$271,706.74 in Student Loans: Oops

2015, when I graduated law school, was a simpler time.   Ariana Grande had not yet licked a donut (let alone Pete Davidson), and big law starting salaries were still the (totally insane) $160,000.  I was fortunate to have lined up one of those big law jobs, and I knew that all I had to do was make it through the bar exam, move into a nice new apartment in one of America’s more expensive cities, and start measuring my life in six minute increments.  I was ready. to. go.

But here’s the thing about studying for the bar exam:  it sucks.  You, my dear reader, know this, because you are either a lawyer (and know it firsthand), a law student (and have heard horror stories), or a genius (and noped the fuck out of studying for the bar by not even going to law school).

So law grads do things to make it a little better–move to the beach, voluntarily watch daytime television, take a shot every time the Barbri lecturer makes a pun, etc.  I kept it simple and discovered the joys of the little coffee shop a few blocks from my parents house.  My parents live in a suburb, and the coffee shop featured a wide variety of suburb staples:  a very gossipy group of octogenarians, a teenage Bible study group, a mom’s group, like fourteen 19-year-old men trying to teach themselves coding but actually just surfing Reddit, and way too many people who believe bike shorts and sweat are appropriate attire for a coffee shop.  And me, nursing a large latte in the corner and trying to not fall that far behind my Barbri counter.

It was there one day where I, desperately seeking an escape from the vagaries of impleader and interpleader, decided to finally total up my student loan debt.

Woof.

I owed $271,706.74.

With a newly rising wave of panic, I closed out my Barbri tab (not something that required much convincing), and started doing calculations of how much and how long it would cost me to pay this off.

Yikes.

Every month, I had to pay $1,447 in interest before I could even make a dent in the debt.  I hastily threw together the first of many charts summarizing my debt load:

 

Debt Balance Interest Rate Monthly Interest
Family Loan $6,025.00 0.00% $0.00
Stafford $5,897.88 6.45% $36.60
Perkins $6,000.00 5.00% $24.66
Stafford $18,895.52 6.45% $101.73
Stafford $21,811.42 5.96% $106.85
Stafford $22,760.63 5.16% $96.53
Grad Plus $61,570.86 6.16% $311.73
Grad Plus $63,183.52 6.96% $361.44
Grad Plus $65,661.91 7.55% $407.46
TOTAL: $271,806.74 6.45%* $1,447.00

As I looked at that chart, I came to four snap decisions:

  • had to refinance my loans, and I needed to do it quickly and to the lowest rate available.  I had house-level debt.  I needed a mortgage-level interest rate.  (Spoiler alert:  I found one through First Republic Bank, although it took me about two years to get my debt-to-assets ratio to an acceptable level to get the loan refinanced).
  • had to live on not just less than I made but as little as I could.  Until I refinanced or paid down the debt, I was going to be spending almost $20 grand a year just on interest.  (Spoiler alert:  I lived on about $40k post-tax my first year as a lawyer, including rent in one of the most expensive markets in the country.  I could have been more frugal, but I was pretty okay with the outcome.)
  • had to learn as much as I could about budgeting, debt reduction, and personal finance as I could, as quickly as I could.  (Spoiler alert:  I have maintained a budget consistently throughout the entire tenure of my legal career.  I use YNAB.  In a future post, I’ll talk about my evolving approach to categories and budgeting.)
  • had to pass the bar–which meant I had to actually get back to studying.  (Spoiler alert:  I passed, first time.  The good thing about debt is that it’s a great motivator!)

Over the course of the next few months, I learned all I could about debt and budgeting.  I read books on increasing your income, books on cutting your debt, books and so many blogs on financial independence.  I was training for a long race that summer as a last hurrah before starting work, and if I was exercising, I was listening to a financial podcast (typically this one — not sure if I unqualifiedly recommend it, but it helped me).  I learned about refinancing products, the debt snowball vs debt avalanche methods, budgeting strategies, emergency funds, and–perhaps most importantly–the fact that plenty of other people had been in worse situations than I was in and had been just fine.

In fact, I developed two beliefs that guided me through the next three years:

  • I was not a victim in this situation. I completely did this to myself.  If I believed I was smart enough to go to law school, I should have been smart enough to run the numbers before signing the promissory notes.  I didn’t, and that was dumb.  I voluntarily turned down a scholarship at another school to go where it “felt right.”  I went on vacation during law school.  I took out the maximum cost of living expenses I could, and I bought new clothes, nice shoes, fancy phones, and a whole lot of stupid stuff off Amazon.  And I didn’t try to find lower interest rate debt or negotiate a larger scholarship–I just accepted the student loan package I was offered.  I made a stupid choice, and now I was going to pay the stupid tax for it.  But if I could have made smarter choices during law school, there was no reason I couldn’t start making them now.
  • I was actually incredibly privileged, and to the extent this was going to suck, I had to make sure that I felt the pain–not anyone else.  I was graduating at a time where up to 25% of graduates at my peer schools were jobless.  I had had one of the plummest outcomes possible:  my firm was stable; my coworkers were nice; and I had job to start in the fall.  More fundamentally, I was about to make five times the national average.  While I knew I was going to make “sacrifices” relative to my peers, I wanted to remember that I was in fact insanely privileged.  I committed to (i) give a certain percentage of my income to charity on the day I received each paycheck and (ii) tip abnormally well any time I had the opportunity.

With that philosophy in hand, I formed a plan that has allowed me to pay off about $60k/year, post-tax, while cash-flowing some major life expenses.  I’ll walk you through that plan in my next post.

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