How Are Lawyers Managing Their Law School Debt? Most Will Never Be Able To Pay It Off

How are you going to tackle your debt after graduation? We seriously hope you have a plan.

Law schools across the country are welcoming new students this week, and there’s no better time than now to talk about the crippling debt they’ll have to face and attempt to pay down in the years to come. We mentioned last week that about two million Americans owe at least $100,000 in student debt, and with about $140,616 in debt per average law school graduate that borrowed to finance their degree, your brethren at the bar make up a very significant portion of that group.

If you’d like to take a look at what your future may hold, check out this compilation of the average indebtedness of 2014 graduates who incurred law school debt, ranked by law school from highest to lowest, courtesy of U.S. News. There, you will see some truly frightening numbers — but perhaps they don’t seem so bad to you because after all, you know you’ll get a job that will pay well enough to service six figures of debt.

We all were once that optimistic about our law school debt. Maybe you will be able to land that high-paying job… but maybe you won’t. The employment market for new law school graduates seems to have “improved” on its face, but that’s only because there have been fewer graduates to employ. We hope there will be actual improvements by the time you graduate, but even so, you’ll still have all of that debt to worry about.

We reached out to our vast network of Twitter followers — largely composed of lawyers, law students, and legal professionals — to ask them the following three questions:

1) How much law school debt do you have?
2) Do you think you’ll ever pay it off?
3) Why?

The responses we received varied, with some hopeful that they’d be able to someday make a dent in their debt or completely pay it off, but others were faced with the stark reality that they’d never pay off their debts. Here are some of the responses to our questions.

The Few, The Proud, The Hopeful

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Praying for Public Service Loan Forgiveness

From the Federal Student Aid website:

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.

Qualifying employers include government organizations at any level (federal, state, local, or tribal), 501(c)(3) not-for-profit organizations, and other not-for-profit organizations that provide certain types of qualifying public services. Full-time work in AmeriCorps or Peace Corps positions also counts for Public Service Loan Forgiveness. Loan forgiveness under this program is not considered taxable as income.

Debt Till Death

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Loan Forgiveness? Don’t Forget About The Tax Time Bomb

From the FinAid website:

The maximum repayment period [for any income-driven repayment plan] is 25 years. After 25 years, any remaining debt will be discharged (forgiven). Under current law, the amount of debt discharged is treated as taxable income, so you will have to pay income taxes 25 years from now on the amount discharged that year.

Law students, if you’re planning to rely on the loan forgiveness associated with income-driven repayment, then you should be praying that the government decides to do away with that ticking tax time bomb, or else you’ll likely be in just as bad of a place as far as debt is concerned — unless, of course, you’re willing to file for bankruptcy later in life.

How are you going to tackle your law school debt? We seriously hope you have a plan.