Over the course of three years we’ve followed Anna Perry* and her financial horror story — specifically the half-million dollars in student debt she racked up, largely for law school.
Five hundred thousand dollars. Half a million. The number is so ridiculous that it loses its meaning — like saying a word over and over again until it has no frame of reference. But the number is likely a little bigger now, with all the continuously compounding interest.
While student loan refinancing would have helped me manage the interest rate, at the time I was facing $500,000 in student loans, and I was stuck.
My Mountain of Debt
Half of my debt is in the form of “private” loans not guaranteed by the federal government.
Subsidized and unsubsidized federal loans make up the other half. All of it is unfathomable and seemingly insurmountable. At this point, more than half of the student debt I owe is in compounded interest alone.
Even having lowered my overhead dramatically, I am unable to afford the approximately $4,000 per month in payments that will last for another 30 years.
While there are purportedly programs to help with federal loans, Sallie Mae continually misprocessed or denied my applications for income-based relief. And the company is intransigent when it comes to offering alternative payment options for private loans.
Even with income-based relief, I would have no money left for food, health care, transportation, or other such “luxuries.”
The real salt in the wound is that people like me — borrowers who are in default and who most need relief from their debt burden — are not eligible for any help.
How Did I Get Here?
So how did I end up in this predicament? I’ve asked myself that question countless times. I didn’t even want to go to college. I wanted to be a hairdresser — or perhaps go into fashion design. But my parents had both gone to college, as had my older siblings.
There was a strong sense of pressure and expectation for me to attend a four-year university. And there was a clear prejudice against taking a service job or going into a profession that involves working with one’s hands. I was young and didn’t have the confidence to say no to all those pressures from family and from society. So off to college I went.
At a small, well-respected liberal arts university, I double-majored in what turned out to be doubly useless fields: philosophy and history. Learning for the sake of learning is wonderful. I have a bottomless sense of intellectual curiosity, and I would never discourage anyone from learning. But that sort of personal intellectual journey is no longer what college is about, and it comes with a massive price tag.
College has become a means to a piece of paper that allegedly entitles a person to a job.
Personal growth and expansion of one’s mind and beliefs no longer have any place in higher education. We all thought that our friend’s parents were heartless dictators when they insisted that if he wanted to major in studio art, he should also major in business.
Looking back, I see that they did it to save their son from a life of poverty and debt. They wanted to give him options later in life.
Four years after not wanting to go to college, there I was — a magna cum laude graduate with a double major in philosophy and history. And yet, I had few options before me. I could become a high school history teacher, wait tables, or go to graduate school.
The author of Project Debt Free: A Practical Guide to Financial Freedom, Frederick O. Towles, MBA, shared his top tips for handling debt with us.
- Tighten your personal financial belt — whatever you do not need, no longer pay for. Start with subscriptions that go unused (gym, steaming services, etc.).
- Develop a strategy for payment and pay toward the debt every time you get paid. If you are paid weekly, you should make a debt payment weekly.
- Dust off your side hustle and make it work; you will need as much income as possible to get out of the hole.
What to Do Next?
When I finished my undergraduate degree, I owed a mere $10,000 in student loans. Don’t get me wrong: $10,000 is a lot of money. I could do so many things with $10,000 right now. But in the shadow of my current student debt burden, $10,000 seems like nothing — a trifle, easily manageable. It was nothing compared to the law school debt to come.
It’s hard not to imagine how the trajectory of my life could have been so different if only I had worked in the real world and paid that small debt off rather than continuing my education and letting the debt mount. But hindsight is always 20/20. I only hope others can learn from my mistakes.
Starting Graduate School
After a year of waiting tables after college, I moved across the country and began graduate school in a top 25 doctoral program in philosophy.
Student loans funded everything. This included tuition, books, rent, living expenses, transportation, eating out, entertainment — everything.
My undergraduate professors had always encouraged me to attend graduate school, whether in history or philosophy. I could see myself fitting in well in academia. I imagined myself teaching, publishing, continually learning, and living my life in jeans and Birkenstocks.
So I studied the philosophy of logic and mathematics, but I failed to apply any logic or arithmetic to the cost-benefit analysis of a Ph.D. in philosophy.
It turns out that there are no jobs for philosophers and very, very few jobs for philosophy professors. No one had bothered to tell me this, nor had I bothered to ask.
I spent a year in the doctoral program, increasing my student debt by $35,000. Although the program offered me funding for half of the next year’s studies, I opted to leave.
The Beginnings of My Law School Nightmare
Then, I waited tables for another year and did what so many liberal arts majors short on options do: I applied to law school. At the time, I knew only one lawyer, but he was rich.
I had never seen The Paper Chase — that 1973 film about the hell that is law school. Honestly, I had no idea what law school or life as a lawyer were like. I knew only that there was allegedly a large pot of gold at the end of the law school rainbow.
As such, I figured that whatever I borrowed for law school would be easily paid off with a six-figure starting salary.
I knew I was “selling out.” But I was determined to enter a field where I would make money, pay off all my student loans, and not have to worry about where my next meal was coming from.
As with philosophy, I didn’t dig in and research what life in law school or a law firm was really like. I naively trusted the barrage of law school admissions and career placement office fluff that, in hindsight, was fantasy. I took the LSAT, submitted my application, and off to law school I went.
Debt and Materialism: A Law School Debt Horror Story
Law school is a special kind of hell. Between the classes and the debt, law school is absolutely a horror story. The entire premise seems to be to assign more reading than one can possibly get through. Then you are publicly humiliated for not having committed thousands of pages to memory and knowing what it is all supposed to mean without any guidance whatsoever.
One thing law school does teach is that networking and connections are more important than hard work. You also learn that you can sound knowledgeable on almost any topic if you have two days to cram the research into your brain.
The Cutthroat Atmosphere of Law School
So this philosopher-poet-hippie chick arrived at law school and found herself surrounded by political science majors and debate team captains — my special kind of hell. They say law school breaks you down and rebuilds you as a lawyer. But, in my experience, it simply breaks you down and breaks your spirit.
Many enter law school with idealistic plans of helping the world (or at least their clients). But many leave as shells of their former selves, with warped values and a cynical outlook.
The intense competitiveness and individualism of law school naturally carry over to life at a law firm.
So if you want to survive the eat-what-you-kill model of many firms, you have to become an apex predator.
Even as an associate with a salary, billable hours hang over your head. Any non-billable activities, such as having human relationships with colleagues or loved ones or going out for lunch, simply cannot be justified.
When you find lawyers who have gone through the experience and maintained any sense of grounding, generosity, or volunteerism, you have found an endangered species. But we are out there, I promise.
Once again, I used student loans to pay for all the expenses of school. This time, it was three years at a pricey private university.
Bad Credit Decisions
Even with the maximum loans available and help from my father, a credit card debt I had fully paid off returned and grew.
In addition to expensive books, one also has to build a wardrobe appropriate for moot court competition, job interviews at firms, and working as a law clerk or summer associate in an office. My law school debt horror story was getting worse by the day.
I went from being a funky, tattooed free spirit to a buttoned-up, Ferragamo-shod fashionista with the credit card debt to prove it. Shoes and handbags became my weakness.
I tried to drown the sorrows of my law school career (and later life in the law) in shopping.
Women’s magazines seem to exist to tell us that happiness is just a new pair of shoes away. I thought the perfect lipstick or buttery leather handbag would magically transform me into a happy, beautiful, successful woman loved by the man of her dreams.
Alas, the closet full of Italian designer shoes and handbags didn’t bring happiness, success, or love. It only left me empty inside and buried in debt. But I sure looked good for those law firm interviews.
The Law School Mistake That Cost Me Six Figures
One critical tidbit law schools fail to tell incoming students is that, as a practical matter, the trajectory of one’s legal career is decided based on one’s grades in the very first semester of law school. That may sound like an exaggeration, but it is absolutely true.
How can that be? It’s all about how the post-graduation job game is set up (and rigged). As you may have noticed, I seem to make the wrong decisions at crucial forks in the road of life, especially when it comes to debt and law school, and this was one where I didn’t even know I was choosing one path over another.
Landing a good first-year summer position is crucial to the second-year summer job, which virtually dictates post-graduation employment.
That first-year summer job is decided based on only fall grades. Why? Because interviews take place during the spring semester, and spring grades usually come out in late June or early July — long after the summer positions are underway.
Additionally, large firms and many agencies will look only at résumés from students in the top 10 or 15 percent of their class. In the viciously competitive law school environment, any first-semester time spent doing anything that detracts from one’s GPA and class rank will take a real toll on one’s career and earning potential — likely for decades, if not a lifetime.
How “Big Law” Can Shape Your Career
First-year associates at large, prestigious firms (aka “Big Law”) come from almost only one source: the class of summer associates they had the year before.
Perhaps not every summer associate will be made an offer, but most are, and to land a Big Law associate position without coming through the summer associate path is rare. Think high-level connections pulling strings to bump someone else out of a slot (i.e., nepotism).
The other routes to Big Law are to be in the top 10 percent of your class at a top 10 law school and clerk for a high-level federal judge, or work for a federal agency for a few years and then make a lateral move to Big Law. Smaller, and I’d say qualitatively better, boutique firms do not follow the same rigid process. However, if Big Law is your dream, then you have to play their game.
If I’d spent my first-year summer at the federal financial regulator internship I landed, then my second-year summer with a fancy-schmancy firm, I might be a partner at some Big Law firm right now.
But I deferred my first summer internship to the fall and traveled instead — a decision that would compound my student loan problems.
I interned for a high-level federal judge my second summer. That was a prestigious and valuable experience, but cut me out of the summer associate process to enter a large firm.
Fellow students interning in firms were paid, sometimes at a monthly rate equivalent to a new associate ($6,000 to $10,000 a month), but my government internships were unpaid.
I didn’t realize at the time my experience was cultivating me for a government or nonprofit role, and would cost me dearly for years to come.
What sort of cost? Easily more than $100,000 in lower income the first few years of my career. But because getting back on a lucrative path in law is exceedingly difficult, it actually adds up to at least $100,000 to $500,000 in lower annual income for the remainder of my career. Not only was I facing a law school debt horror story, but I was also facing lower income!
Not going to Big Law “pays” in other ways, such as lower stress, far more free time, and the ability to have meaningful relationships and hobbies in life rather than working six days a week, often for 12 to 16 hours days. Work-life balance has a definite value, though I think we each value it in different ways.
But looking purely at income potential, making a wrong turn at a seemingly inconsequential point of one’s schooling or career can add up to millions in lost income opportunity.
I finished law school and was among the lucky graduates to have a job already lined up before graduation. My particular experience and coursework opened the door to a position with a federal banking regulator at its headquarters in Washington, DC.
But I had six-figure student debt and would make half the salary of a beginning Big Law associate — $56,000 rather than $100,000-plus.
Nonetheless, at the time it seemed the right thing to do, the only path before me, so off to Washington I went.
After law school comes a summer of cramming for the bar exam. You have to take a special bar review course because law school does not provide any meaningful preparation for the bar exam or actual legal practice. This only adds more debt to the law school toll.
Sallie Mae’s Trap
I sat for two states’ exams and then packed up and headed off to DC for my first office job, where people pretend they are important because they wear suits. But in reality, they are still just cogs in the machine.
I arrived in Washington, DC, not knowing anyone and never having been in the area. Soon, I found a small apartment. It was on the same Metro line as my shiny new federal government job. I was excited to start my career. I was knowledgeable and passionate about the field I was entering, although banking law certainly doesn’t excite everyone.
The government salary was not enough to get by in a big city and pay my student loans.
Sallie Mae was happy to give me a payment plan with negative amortization in which the payments were less than the accruing interest. That means the principal balance grows when the interest compounds, although less so than if no payments were being made at all. I didn’t have any other options to make ends meet (government employees and most attorneys cannot take side jobs due to potential conflicts of interest).
I figured my salary would increase with the agency. Or, I thought, I would eventually enter private practice at a law firm salary and be able to pay off the student loans and end my law school debt.
At that time and for many years to come, I acted on an unspoken, likely unrecognized, worldview that the future would be better, more lucrative, than my present. I have perhaps swung too far to the opposite point of view. Now I think that each year seems to be harder, more impoverished, than the last.
Lessons From My Law School Debt Horror Story
I don’t want to be so pessimistic, but by budgeting for the worst, I can at least avoid or minimize further financial calamity. Perhaps I’ll be pleasantly surprised one of these days.
My low government salary seemed to be a set figure. I accepted it at face value, as nonnegotiable. I think women tend to do that and not negotiate for better compensation. That is one part of the reason that women tend to be compensated at lower rates than men doing the same jobs, according to a report by PayScale.
One of the other attorneys that started at the agency with me had definitely negotiated for a higher starting salary. This meant that he would also receive larger percentage-based raises and cost-of-living adjustments going forward. Once again, I had sold myself short.
I left money on the table in a way that would also impact future earnings.
Another lesson that can be learned from my law school debt nightmare is the importance of refinancing student loans. With student loans involving compounding interest, it can be helpful to consolidate loans in the hopes that you can be approved for a better interest rate. A few points saved can be tens of thousands of dollars saved, if you are $500,000 in debt.
If you work in the public sector, you can also apply for Public Service Loan Forgiveness, if you are willing to continue in working with federal, state, local, or tribal governments. This can be a great tool that can free you from a debt that may seem insurmountable.
The Bottom Line
I put on my fancy new suits and headed off to my first “real” job. I didn’t really know what the future would hold. Hopefully my law school horror story can help others manage their education, careers, and debt better than I did.
*Name changed to protect privacy.