According to a new report from the American Bar Association, many new attorneys are frustrated with their student loans – and some say they are depressed because of their debt.
The July 2020 survey of 1,084 lawyers found that student loan debt affects almost every aspect of their lives:
48% said they postponed having children or decided not to have children.
29% said they postponed the marriage or decided not to get married.
56% postponed buying a home or decided not to buy a home. Some reported moving in with their parents.
37% chose a job because of a higher salary versus a job they wanted more.
17% selected a loan-qualified job over a job they wanted more.
“The fact that most new lawyers carry large student debts from law school is a significant problem for all lawyers,” ABA President Patricia Lee Refo said in a statement to NerdWallet.
This is how you get a manageable loan disbursement
The average legal salary is $ 145,300, according to the latest data from the Bureau of Labor Statistics.
But “not everyone comes out of school on a six-figure salary,” says Aaron Sohaski, director of student loans and financial wellness at ABA Young Lawyers Division.
Ashley Foster, certified financial planner at Nxt: Gen Financial Planning in Houston, says lawyers should compare how much they make and how much they owe to determine an appropriate student loan repayment option:
- When your starting salary equals or exceeds your debt: Payments under the usual 10-year maturity will likely be manageable. You can also consider refinancing Jura loans and aggressively repaying them.
- If your starting salary is less than your debt: You will likely need to sign up for an alternative repayment plan for an affordable bill that balances payments with other financial priorities.
Foster draws the line between these two options with debt equal to 1.5 times income. At this point, he says it makes sense to pursue a federal program, such as public service loans or earnings-based repayment.
More considerations for lawyers
According to Foster, lawyers also need to evaluate their short- and long-term career plans to avoid costly repayment mistakes.
For example, if you plan to do something about the public interest, your federal loans may eventually be eligible for public service loans.
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“I’ve seen a lot of lawyers in this industry who don’t know [forgiveness] exists, ”says Foster. “You consolidate or refinance into personal loans and then you’re done.”
The refinance replaces your existing loans with a new personal loan, ideally at a lower interest rate. Refinancing can save money, but it costs access to federal programs.
If you’ve decided to get a job in the private sector, especially one that is highly paid, see if refinancing would free up money.
“Asking never hurts,” says Sohaski. “Go out there and see what [refinancing] would do to your monthly payments. “
According to the latest data from the National Center for Education Statistics, the average law school debt in 2016 was $ 145,550. If you owe that much at 7% interest, a 5% refinance would cut your monthly bill by $ 146 and save you more than $ 17,500 total in interest, assuming a 10 year repayment period.
Should You Refinance Jura Loans?
Loan repayment is currently on hold for most borrowers until 2020. You should refinance federal loans only after this suspension has expired.
If you have taken out private Jura loans, refinance now because interest rates are historically low and private loans do not qualify for government benefits.
Definitely read: Student loan borrowers could face financial and administrative problems if loan payments resume, proponents warn
Refinance lenders look for permanent applicants with a credit score of at least the high 600s and enough income to pay off all of your debts. If you haven’t found a job or are concerned about being laid off or on leave, refinancing is likely not for you.
But if your job is rock solid, you work in the private sector, and your debt is no more than 1.5 times your income, Foster calls refinancing your “best option.”