies

At first blush, it might seem to be a good deal - because all you're loosing is the Time Value of Money of the $250, which might not be that great IN THIS ECONOMY. (Though, zOMG, John McCain is gonna cut the capital gains tax in half! That'll help!).

Anyway, I would submit that you lose much more than that and that you should strongly consider whether or not you want to give one of many test prep corporations an interest free loan three years in advance for consideration that is somewhat nominal:

Even as a 2L, $250 - or 15 meals in the Law School cafeteria - is worth much more to us now than it will be in a year or so, because many of us ( haven't had any income in a while, but, hope to have some this summer. So it's not just the ability to invest the $250 that makes it worth more now than an equivalent or somewhat greater amount in the future, it's the fact that the income stream of many 2Ls is going to be clustered at a point after which they would have to put down a relatively large deposit.

You might consider this a unique circumstance of being a first (or in loyal uvalawblog's readers' case) second year law student. I think that's something that's not accounted for in BarBri's pitch . . . In any event, you have to consider on top of that the fact that an additional $250 in your pocket *now* is $250 you don't have to take out of loans - typically private loans since your federal ones will be exhausted at this point. I don't need to tell you what the absurdly high interest rates on these are, but let's be nice and assume a locked interest rate of 8%. That means that taking out $250 to pay the BarBri deposit now means that you will owe $314.92 at graduation, and the amount will continue to increase 8% each year until you decide to pay it back.

Now, of course, you're thinking, this whole analysis makes a difference on the basis of if and how my employer covers Bar review course expenses. Well, be careful, and consider the following options.

I Will Not Be Going to a Private Law Firm
If you're planning on working for the government or some legal aid place, you probably won't get your Bar-study expenses reimbursed. C'est la vie. So signing up for BarBri / Kaplan in advance seems like a great idea right? Well, not necessarily - BarBri is, we believe, the most expensive Bar-prep course out there - do you really want to commit to the most expensive option *three years* in advance just to lock in a cheaper (but still really expensive rate)? Since BarBri lost it's antitrust case there has been competition in Bar-prep courses, and you might well - with thousands and thousands of dollars in debt and a government salary to look forward to - want to choose one of the cheaper options - or at least do some research before you commit.

Also, the fact that you don't know if you will be doing this or not is another good reason not to commit to it.

I Will Be Going to a BIGLAW Firm
The first thing I have to say is: you hope. But as Lat put it the job prospects for BigLaw in the next few years are going to be "crappy". You don't have that BigLaw job yet, so don't get cocky - believe us (we're 2Ls) it's tough out there, and nothing is guaranteed. You 1Ls - 50% of you will be in the bottom of your Law School class, and if you're part of that 50%, things WILL be tough out there. It's a drag , but that's capitalism / competition in a recession for you.

Anyway, say you do get a BigLaw offer. Well, it might turn out that your firm simply direct-bills the prep courses. Meaning that while you'll get your deposit back (I think), it did you no good to spend the money three years earlier and, of course, actually hurt you. A lot of firms direct bill - see this chart from ATL.

And, even if you're at a firm that gives stipends - all of the stuff about the subjective value of the money still applies. More importantly, since you don't know whether you'll be at a stipend-firm or a direct-bill firm in advance, why risk it?

Finally, a word about those 1L lectures / study guides
You really don't need them - or at least don't lay down the deposit because of this. We've seen a few of the study guides and I would say they are inferior to the ones on sale at the book store (or the ones on reserve at the library that you can read for free - this was our strategy, btw). As for the lectures, we never went, but we will say this: burning an entire day listening to a civpro review won't be as helpful as taking the practice exams; plus we had Nelson and so the lecture apparently only covered 1/3 of the material anyway . . . But moving on, we have friends in the top 25% or whatevers who didn't use BarBri's study guides so . . . there are plenty of study guides out there, that's all.

/Hopes 1Ls read this before it's too late./

Don't get us wrong - we have nothing against BarBri or Kaplan and will probably use them when the time comes - we just think that everyone should make an informed decision or at least see the potential otherside of the argument. We also realize we may have missed something in this hastily-typed piece, so if you have a critique or just want to blow us out of the water use the comments section.


jb4tw said...

But you should by all means enjoy the free pizza.

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Anonymous said...

You are right about this -- its dumb.

In other real news you should cover: ATL says firms are snatching offers off the table before 2Ls can even respond. Get some coverage

Anonymous said...

I don't like that you call your blog "UVA Law Blog" yet espouse your personal political and sports opinions, BUT I do appreciate this post.

Rule 12 (f) said...

"I don't like that you call your blog "UVA Law Blog" yet espouse your personal political and sports opinions, BUT I do appreciate this post."

Uh - OK? Start a competing blog??

3.51 - interesting, we dont know anyone personally in this position, but we're keeping our eyes open . . .