Five Years to Becoming a Debt-Free JD: How One Attorney Paid Off Six-Figure Law School Debt
Law careers are traditionally viewed as lucrative and enviable. Yet, many attorneys are saddled with mortgage-sized law school debt after graduation.
About five years ago, Harvard Law School left one law school grad and blogger, DebtFreeJD, with nearly $150,000 in student loan debt. After a few years of payments, she’d made a $25,000 dent in that total. Then, she and her husband made an ambitious vow to tackle her remaining law school debt in one year and two months—about the same amount of time it took to build the Empire State Building. Today, thanks to diligence and a refinance, she has earned her DebtFreeJD moniker.
Law school loan debt payoff, as DebtFreeJD knows, is a lot like a skyscraper’s floor-by-floor construction, in that it can involve a combination of hard-core budgeting, loan forgiveness programs, and loan refinancing before it tops off. Refinancing, which is particularly suitable for attorneys because of their expected salary trajectory, can accelerate repayment while saving money on interest. As of June, 2016, the average lifetime savings for SoFi members who refinance their student loans is $22,359.
Loan forgiveness programs, meanwhile, can also help lower debt if you qualify (by entering public service, for example). Offering tax-free forgiveness for eligible loans after 120 qualifying monthly payments, loan forgiveness programs are available through federal and state governments, organizations, and individual law schools. Some entities also offer loan repayment assistance programs (LRAPs), providing funds to make monthly payments.
If you’re a recent or soon-to-be law school grad with jaw-dropping student loan debt, know this: Fast payoff is possible. And as DebtFreeJD’s debt payoff story proves, you need not be a top-earning attorney to turn that possibility into a reality. Here’s how she left her loans on the ground floor.
You’ve been blogging since May 2014, when you owed nearly $126,000 in student loan debt. What made you start the blog, and how did you come up with your repayment goal of one year and two months?
I thought blogging would be a good way to stay accountable and make the quick repayment process more fun. I started the journey with nine loans. In my first year of law school, I took out $47,803 in federal loans. In my second year, I borrowed $56,075 more in federal loans. And in my third year, I received a $45,450 grant from the school, which was dependent on me getting a job in public service. When I instead went to work for a private firm, the grant was converted into an 8% loan. All total, I had $149,328 in loans.
One day, my husband and I sat down and ran all of the numbers. For three years, I had paid at least the monthly minimum, and I was discouraged by how much money was going to interest, and how long it would take to pay it all off. That’s when it occurred to me to look at the length of time it took to complete a different kind of big project. I did some research and found that the Empire State Building took one year and 45 days to complete. So I used a similar time frame as my goal. Doing that just helped make it more real.
Let’s talk tactics. You were earning $6,574 per month when you really got serious about paying off your loans quickly. What was your specific financial game plan?
The basic financial strategy was obvious: We had a certain amount of money coming in, so we had to decrease the amount we were spending.
We eliminated big-number items first—canceling cable and choosing to live with only one car. Then, we cut additional spending month to month. One month we didn’t go out to restaurants at all; another month we enjoyed an occasional date night. I also read blogs focused on paying down student loan debt, and found those to be inspiring and helpful.
By 2015, we had made a lot of progress— only one loan remained. But the interest on that loan was very expensive, so I looked at refinancing.
How did you hear about SoFi and what role did refinancing play in your overall repayment success?
A friend from law school refinanced with SoFi, and had a good experience. I had not heard of SoFi before, so I did some research and decided to do it. I was paying 8% interest on my 10-year term loan from my third year of law school before I refinanced through SoFi to a 5-year, variable-rate loan at 3.66% interest. The process involved some paperwork, but not a crazy amount.
Refinancing made sense and played an important role, because even though we knew we were taking on more risk by refinancing to a shorter-term variable loan, we were also confident that we were on track to pay it off quickly. Our jobs were stable, and as a two-income family, one of us would still work if the other lost a job.
You also had a baby and bought a house in 2015. How did those milestones impact your repayment progress?
Buying the house was actually cash positive. We had to come up with the down payment, but our mortgage is significantly less than what we were paying in rent. In our area, it’s much cheaper to buy than to rent.
The baby is obviously a big expense, but he arrived around the same time we paid off all our loans. We only missed our goal of 14 months by only about three weeks. Not to make excuses, but it was kind of a busy year!
How do you think the current job outlook for new lawyers will impact their loan repayment strategies?
I entered law school right before the recession hit. The whole world changed while I was there. While law jobs with high-paying salaries are still out there, it seems only lawyers who graduated from top-tier schools get those. For middle-tier school graduates, jobs just don’t pay what they did when I started law school.
Still, it’s possible to pay off student loans when earning a lower salary in law. One person I talk to through my blog makes around $80,000 a year and has a very large debt burden. But he just decided to tackle it, even though it involves sacrifices.
My husband and I are grateful we were in a position to commit seriously to paying off my loans. It would have been a lot more difficult if we had waited until after starting a family. But for people who don’t have the luxury of focusing solely on their loans, or who have different priorities, a more balanced approach is helpful.
For example, single attorneys in a high-tax bracket might choose to balance paying off loans and contributing to tax-deferred accounts to minimize their tax burdens. Young families intent on buying a home might want to save toward that goal while also trying to accelerate at least some of their student loan debt, if the interest rates on their loans are low enough. Of course, for folks who have high-interest debt and a low-interest student loan, it makes sense to prioritize the high-interest debt.
What role does mindset play in student loan debt payoff success?
As we were paying down my loans, it became more like a game, rather than a goal detracting from our quality of life. We found a creative way to solve a problem, and it was very satisfying to determine strategies together. It was even good for our marriage.
Mindset is key because you want to avoid feeling overwhelmed. So, as you make sacrifices, it’s important to remind yourself that you’re doing so for only a short term. You can do anything for a year or two, especially if the end goal is so rewarding.
I have friends who work at big law firms and make a lot more than what my husband and I do, yet they think they can’t pay down their loans. They work so hard—every minute is taken up by their jobs—and they have other pressures. But like most problems in life, if you’re really willing to think seriously about it and tackle it, you can usually find a solution.
Loan Forgiveness and Assistance Programs for Lawyers
John R. Justice Student Loan Repayment Assistance Programs — For state and federal public defenders and state prosecutors who agree to remain in their roles for at least three years.
Public Service Loan Forgiveness Program — For those employed by federal, state, local, or tribal government organizations or tax-exempt non-profits, or for those serving in a full-time AmeriCorps or Peace Corps position.
Department of Justice Attorney Student Loan Repayment Program — For DOJ employees. Matches loan payments made by the individual attorney, who must apply for limited funds. New requests accepted in March 2017.
Herbert S. Garten Loan Repayment Assistance Program — For Legal Services Corporation grantee program attorneys, who may receive up to $5,600 per year for up to three years. A program of the nonprofit organization LSC, the largest funder of civil legal aid for low-income Americans.
School-offered loan repayment assistance programs — For law school graduates working in the public interest sector, government, or other low-paying legal fields.
Loan Repayment Assistance Programs — Mainly for public interest law emplo@yees, with some programs funded by state legislative appropriations and others relying on funding from the private sector or Interest on Lawyers Trust Accounts.