Sunday, January 17, 2010

The Reality of Student Debt

So you went to law school to “make something of yourself,” right? You wanted to make yourself more marketable and provide your family with some financial security. You bought into the national mantra that was beaten into your brain since you were a toddler, i.e. “Education is the key to your future.” Naturally, you worked hard and advanced in your studies.

Well, now that reality has set in, you can see that you have indeed made something of yourself; you have become a debt slave. Not by being irresponsible by racking up huge shopping bills and buying expensive cars, mind you. But by being naïve enough to believe the lies. According to the apologists, it is entirely your fault that you did everything you were asked to do, and now find yourself in the situation you are in. And now YOU are the one stuck with the bill. Not quite the rosy picture painted by our policymakers, “educators,” parents, friends, and grade school teachers, is it?

I went to this online Financial Aid loan repayment calculator. My total student loan debt is $73K and my income is about $38,000. As far as I can tell, I am doing better financially than many law graduates from “lower first tier” and second tier schools, many of whom took out massive amounts of student loans for the "privilege" of attending law school. And a lot of those JDs cannot even find work.

Here is what came up when I entered my figures:

Wow! You're borrowing a lot of money to pay for your college education. Maybe you should think about attending a less expensive college? A good rule of thumb is that your total education debt should be less than your expected starting salary. If you borrow more than twice your expected starting salary you will find it extremely difficult to repay the debt. Live like a student while you are in school so you don't have to live like a student after you graduate. [Emphasis mine]

When did the financial aid office at your college, or your law school, EVER tell you that your total education debt SHOULD BE LESS THAN your expected annual starting salary?! In fact, most law schools provide their students with information from private lenders.

These results assume that the student is paying the interest charges on any unsubsidized loans and is not capitalizing the interest while in school. If the student is capitalizing the interest, the cumulative payments and total interest charges will be higher than shown here.

And how many students are paying the interest on their unsubsidized loans, while they are in school?

Note: I received a full-tuition scholarship to attend law school. I know people who borrowed the entire amount, i.e. for living expenses and tuition. I personally know people who borrowed in excess of $120,000 just to get a law degree from Third Tier Drake. And many are unemployed, working part-time, taking court-appointed work, or looking solely at non-legal positions.

If I were to pay off my student loans over a thirty-year period, I will have ended up paying $149,212.72. This means, I would end up paying $76,212.72 in interest – an amount greater than the entire principle!! If I pay them off in 20 years, I will have paid $120,517.41. Which means interest payments will have totaled $47,517.41.

Also, in order to pay this off in 20 years, it is estimated that my yearly salary will need to be $60,259.20. If I want to pay them off AND experience “some financial difficulty”, I will need an annual salary of $40,172.80. Who needs to buy a house or get married, when you already have a small mortgage, right?

It is estimated that you will need an annual salary of at least $60,259.20 to be able to afford to repay this loan. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loans. This corresponds to a debt-to-income ratio of 1.2. If you use 15% of your gross monthly income to repay the loan, you will need an annual salary of only $40,172.80, but you may experience some financial difficulty. This corresponds to a debt-to-income ratio of 1.8.

My situation is not terrible or beyond repair. I post my story so others can see that going to law school is a poor decision for the vast majority of students. Remember, I only took out $37K to attend law school. What about those poor souls who take out $100K or $140K to go to law school? Sweet dreams, lemmings. When you wake up from your "American Dream," reality will be staring you squarely in the face.


  1. In fairness, you did graduate less than a year ago, right?

    That means you graduated in the midst of a terrible employment picture for everyone, not just lawyers (alothough it seems even worse for lawyers).

    So, perhaps when the economy turns around and unemployment retreats you actually will be able to find a reasonable salary out in the workforce as a lawyer.

    But the info on keeping student loan debt still applies, regardless, of course.

  2. Former top-tier student and BigLaw associate here - yes, there is terrible employment picture for everyone, not just lawyers, but in particular, lawyers. I took out about 140K, which was manageable with my old salary. Now, after 14 months of job searching, networking (fucking bullshit) and eating lots of veggies (they're cheaper) - all I can find was a job paying $33,000 for the state. And the worst part about it was that as a second year associate I generated about $200,000 in business for my old firm.

    Also, I'm a little confused as to why the economy must turn around and not just reach a new low baseline?

  3. Former T2 grad here, current v50 associate. I was able to pay off my loans of $100K a few years ago, but after talking to several of my former '01 classmates, I imagine I am one of only a handful of students to do so. I simply threw $2,500 payments at them whenever I could, including a $20,000 payment to pay them off for good. Of course, I have no spouse and I rent.

    What do you think of this approach? I have a friend who married a '04 grad from the same school. They have, probably, $220,000 in combined debt (which is a conservative estimate) AND THEY HAVE NO INTENTION OF PAYING THEM OFF. They bought a house and he just bought a brand new luxury car. They pay the minimum and seem to have decided to just pay the minimum on their loans until they die. That got me to thinking, is there anything wrong with that? They will never pay them off if they try, so why not bother? The only problem I see is that when one of them dies, any assets he or she has will be applied his or her debt. I am not sure if the house would exempt in such a transfer between spouses, but I am not sure that will be much of an issue either, as it seems he or she will have little to no cash on hand.

  4. Prelaws don't even know what capitalization or interest is! All they see are the dollar signs of average starting salaries of law graduates at any given law school. They think, "I'll pay off my loans in 5 years with the money I'm going to make."

  5. Nando, why stop at $140K? There are some schools approaching $50k in tuition alone! That's $150k in just principal. Throw in living expenses (particularly for NYC, LA, and Boston schools) and you're easily over $200k. Plus, interest on these loans are usually high and many people have undergrad loans.

  6. I wish the schools were forced to spell out to every student exactly how much they will be paying each month for the amount they are borrowing.

  7. So many good comments to address. 2009LawGrad, you and I did graduate in the depths of a terrible economy. However, the shortage of attorney positions is not due solely (or even primarily) to the current state of the economy. Law schools have been producing far too many JDs for decades. This has resulted in gross over-saturation of the lawyer market.

    In page 49 of his book, "With Justice for None," Gerry Spence notes:

    "Our law schools are jammed. The number of students enrolled in ABA-approved law schools doubled in the twelve-year period from 1968 to 1979. By 1987, we had 117,813 students in ABA-approved law schools."

    Currently, ABA-accredited law schools produce more than 43K JDs every year. Why hire someone who graduated law school last year or two years ago, when there is always a fresh crop?

    Thank you to the second and third commenters on this entry. It is important that pre-law students hear of the situation for lawyers from people like you. At least your friends are making their minimum monthly payments. (Although, I don't like the idea of someone buying luxury cars when they are in such financial shape.)

    Esq. Never, I was using that as a somewhat conservative baseline. It seems that many who go to law school on the East Coast could easily rack up $200K in loans just for law school. And many of them do, in fact, reach these depths. You are exactly right that private lenders charge much higher interest rates. (From what I understand, these lenders do not need to work with someone who cannot find a job - or simply has trouble making the monthly payment. But I could be wrong about that.)

    JJD, I as well wish law schools were forced to do this. Since the gutless, spineless ABA will not require it of their member schools, it is up to us, and other JDs, to show prospective students how much they will likely pay back, over the life of their loans.

  8. You are all ignoring the fact that the new IBR and Public Service Loan Forgiveness problem basically make going to law school free if you work for the government for 10 years.

    I have $115,000 in total student loan debt.($20k undergrad,$60k law, massive bar loan, paid nothing for 2 years.) My $5k Perkins loan from 1997 is currently being forgiven because I work in law enforcement(prosecutor).

    I currently pay $170/month for the rest. That is $170/month on a $108,000 loan. That does not even cover half the interest payment.

    After 10 years, the entire capatilized balance will be forgiven. Of course my payment will go up with my salary(it tops out at just under $110,000 after 11 years) but even with the increases the balance at forgiveness will be about $22k more than I ever borrowed.

    It's as though the government will have paid me to go to school and then stay in a job I love. Now, I know the kicker is that I have zero private loans, and that's my point. Under the new law, federal loans are not really a bad deal, I'm proof.

    I think your message would be much more credible if you focused on the difference between Federal loans and private loans, instead of lumping them together.

    Federal loans can still be a great tool to advance yourself. I agree private loans for law school should be avoided at all costs, including not attending law school.

  9. Getting a government job, at least with a JD, in my experience, is like getting a BigLaw job - almost impossible, with a big chance of depression. I'd LOVE to get a job with the government (doesn't matter if it's a "lawyer" job or not), and I apply for as many as I think I qualify for, but so far no dice. I'm sure there are a LOT of us in the same boat - while the government might be hiring, it's not hiring lawyers. Not even to be mail clerks, technicians, or secretaries. This year's JAG hiring was reportedly the most competitive on record, and it's only going to get tighter.

  10. They call it the American Dream 'cuz you gotta be asleep to believe in it.

  11. Funny how you all complain about how hard life is. Yet I have utilized my law degree, networking skills, and the power of positive thinking to become a wealthy industrialist. I earn over $400,000 each year. I enjoy my country club, yacht, and jetting to vacations all over the world. The difference between us...I AM A FREE MARKET RISK TAKER AND CHAMPION. I do not focus my energy on self-defeatist filth. I pity you and your empty days and nights blogging about how impossible it is to succeed...Meanwhile some of us are doing just what you claim is impossible. BWAHAHAHA!!

  12. Obvious troll is obvious.

  13. 3:31 is funny:

    "400,000 each year"

    "wealthy industrialist"

    "jetting to vacations all over the world"

    It's like he was frozen in 1950, and then decided to write a blog comment immediately after being thawed out.

  14. Is it better to drop out after one year or keep going when each year costs 42k?

  15. Adrian, it is even better to drop out after first semester, if your grades do not place you in the top 10% of your class. This is especially the case if you attend a lower-tier school, or are paying full sticker - or close to full price. There are exceptions, i.e. you *definitely* have legal employment lined up after graduation - at a salary that will permit you to pay back your loans; you are living at home, not paying any bills, and your family is helping out significantly with your tuition; you are attending an elite school (but you should still be in the top half of your class).

    Looking back, the people in my class who dropped out after first semester/first year were smart to drop out. It is easier to explain an unemployment gap of a few months than it is to explain to employers why you are looking for non-legal employment, even though you have a law degree. The biggest benefit, however, is that you get to escape the doldrums of law school, and avoid crushing student loan debt. You know your situation better than anyone. Make the best decision you can, with the best information available. Do not rely solely on the word of a law school dean. They have a direct intere$t in keeping you in school.

    Yes, 3:31 is a troll. In his next post, he will probably tell us all how he (allegedly) had a threesome two supermodels, on a beach in Belize, last night.

  16. Nando - one more thing you should take into account is the opportunity cost - going to school for 3 years means that you are not earning anything for those 3 years...

  17. Hey Nando,

    I discovered the "law school scam" community of bloggers a few days ago, and have been reading with great interest. I graduated from a tier three law school, top 10%, law review and moot court. My combined undergraduate and law school debt is just shy of $140K. There are no jobs around here, so I've been attempting a small start-up firm with two friends. There's plenty of work to do, if one doesn't mind making small dollar. I'll be really surprised if my take-home tops $15K this year.

    I've recently begun thinking I've been had, and that's been a troubling realization. Wish I was smart enough to see it sooner, but I guess that's the power of the mythology surrounding the legal profession. The merits of becoming a lawyer are so far beyond question, people don't ask the right questions until it's way too late.

    Anyways, I really support what you are doing, and would like to offer what help I can. I co-host an independent (single station) radio show that reaches a college audience. If you're so inclined, I'd enjoy having you on for an interview. Let me know at

    Either way, keep doing what you're doing.

  18. I dont possess the smarts or drive for any kind of advanced degree like law but this blog is a fascinating and eye opening read. I have been in heaps of debt and slowly crawled out after years of just pounding away at it, I know what the crushing debt is like...dont give up.

  19. @ "m"-- I wrote this comment on another blog: DC is a misconceived to have an abundance of jobs. First of all for many current federal jobs in law they are under different forts, military installations or military bases as the current wars continue. This means that although you work in the capacity of law, at any time you may ne deployed in war as you are technically part of military armed forces. Other agencies like FTC, federal courts (trustee positions) or SEC want old men with 15 years of experience from BIGlaw. The market is saturated so now the federal hiring agencies only want top 10 law grads w/ law review--read the qualifications section of the vacancy. Apply for vacancies and you will get any of these template responses"hiring authority not hiring at this time" "vacancy cancelled" "application under review" or my favorite "you were qualified but not the MOST qualified." I actually realized this was a definite template when a friend of mine in a different field--accounting received the EXACT wording in her rejection letter. Baby boomers are holding onto their government jobs, so others will remain in latter category and likely not surpass minimum qualifications because they are unable to obtain jobs to get experience. I've met attorneys who it took from 3-6 years to get a government job. Dont believe the propaganda about DC, it's simply
    not true--they're not hiring and if they are it's only for a minute, select few--same as private industry.

  20. I worked at a Public Defender's Office and a DA's Office for free, and still couldn't get a job out of law school for the government. For those that get these jobs and get on IBR, it isn't exactly "great" but it's not awful. But the vast majority have zero chance at these jobs...

  21. some school even have people in financial aid on the boards of lenders. i mean that is grosser than some of your pictures.

  22. access group is stuffed with school on it.

  23. The Public Service Loan forgiveness program is just going to make public sector jobs more competitive - likely to the effect that the top percents go biglaw or government. It's a bandaid that will only help a small percentage of JD candidates - those that probably didn't require that much help to begin with.

    I mean, why would the DA, States' Attorney, Public Defender hire second and third tier lawyers from the bottom 90% when top tier and top 10% folk are applying?

  24. Actually, if you dig into the income-based repayment program, you'll find that tons of jobs qualify you for the program - not just federal government jobs. State and local government jobs and non-profit work qualify as well.


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