This is a topic that I am really passionate about. I wanted to write about what led me to really start budgeting and also to create this page. This is part one of a two part post, which focuses on what the average law student faces when they graduate. Part Two will go through how representing Plaintiffs has taught me the importance of being prepared, but more on that topic to come!
There is a common misconception about attorneys. The majority of individuals who graduate from law school do not graduate with jobs with some lavish salary. The average starting salary for top ranked law schools in 2015 was $68,300 for those in the private sector and $52,000 for those in the public sector. When you couple that with the fact that the majority of law school graduates have at or above six figures in debt, that is not as much money as it seems. I have heard of those who went to private school that graduated with over $200,000 in debt. Even more concerning, graduate students have higher interest rates than those who take out loans for an undergraduate education. Interest rates start at over 6%. For example, someone with $100,000 in debt and a 7% interest rate would have to pay $1,161.08 per month to pay off the loan in ten years. When the loan is finally paid off, he will have paid $39,330.43 in interest alone.
Here is another kicker, you can’t just start working when you graduate. You cannot practice law until you pass the bar exam. If you fail, then you are stuck with this heap of debt and unable to practice in the typical sense. Stressful, right? That doesn’t even scratch the surface. The bar exam only occurs twice a year, the end of February and the end of July. To sit for the two day exam, you will need to take a bar prep course. The standard course costs $5,995. Then you have to wait a month to three months for results, and then go through the swearing in process. Your loans have been accruing interest for at least six months before you can even start practicing.
For me, my loans varied between 6.55% and 7.6% in interest. By the time I was able to start repaying the loans, my total debt was approximately $93,000. After graduation, I got a job in the private sector, but my salary was below the national averages outlined above. Considering that I wasn’t making that much after graduation, I could not afford the over $1,000 payment per month that would be required in the standard ten year repayment plan. I entered into a graduated repayment plan with the goal of paying it off over twenty years. If you were to average my interest rates, it would mean that I would have to pay $721.03 a month over twenty years. After they were finally paid off, my total interest paid would be $80,046.16! That would mean that I would almost pay as much in interest as the initial principal amount!
I quickly realized that minimum payments would not be enough on their own. I started aggressively attacking my loans after I started practicing and I did make some decent strides. But then I got engaged and we bought a house. Then we helped fund our wedding and a two week European honeymoon. Then we bought another house (and rented out our old one, which is a post for another day). Anyway, at some point I realized that I had gotten off track from my original plan. Now we have decided to start fresh with a clean budget and a plan to aggressively pay down our outstanding loans. Our plan is to be debt free by October 2020. That is a combined $125,000 in debt in three years and three months. Hope you enjoy following along.