The debt-free JD

Strategies for tackling law school debt

Guest Column

Barbara Finder

Barbara Finder is a senior vice president and financial adviser with the wealth management division of Morgan Stanley in Chicago. The information contained in this column is not a solicitation to purchase or sell investments.

October 2018

Law schools across the country graduated nearly 35,000 students in 2017. Although earning a J.D. is an exceptional accomplishment, law school graduates are often burdened by student loan debt. In fact, the American Bar Association found that current levels of law school debt hover around six figures, a number that may range higher for those attending private institutions and lower for those attending public schools.

Law schools have been rocked by changes in the profession that do not look like they will go away.

For one, the rising prevalence of automation in law offices coupled with job market-related fallout stemming from the recession from nine years ago are among the factors that have contributed to a decrease in law school enrollment. Fewer jobs have young people looking for a professional degree to look elsewhere.

Yet, even with lower enrollment figures, and the possibility of law schools making budgetary cutbacks, tuition has for the most part continued to rise. And higher tuition means more students rely on borrowing to make attending law school feasible.

Law school students often assume their higher average starting salary will offset graduate (and lingering undergraduate) debt, but that’s not always plausible. While repaying law school debt is certainly a challenge, a proactive approach can help to ease some of the load. Here are a few tips:

Don’t delay

Procrastination is one of the biggest mistakes people make when it comes to student loans. Many repayment plans have built-in grace periods that allow the borrower time to get established, but it’s prudent to start repayment as soon as possible. Otherwise, interest accrues (just like credit) and the debt balloons, potentially hamstringing future financial flexibility and borrowing capability.

Say the average law school graduate is 28 years old. Those who are proactively and diligently repaying loans may be able to clear the debt within a decade (depending on the repayment plan chosen). But if repayment slacks and the interest compounds, that debt could still linger and cause financial difficulty two or three decades into the future.

How long it takes to pay down all student debt depends on consistency and pace of repayment, but if there is one item we know for certain, the best time to start is early.

Craft a repayment plan

As with just about anything pertaining to money management, a comprehensive plan is key. The student loan repayment plan should actually begin while you are still enrolled in law school. Make sure to keep track of how much you have borrowed, the type of loan (federal or private) and the accompanying interest rate. That way you are not caught off guard upon graduating.

We all know law school and studying for the bar is a full-time job in itself, but you may want to consider taking up a part-time job to earn a bit of extra income (or at the very least become a teaching assistant or resident adviser for a housing stipend). Even if this extra income is not enough to offset borrowing, it’s money that can be allocated toward future repayment efforts.

Recently graduated and/or newly employed lawyers should first select a loan repayment strategy that best fits their personal and financial situation. This might mean an income-driven mechanism that regularly deducts a commensurate amount of salary or refinancing all debt at a lower interest rate (although refinancing can remove some repayment flexibility). Those who go with an income-driven method must be sure to increase the repayment amount as income rises.

It’s also worth investigating options like the Public Service Loan Forgiveness Program or the Department of Justice Attorney Student Loan Repayment Program. Public service loans forgive loans after both a certain amount of time at a qualified employer and certain number of repayments, while the justice attorney program offers assistance in exchange for a few years at the Justice Department.

Regardless of which route you select, a thorough plan helps to keep you organized and on-track throughout the entire repayment process.

Live within your means

The Bureau of Labor Statistics lists an average salary for a lawyer at around $115,000, but that number varies for lawyers just starting out. While initial salaries are generally decent, young lawyers should not view this as an invitation to live and spend impulsively. Income spent on luxury living accommodations, fancy cars and unnecessary subscriptions is all money that could otherwise be allocated toward expediting toward loan repayment.

It’s not that you can’t indulge in all that comes along with hard work and having a good-paying job, but focusing first on tackling items like law school debt will only help to preserve your ability to partake in those activities.

Repaying law school debt is a tall order, but take solace in knowing that you are not alone. Lawyers, young and old, are dealing with similar situations. Approaching the task with that same tenacity and level of detailed planning/preparation that might go into a brief or trial can help ensure you begin life as a lawyer on the right financial foot.