Lana Oconnell
Lawyers face a challenging task when it comes to paying off student loans, with the average law school debt load being around $100,000 to $200,000. The interest on these loans begins to accrue immediately, and the median starting salary for lawyers varies greatly, with public sector lawyers earning a median of $57,500 and private sector lawyers earning a median of $200,000. This makes it difficult for lawyers, especially those in the public sector, to pay off their student loans quickly. However, there are strategies that lawyers can employ to manage their debt, such as employer loan repayment benefits, refinancing, and various loan repayment plans. Some lawyers may also choose to pursue a long-term loan forgiveness approach or take advantage of cashback programs. Additionally, it is important for lawyers to consider their financial habits and make extra payments when possible to reduce their debt burden.
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What You'll Learn
Student loan repayment benefits from employers
Lawyers often graduate with significant student loan debt, with the average being around $100,000 to $130,000. Women and minority graduates bear a disproportionate amount of this debt, largely due to income disparities.
Given the high debt-to-income ratio that many lawyers face, student loan repayment benefits from employers can be a valuable tool for managing this debt. Many large and small legal employers recognize the burden of law school debt and offer student loan repayment benefits. These benefits can take the form of direct payments toward employees' student loans, either immediately or after an initial onboarding period. Some employers may also be open to creating such a program if they do not already have one in place.
Student loan repayment assistance programs can offer tax-free benefits of up to $5,250 annually. This benefit is provided by both government agencies and private employers. For example, health professionals, public defenders, military members, and STEM workers may be eligible for assistance through federal or state government agencies. Private companies such as Ally Financial, Chegg, Google, and Fidelity also offer student loan repayment assistance programs.
It is important to note that eligibility for certain loan forgiveness programs may depend on the type of loans (federal or private) an individual has. Federal loans generally provide more opportunities for forgiveness, and federal loan forgiveness programs like Public Service Loan Forgiveness (PSLF) are available for lawyers working in public service or public-interest roles.
In summary, student loan repayment benefits from employers can provide valuable financial assistance to lawyers burdened with student loan debt. These benefits are becoming increasingly common, and lawyers should research and consider their options for maximizing their ability to manage their debt.
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Refinancing and loan repayment options
Refinancing Options:
- Preferred lenders: Some law schools suggest using a list of preferred lenders for private loans, which may offer competitive interest rates. However, it's important to compare the range of rates offered by these lenders to ensure you're getting a good deal.
- Federal loans: For graduate studies, federal Grad PLUS loans are an option. While these carry a higher interest rate (9.08% for the 2024-2025 academic year), they may be a viable choice for law students.
- Private lenders: Private banks may offer specific loan programs for law students, such as a "Professional Student Line of Credit" with competitive rates.
- Specialized refinancing companies: Companies like First Republic offer refinancing deals with low-interest rates and rebates for early repayment, which can be advantageous for lawyers with six-figure law school debt.
Loan Repayment Options:
- Employer benefits: Many law firms, both large and small, offer student loan repayment benefits. These may provide financial assistance towards student loans, either immediately or after an onboarding period. Discussing student debt with your employer and advocating for loan benefits can be a viable strategy.
- Standard repayment plans: A standard 10-year term loan for a $30,000 balance at a 4% interest rate can be paid off three years earlier by increasing monthly payments by $100.
- Income-driven repayment plans: The Revised Pay As You Earn (REPAYE) plan is an income-driven repayment option that can lower monthly payments based on your income. This strategy may be beneficial for those with high loan balances and can also provide interest subsidies. However, it may extend the repayment period.
- Public Service Loan Forgiveness (PSLF): Lawyers working in the public sector can take advantage of the PSLF program, which offers loan forgiveness after a certain period. This option may be attractive to those prioritizing a public interest legal career over high salaries.
- Investing and financial strategies: Some lawyers may choose to invest their money elsewhere if their return on investment (ROI) is higher than their loan interest rate. Additionally, taking advantage of tax-advantaged accounts, such as a 401(k), can help maximize financial strategies while managing student loan debt.
It's important to carefully consider your financial situation, income, and career goals when deciding on a refinancing or repayment strategy. Seeking financial advice and exploring various options can help lawyers make informed decisions about paying off their student loans.
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Salary expectations and repayment strategies
The average law school debt load varies across sources, with some reporting an average of $100,000 in loans for a Juris Doctorate, while others state that lawyers who graduated in 2020 had an average debt load of $118,400 or even $130,000. Graduates of the Whittier Law School have the worst debt-to-income ratio, with an average debt of $204,664 and a median starting salary of $40,747. The median starting salary for a lawyer in the public sector is $57,500, while those in the private sector earn a median starting salary of $200,000. According to the Bureau of Labor Statistics, the average earnings for lawyers are $126,930.
Given the high debt load and varying salary expectations, lawyers can consider the following repayment strategies:
- Taking advantage of student loan repayment benefits offered by legal employers, which can provide extra money towards loan repayment.
- Discussing the impact of student debt with employers and exploring the possibility of creating a repayment program.
- Understanding that paying off debt aggressively may not always be the best strategy, especially if your ROI is higher than your loan interest; in such cases, investing your money elsewhere may be more beneficial.
- Considering the REPAYE or PAYE student loan repayment options, which can provide long-term repayment strategies, or the PSLF program for pursuing a public sector legal job.
- Living frugally and making prepayments to reduce debt, especially in the first year as an associate.
- Refinancing loans to take advantage of low-interest rates and rebates for early repayment.
- Using cashback programs that provide payments directly to your student lender when shopping at specific stores.
- Following federal guidelines that recommend allocating a maximum of 36% of income towards debt repayment.
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The psychological benefits of paying off debt
Lawyers who graduated in 2020 had an average law school debt load of $118,400, with some sources placing the average at $100,000 in loans for a Juris Doctorate and around $130,000 of loan debt following graduation. Graduates of the Whittier Law School borrowed an average of $204,664, giving them the worst debt-to-income ratio among all law schools. It is very difficult for the average lawyer working in the public sector to pay off federal student loans, and it will take the average lawyer 18 years to pay back their student loans.
Given the magnitude of these debts, it is no surprise that paying off debt has psychological benefits. Debt settlement is like a financial reset, allowing you to move on with your life. It can improve your psychological functioning, decision-making, and confidence. It can also reduce stress, which is associated with lower blood pressure, better sleep, and lower anxiety, all of which positively impact your physical and mental health.
Paying off debt can also improve your relationships. Financial strain is a common source of tension in relationships, often leading to conflict, secrecy, and emotional distance. Becoming debt-free can reduce that strain and foster healthier communication.
To unlock these psychological benefits, it is essential to create a manageable and empowering plan. This might involve working with a credit counselling agency to consolidate debts into affordable monthly payments, or negotiating with creditors for more favourable repayment terms.
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Racial bias and student debt
Student debt is a significant issue for lawyers, with the average law school graduate taking 18 years to pay back their loans. The burden of student debt disproportionately affects people of colour, exacerbating the racial wealth gap. Black students finance their education through debt, and due to income disparities, college degrees contribute to the fragility of the Black middle class.
Black students typically owe more than white students, with Black borrowers taking out an average of $39,500 in student loans compared to $29,900 for white students. This disparity is further intensified by the fact that Black graduates have lower wealth levels than their white counterparts, with the average white family having around ten times the wealth of the average Black family. This disparity is due to historical policies that have created structural racial inequities, including racial discrimination in the housing market and other anti-Black policies that have limited wealth-building opportunities for Black Americans.
The high cost of law school, with average annual fees ranging from $26,264 for public law schools to $81,292 for Columbia University, the most expensive law school in the country, contributes to the student debt crisis. The median starting salary for a lawyer in the public sector is $57,500, while those in the private sector earn $200,000 on average. As a result, it can take a lawyer in the public sector 19.1 years to pay off their loans if they allocate 25% of their income, while a private sector lawyer can do so in 9.9 years following CFPB guidelines.
To address the racial bias in student debt, the American Bar Association (ABA) recommends that law students and lawyers take the Implicit Association Test (IAT), developed at Harvard University, to gauge racial bias. Additionally, student loan forgiveness plans and debt cancellation proposals have been suggested as ways to narrow the racial wealth gap and increase access to higher education for students of colour. Legal employers are also playing a role, with many big firms offering student loan repayment benefits to help ease the burden on their employees.
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Frequently asked questions
On average, it takes 18 years for law school graduates to pay back their student loans. This is lower than the average time for paying back any graduate degree, which is 23 years.
Lawyers who graduated in 2020 had an average law school debt load of $118,400. This amount varies, with some sources citing an average of about $100,000 in loans for a Juris Doctorate, and around $130,000 of loan debt following graduation.
The average earnings for lawyers are $126,930 according to the Bureau of Labor Statistics (BLS). However, there is a bimodal distribution for lawyer salaries, with a high chance that a lawyer's salary could be $80,000 or $190,000.
Most lawyers make mistakes when paying back their student loans. It is recommended to choose the appropriate repayment strategy, such as REPAYE or PAYE, or pursuing loan forgiveness through programs like PSLF. It is also important to consider factors like interest rates, refinancing options, and employer benefits for student loan repayment.
Student loan debt can have significant financial, mental, and emotional impacts on young lawyers. Women and minority law school graduates bear a disproportionate percentage of student debt due to income disparities. Additionally, young Black lawyers have the highest debt load and the most difficulty reducing their balance.
