Law Schools

Think Student Loans Are Bad? Business Loans To Start A Practice Are Way Worse

You're probably getting off pretty easy as a lawyer...

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Over the past several months, this column has compared and contrasted the plight of debt-burdened lawyers with other professionals who borrowed student loans to finance their degrees.  In some ways, the situations for most debt-burdened lawyers are similar to doctors, veterinarians, dentists, and other professionals who borrowed student loans.  Indeed, many individuals from a number of professions have six figures of student debt, and even with an above-average income, it can be difficult to pay off large sums of student loans.

However, in many ways, the situations of debt-burdened lawyers are different than other professionals who have student loans.  The employment outcomes for many lawyers are more grim than other professionals, and lawyers were fed bad information regarding the employment prospects of recent graduates.  Nevertheless, there is one thing about being a lawyer that makes our student loan situations way better than other professions.  Unlike other professionals, most lawyers will not need to borrow money to start a practice.

I recently discussed student debt with a dentist friend of mine who borrowed large sums of money to attend dental school.  However, this friend told me that he also needed to borrow around $150,000 to purchase the equipment necessary to open his dental practice.  Apparently that chair everyone sits in to undergo dental work costs tens of thousands of dollars. Who knew?  Also, dentists must purchase X-ray machines, tools, medicines, and a number of other items to open their practices.  Since most dentists don’t have piles of cash laying around, these professionals must borrow money to open their practices on top of the money they borrowed to attend school.  This leaves many dentists far more indebted than lawyers who only need to borrow money to attend law school.

Many dentists do not have the option to avoid borrowing business loans by joining larger practices or seeking some other type of employment.  Unlike many law firms, dentists typically practice in small shops, so many dentists must go out on their own and purchase the equipment necessary to open a practice.  In addition, there is not much flexibility with the type and amount of equipment a dentist must purchase, since there is a baseline of tools that a dentist must possess to competently practice their profession.

In numerous ways, the business debt many dentists must borrow is worse than student loans.  Of course, this business debt is not eligible for income-driven repayment.  As a result, even if a dentist is not making a good living, they must still pay a consistent amount to repay the debt they borrowed to open their practice.  In addition, business loans are less likely to be eligible for forbearance, deferment, or any other type of benefit that most student debt borrowers enjoy.  Furthermore, although one can usually change the repayment period involved with paying off student loans, the repayment timeframe for business debt is usually set in place, and business loans typically must be paid off in a shorter period of time than the repayment period of most student debt.  In addition, business debt is not subject to the same tax benefits that student loans typically have.

It is true that some lawyers need to borrow money to open their own practices.  However, the amount of money a lawyer needs to open their own shop is much less than the amount of money a dentist needs to borrow to open their practice.  This is because a lawyer doesn’t need much more than an office, office supplies, a computer, and some other items to practice law, whereas a dentist cannot get by without thousands of dollars of equipment.

The legal industry is mostly set up such that lawyers do not need to spend much capital to begin practicing law.  Many attorneys work in larger firms, and don’t need to shell out any money to begin practicing as an attorney. Indeed, many of us are lucky enough to work at firms that pay all of our bar association dues, CLE fees, and other expenses that are associated with practicing law.  In addition, numerous lawyers work in-house, and many of these lawyers do not even need to pay the same fees that practicing attorneys must pay.  Of course, some attorneys may need to borrow money to study for the bar exam, but this expense is far less than the amount of money many dentists must pay in order to begin practicing their profession.

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Dentists are not the only professionals who need to borrow money to begin practicing, and I am sure that other individuals in the medical field also need to borrow money to begin practicing their professions.  Indeed, I recently corresponded with a chiropractor who needed business loans to open his clinic.  If you are another professional who needed to borrow money to begin practicing, definitely feel free to reach out to me, I’d love to hear your story!

In any case, many professionals need to borrow student loans in order earn their degrees.  Unlike lawyers, however, dentists and others must also borrow insane sums of money in order to begin practicing.  I never thought I’d say it, but I almost feel that as a lawyer, I got off easy.  Although I had an insane amount of student debt, I didn’t need to borrow money to being practicing my profession like so many dentists, doctors, and others are forced to do.

Jordan RothmanJordan Rothman is the founder of Student Debt Diaries, a personal finance website discussing how he paid off all $197,890.20 of his college and law school student loans over 46 months of his late 20s. You can reach him at Jordan@studentdebtdiaries.com.

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