Balkinization  

Monday, November 07, 2011

The Debt Travails of One of Our Law Faculty Colleagues

Brian Tamanaha

In response to posts I have been writing about the broken economics of attending law school today, I have heard from several law professors (and a dean) who are skeptical that law school debt is as much of a problem as I make it out to be. In the hope that law professors will be persuaded that the situation is indeed severe, I am reprinting below a comment on one of my posts by a visiting fellow currently on a law faculty (I have confirmed this):

I also want to echo Brian, M, and others that the scope of modern law student debt (particularly as metaphorically and literally compounded by the effects of the recession) is unreal. This is true even for those of us who have won the employment lottery—and it is a lottery.

I’m one of the lucky ones. I went to a highly-ranked law school, knocked the academic ball out of the park, and now I’m teaching. I’ve effectively “managed” my debt, kept my credit gleaming by always paying on time, but after 3 and a half years I still owe as much or more than I borrowed on many of my loans, because of the effects of amortization and compounded interest. I don’t know how grads with different circumstances than mine, or those with kids, have a snowball’s chance in hell at managing numbers like this.

I went to law school in a major city after paying off nearly all of my undergrad debt, and ultimately took out $136,000 in student loans ($5k Perkins, $25k private, the rest subsidized and unsubsidized Stafford and PLUS). I received a very small merit scholarship, but although my income was very low before law school I qualified for no grant aid (my school followed the popular law school practice of taking my parents’ income into consideration for my aid package, despite me receiving no family support for law school and not having been a tax dependent of my parents since the 90s). I accepted all this as the price of admission.

Here’s how three and a half years of “responsible” management of this debt still hasn’t gotten me ahead of it in the recession era, even with enviable employment prospects: I graduated in 2008 with enough bells and whistles to land a federal clerkship. I started paying off my loans at about $1,300/month on the 10-year standard plan as soon as I graduated. Because of amortization, of course, very little of these payments went to principal rather than interest. Also, although I had paid off the interest accruing on my private loan during school, $8,300 worth of interest had compounded on my unsubsidized federal loans, and was added to my principal after graduation.

During my clerkship year, I lived cheaply and continued paying on the standard plan, sometimes a little extra, until the bottom fell out of the economy. Start dates were pushed back, I saw equally qualified friends laid off right and left as jobs evaporated, and in autumn 2009 after my clerkship ended I went on unemployment and deferred my federal loans during an unanticipated three month gap before finally starting work at a firm. I began paying my loans on the 10-year plan again as soon as I was employed again, but another $1600 of interest had compounded during my deferral and was again added to principal. In 2010 I switched to an extended 25-year repayment plan in order to set aside cash for an emergency fund and a cushion for a transition to academia. This year I took a law teaching fellowship for $50k/yr, and went on IBR, where I will remain until I either take a tenure-track position or go back to practice.

Have I been able to “manage” my debt over three and a half years in ways that have allowed me to preserve my credit, pay my bills, and make career transitions on my own terms? Absolutely. Do I feel lucky every day (and never entitled) that I survived the 2008/09 guillotine that took down the careers of plenty of people with the same qualifications as me? Hell yes. But, after more than $35,000 in loan payments, I’ve only paid off $6k of original principal, and on some of my loans I owe more than what I borrowed. I still owe almost $130,000 (and on IBR my federal loan interest is again accruing, as Brian points out). Again, I consider myself one of the lucky ones, as I have at least made minor headway.

For me, my choice of law school has been worth it career-wise, if not “economically” by Orin’s metric. Still, my financial situation is radically different than that of the older law professors at my institution. My massive debt may be “manageable” but I’ve accepted that if I follow my chosen career path it’s gonna haunt me for life.

Comments:

Nice article. The words "...haunt me for life" echo in my mind. As an "untraditional student" in my 40's I now realize that after graduation, whether I find a good job or not, I will be living deep in poverty until the day I die.

I really can't say that choosing to attend law school, to 'finally make something of myself,' was the worst decision of my life, but I am certain it is in the top ten of poor life decisions.
 

Recall from TV of yesteryear:

"There are eight million stories in the Naked City. This has been one of them."

No doubt there are a lot more stories to be told about student loans, which perhaps can to added to the many more stories about credit cards, baring so many "Countrywide."
 

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