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Debtgiving update

In an effort to get my financial affairs in order, I’ve signed up for Mint. I signed up for the service prior to attending law school and didn’t find it that useful. In its prior iteration,  Mint just seemed to provide graphs of my bank account balance, which I didn’t have much use for. It’s improved a lot in the last few years. Now, it provides budget tools, spending updates, and offers a quick, convenient overview of where my money is going.

I’ve also started using YNAB again. Like Mint, I used this before going to law school. After graduating with my JD, my law school loans seemed so large and insurmountable that it seemed useless and depressing to keep track of spending and pay off my loans, but I’ve since rejected this unproductive mindset. Even if I have to live on water, ramen, and live with my parents into my late 30s, it’s worth it if it means freedom from law school debt in the end.

Some of my budget challenges currently include:

  • Take the bus to the train for my work commute instead of paying to park my car at the train parking deck
  • Pack lunch EVERY day for work
  • Change from a $20/month gym plan to a $10/month plan
  • Avoid meeting friends at bars. Beer expenses add up

Here’s where my law school loans currently stand as of 11/28:

Principal Accrued Interest Interest Rate Total
$22,000.07 $15.79 6.55% $22,015.86
$35,451.08 $29.72 7.65% $35,480.80
$23,437.53 $456.71 6.55% $23,894.24
$44,022.11 $27.69 8.00% $44,049.80
$24,300.94 $27.69 6.30% $24,328.63
GRAND TOTAL: $149,769.33

I’ve been making an effort to keep the level of accrued interest low, so at the very least my total loan balance will stay static. My current balance is $1,067.14 less than my last update on Nov. 4, which is pretty solid.

When I initially went to law school, I thought I’d be earning a high salary and generally enjoying a solid middle class lifestyle. Dumb, I know. This entire process of incurring debt and struggling to get my career going has made me question my values and goals. I think I’ve finally come to the understanding that family and friends are the most important aspects of life. As I’ve found out, a total lack of money can put a severe crimp on your life, but chasing after money doing something you don’t inherently enjoy is also a miserable way to live and life is very short.

I constantly run images of my past through my head – graduating from undergrad with no debt, having a beautiful girlfriend, thinking law school was just the next step in the golden road ahead, etc. Unfortunately, that all went the way of the dodo in a surprisingly short period of time. I incurred an ungodly amount of debt, my law school performance was not as good as I wanted, I never landed a good law job, and I’m turning 30 and live with my parents.

I know replaying an idealized past isn’t good for my mental health, and it’s a habit I’m working on changing. My current situation is fairly grim – I admittedly had medium grades from a top law school, which means I’m ineligible to work at large law firms that pay the large salaries the public thinks every lawyer makes. I didn’t enjoy studying law, I didn’t enjoy the people I met in law school, and although I think I perform very competently and much better than many lawyers I interact with, law has just never felt right for me. This may sound like first world problems whining, but I think it’s fair to say it’s impossible to excel at a discipline unless you derive some inherent satisfaction from it. It might be because law has not been profitable for me (at all), but it could also be that it’s not profitable for me because I don’t enjoy it – a cart before the horse problem.

In the next couple years, I have to decide whether to continue hacking it in small law firms, where the pay is often in the $40,000-$60,000 range (from my personal experience at least). I’ve been exploring some other career options, specifically marketing, programming, and writing to make some more money to pay toward my loans. I don’t have family or relationship obligations and since I’ve only managed to make in the $40,000-$60,000 range in law and I see how much other lawyers (even very experienced ones) struggle, so I don’t feel like I would be walking away from anything good if I were to leave law behind for another more-profitable and personally-satisfying career.

In any case, I don’t want to complain too much, but I want this blog to provide a fairly unvarnished portrayal of my life. I hope everyone had a happy Thanksgiving! Keep paying off those loans!

Law school loans: draining my savings edition

I, Mr. LawSchoolDebt, now have zero savings after siphoning everything into my law school debt.

goodman

I still have $1,000 in a 401k from an old job and I’m planning to liquidate that. And yes, I’m well aware that taking the tax penalty for withdrawing a 401k early is the Lloyd Christmas approach to financial planning, but we’re only talking about a $1,000 401k and paying off my law school debt is my #1 goal in life. The little Mr. LawSchoolDebt who wanted to be a dot-com CEO wouldn’t be impressed that paying off student loans is my life’s dream, but little Mr. LawSchoolDebt grew into medium Mr. LawSchoolDebt, who thought law school was a good idea, so little Mr. LawSchoolDebt has zero credibility.

Here’s the current damage report as of today:

Principal Accrued Interest Interest Rate Total
$22,084.34 $16.74 6.55% $22,101.08
$35,533.53 $37.24 7.65% $35,570.77
$23,437.53 $1,007.08 6.55% $24,444.61
$0.00 $0.00 8.25% 0
$44,345.54 $33.31 8.00% $44,378.85
$24,307.85 $33.31 6.30% $24,341.16
TOTAL: $150,836.47

It’s a breathtaking thing of beauty to see the loan with the ghastly 8.25% interest rate reduced to nothingness. I hope some banker is crestfallen that I paid off the loan quickly and he will be unable to enjoy his fourth gold-plated LEED-certified hot tub that he planned to finance with compounding interest from my law school loans.

There will be few days when I will be able to enjoy a steep drop in my loan balance like today, so I will do my best to savor this experience and fondly look back on the day I slayed the 8.25% Death Monster. Of course, this could all change if I landed a job that paid significantly more or I won the lottery/Jeopardy/Survivor. However, my life experience has taught me to assume the worst possible outcome is more likely to happen to me than an unlikely fantastic outcome, so I’m going to continue to operate on the assumption that my present life situation in terms of debt and salary won’t be materially altered in the near term.

What would it take to pay off your law school loans in three years?

Excellent question to ask yourself, Mr. LawSchoolDebt! Also, stop talking to yourself because other people think it’s weird and this is #WhyImSingle. Although it takes three years to pile up an enormous, jaw-dropping sum of debt that dismantles your quality of life, reshapes your future, and drenches your life in cynicism and despair, three years is actually not a very long time in the greater scheme of things. So, I thought I’d run an experiment using Credit Karma’s online debt calculator to see what it would take to pay off the balance of my law school loans in three years. Here are the results of my scientific study:

Monthly payment Interest paid Total paid
Loan #1 $22,084.34 $677.00 $2,302.00 $24,386.34
Loan #2 $35,533.53 $1,108.00 $4,435.00 $39,968.53
Loan #3 $23,437.53 $719.00 $2,441.00 $25,878.53
Loan #4 $44,345.54 $1,390.00 $5,679.00 $50,024.54
Loan #5 $24,307.85 $743.00 $2,432.00 $26,739.85
Monthly payment: $4,637.00 Total: $166,997.79

Seeing as I’m only making about $3,000 a month post-taxes, I don’t think this is feasible. There’s currently no way I can make a $4,637 monthly payment unless a sugar momma were to magically come into my life and I don’t have the abs for that to happen, so it looks like the three-year plan is out. C’est la vie.

What would it take to pay off your law school loans in six years?

Let’s stop talking foolish and aim for a more realistic goal of six years. Six years is longer than I’d like to take and certainly longer than my parents want me to live at home and, by my calculation, exactly six full years longer than a single woman will accept a 30-something prospective suitor to live with his parents, but $150,836.47 in debt is more than I’d like to have, so them’s the facts. Here’s how the six-year timeline looks:

Monthly payment Interest paid Total paid
Loan #1 $22,084.34 $372.00 $4,679.00 $26,763.34
Loan #2 $35,533.53 $617.00 $8,887.00 $44,420.53
Loan #3 $23,437.53 $395.00 $4,962.00 $28,399.53
Loan #4 $44,345.54 $778.00 $11,626.00 $55,971.54
Loan #5 $24,307.85 $406.00 $4,951.00 $29,258.85
Monthly payment: $2,568.00 Total: $184,813.79

Now this is looking better. If I could get some side gigs, I think paying $2,568 per month is within striking distance of encroaching upon the outer limits of the universe that just may intersect the mystical realm of feasibility. I’d prefer not to live with my progenitors for another 1/2 decade + 1, but if that’s the hand life has dealt me then so be it. The thing that irritates me under the six-year plan is the amount of interest I’m forking over to the greedy, evil, unloved-by-their-mothers bankers – $17,816 more in interest. For your convenience, I’ve included this handy graphic that not only reenacts each EvilBanker’s reaction to receiving your law school loan payment, but also conveniently and uncannily offers you,  dear reader, with a militarily precise representation of each and every EvilBanker’s physical appearance and manner of dress:

snidely-whiplash

I would rather pay off my law school loans faster than the Evil Banker can exclaim, “Curses! Foiled again!” If you’re a banker and offended by this factual depiction, I am more than willing to portray bankers in a sympathetic and attractive light in exchange for a hefty and morals-shifting gift to the Money For Mr. LawSchoolDebt’s Debt Charity. My 501(c)(3) status and Charity Navigator rating are pending, but don’t worry, it all goes to good cause.

So there we have it. $4,637 a month if Mr. LawSchoolDebt wants to unshackle himself in three years. $2,568 if Mr. LawSchoolDebt wishes to dig through a 500-foot financial sewage pipe for six years and escape into a ferocious rainstorm of freedom that will physically and metaphorically cleanse Mr. LawSchoolDebt’s soul à la Shawshank Redemption.

law-school-debt

 

 

 

Where things stand

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Call me Mr. LawSchoolDebt. I graduated from law school in 2011. I went to a law school that ranks pretty highly (usually in the 15 to 20-ish range, so not a vaunted T14 member but not too shabby by any means). Prior to attending, I had heard about some poor law school outcomes but I thought they were limited to graduates of third tier and lower law schools. I got average grades and ended up in the middle of the class, which translates to being barred from working in BigLaw firms and prestigious government agencies that pay well. My law school debt when I graduated was approximately $190,000.

The published starting salaries for my law school were substantial and strong six-figure incomes, so I reasoned that taking on six figures in debt was not crazy and I could pay it off within a 3-5 year period of time. Wrong. I graduated without a job and had to spend quite a while finding one. I worked for a year at a law firm that paid peanuts. My law school debt meanwhile ballooned to more than $200,000. I eventually found a job that pays a little more than $40,000. It’s not perfect, but it has benefits and I feel that it adds more value to my future than doing temporary document review gigs.

I’ve been through the Kübler-Ross model, more popularly known as the five stages of grief: denial, anger, bargaining, depression, and acceptance.

  • Denial: at first I pretended that Income-Based Repayment (IBR) was going to save me and that I’d eventually find a high-salary job with my oh-so-prestigious law degree. As the months turned into years, I’ve accepted that I most likely will never land a high-paying law job and I’d be better off paying off the debt as soon as possible. Under the IBR plan, you make small payments based on your income and your law school debt is “forgiven” after 25 years. But there must be a catch, right? Correctamundo. The amount of debt that’s forgiven is treated as taxable income. With some of my loans at 8%+ interest rates, it’s entirely possible that my debt could explode to $400k+ in 25 years if I just made the minimum payments under the IBR plan. So in 25 years, I could face a HUGE bankruptcy-inducing tax bill when I’m in my 50s and past my prime earning years. Needless to say, this would be a catastrophe. I’ve since stopped living in denial that IBR isn’t a good plan for my future.
  • Anger: I will admit that I was very angry for a time – angry at the law school for sending me all those seductive marketing materials, angry at my law professors for not giving me the A grades I thought I deserved, angry at other law students for “taking” the jobs I thought I wanted, angry at the ABA for failing to regulate the legal industry and legal education, angry for feeling tricked and having my finances destroyed, etc. I was definitely angry for a while. I still am slightly angry, but I’m more angry at myself for letting my life get off the rails and being as naive as I was in my early 20s.
  • Bargaining: I thought if I went to a ton of networking events, CLEs, MeetUps, and emailed lots of people, I’d be able to rise like the phoenix from my grave of law school debt. Nope. The debt just continued to grow and my efforts at career networking produced rejection after rejection.
  • Depression: I’m not proud to admit that I’ve suffered some severe depression after law school. I’ve had to move back with my parents. I hate complaining but my salary isn’t paying the bills. I drive a 17-year-old car. I don’t have money to partake in social activities, take trips, or pursue my interests. If it even needs to be said, this translates to zero dating life. I’ve realized I’ll be broke for a very, very long time. I was also depressed that I would never be able to find a wife or start a family due to my financial and career condition. All of this caused some pretty severe depression and during the depths of my depression, I often had thoughts about self-harm. When you’re turning the corner on 30 and you have no savings, your career is going nowhere, you have HUGE student debt, you have no dating life, you live like a hermit with your parents, and you spend your time fruitlessly searching for better job options, it’s not good for the psyche.
  • Acceptance: I’ve come to accept that I signed up for the debt. No one forced me to get a law degree. It’s my responsibility to pay back the money I borrowed. I also started focusing on exercising, nutrition, and making time to socialize with friends and family, which was good for my mental health. Reading more books and engaging in cheap or free activities has also been good for my outlook. I’ve accepted that this law school debt is the challenge life has handed me and I think I’m up for the task. I’ve also begun building other skills that may provide me the opportunity to change careers into an industry with more jobs and better salaries.

So enough Tony Robbins psychobabble. Here’s the damage I’m looking at as of today:

Principal Accrued Interest Interest Rate Total
$22,159.66 $11.93 6.55% $22,171.59
$35,583.53 $3,887.10 7.65% $39,470.63
$23,437.53 $1,065.11 6.55% $24,502.64
$6,621.76 $4.49 8.25% $6,626.25
$44,515.47 $3,224.48 8.00% $47,739.95
$24,371.95 $3,224.48 6.30% $27,596.43
TOTAL $168,107.48

$168,107.48

That’s the number standing between me and some semblance of freedom. It’s a lot of money. I’m throwing most of my paycheck at the debt and working side jobs to throw even more money at it. It’s going to take more than a minor miracle to pay these loans off in the near future.

This blog is going to detail my progress paying off my law school debt and hopefully it can serve as a resource for others with similar debt troubles. I’ll share any tips I have for paying off debt and hope to commiserate with others working hard to pay off their student loans. There is strength in numbers.