Much has been made of the Great Resignation, where employees now have more leverage when it comes to getting jobs and negotiating salaries due to a labor shortage. But not everyone has benefited, and a young lawyer struggles with what appears to be unfathomable debt.
Business Intern featured Steve, a 2017 graduate of Seattle University School of Law. Steve grew up in a working family and became a social worker after graduating from college. He said he was often told by lawyers and those around him that pursuing a law degree would leave him well.
So he went to law school and took out student loans to cover the full tuition, thinking he would get a job after graduating and earn enough money to pay off the full loans. . Some of his loans were Grad PLUS loans, which have the highest interest rate at 7.54%.
But life gave Steve a hard time. His fiancee had medical issues that prevented her from working and forced Steve to delay the bar exam. They left Seattle to move to Nebraska to live temporarily with their family, then moved to Albuquerque, New Mexico, where they now live. They receive government assistance in the form of rental assistance and the Supplemental Nutrition Assistance Program.
Steve has not been able to secure a steady income and has no monthly student loan repayments under his Income Contingent Repayment (IBR) plan. Accrued interest is frozen until August 31, when the moratorium on loan repayments is expected to end, unless there is another extension.
Steve’s situation should sound familiar to most young lawyers. He got optimistic advice about law school from people who probably didn’t know any better and from lawyers who should have known better. And he funded his entire legal education in hopes of finding a job after graduation. He couldn’t find a job after graduation due to his unhappy situation and his alma mater’s career service couldn’t help him because they probably don’t have many connections. with the elders in Albuquerque.
And now he has nearly $350,000 in non-dischargeable student loans, more than the average cost of a home in Albuquerque. Moreover, assuming an average interest rate of 6%, his loans will earn $20,000 in interest per year. So unless he can afford to pay a minimum of $1,735 per month just to cover accrued interest, his loan balance will continue to grow and he will eventually become an IBR lifer.
Unfortunately, his large debt is not surprising because there are many like him. Looking at the average cost of law school and rent in big cities like Seattle, full-time students will need to borrow at least $80,000 a year to cover costs. After three years, the law school debt can exceed $250,000. And assuming there is an additional undergraduate debt of $50,000, the total debt may be $300,000.
And will people like Steve get some form of loan forgiveness? The government doesn’t seem sympathetic to lawyers because it thinks all lawyers earn obscene salaries. But even if he does, his IBR status and accrued interest could negate the benefit. For example, if $10,000 of his loans were canceled as proposed by President Joe Biden, it won’t change anything for him. His IBR payment is already zero, so the partial loan forgiveness will not affect his loan repayments. Plus, his accrued interest will likely eat into savings within a year or two.
Steve went to law school so he wouldn’t have to worry about putting food on the table. Now he lives on food stamps and his career prospects are uncertain. I hope his situation improves, but he may have to become “criminal lawyer or making and selling meth on the side to make ends meet. So for those entering law school this fall but hesitant to demand tuition cuts, read his story because chances are you’ll find yourself in the same predicament if you don’t do everything your best to minimize costs. And if the current inflation trend continues, you could walk away with $350,000 or $400,000 in debt. Law schools don’t owe you better grades just because you paid the full tuition.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolves tax disputes. He is also sympathetic to people who have large student loans. He can be contacted by email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.