Law School Debt – How Much is Too Much?

Law school debt is a part of most law school graduates’ lives. But it’s worth it, right? You invest money in your education so that you can have increased earning power in the future. Recent analysis suggests that it is difficult to see a return on investment for law school debt; but for those who are passionate about becoming attorneys, having a career they feel proud of is worth the cost.

If you are considering law school, you may be wondering how much debt is too much, especially considering the promising, but uncertain job prospects for attorneys.

I’m going to go out on a limb here and say that the amount of law school debt alone should not be a factor that drives your law school decision (assuming that going to law school is something you really want to do). I’m not sure whether this falls into the “makes sense” or “feels right” category, but I’m going to make the case here that fear of law school debt should not be a primary consideration for most people.

Let’s start with a cautionary tale against educational debt. Recently, the New York Times’ “Your Money” column featured a story that asked who should be blamed for skyrocketing student loan debt. The story chronicled the tale of Cortney Munna, an NYU graduate who left school with nearly $100,000 in student loan debt. The author, Ron Lieber, describes the consequences of this mountain of debt:

It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners.

He then looks for responsible parties:

For starters, it’s a shared failure of parenting and loan underwriting. But perhaps the biggest share lies with colleges and universities because they have the most knowledge of the financial aid process. And I would argue that they had an obligation to counsel students like Ms. Munna, who got in too far over their heads.

As for Ms. Munna, she wishes she had it all to do over again:

“I don’t want to spend the rest of my life slaving away to pay for an education I got for four years and would happily give back,” she said. “It feels wrong to me.”

It’s true that student loans present unique challenges that are different from normal consumer loans. If you have guaranteed student loans, you are likely familiar with the fact that you can’t run from the government. In pursuing repayment for your student loans, the government can, for example, garnish your wages and take away your tax refund each year. In addition, it has become difficult (though not impossible) to discharge your student loans in bankruptcy. Note that, as of 2005, this is true for both government loans and private loans.

Sounds pretty grim, doesn’t it?

Perhaps, but let’s regroup. First off, a reality check: it may be hard to run away from student loans, but they are still unsecured loans. In the modern era, we don’t have debtors prisons. If you face one month – or even one year – where you simply can’t make ends meet, just don’t pay your student loans. You might get phone calls asking about your ability to pay, but no one’s going to kill you. You might have bad credit for awhile, but no one is going to show up on your doorstep and break your arms.

Second, $100,000 may seem like a lot of money; but for four years at NYU, I think it’s not a bad deal. If you truly treasure education and have a chance to go to a good school, be grateful. When I first graduated from Stanford Law School and started to face my monthly loan payment, I always felt deep gratitude that I had the privilege of going to a top law school. I spent three years surrounded by the smartest people I’ve ever met and it was an honor. That’s not to say I wasn’t afraid each month when I had to write three checks to the different banks to whom I owed money. But amidst the fear, I also felt a clear sense of time well spent. And remember, even if you default on your loans, no one can take away the education and life experiences you have in school.

Third, what if debt were a motivator rather than a debilitator? Let’s say that you take on $150,000 to go to law school and you have to pay $1,200 each month to service your debt. Well, the bad news is that it will be very hard for you to become a street musician and hitchhike around the country following Phish. I admit, that is a loss to be grieved.

The good news is that you will have to make at least $20,000 pre-tax each year just to service your student loans. Why is this good news? It means that you are on the track of actually making money for a living – potentially, lots of it. Student loans are a terrific motivator to push yourself to excel and express your talents in the work world. The bar has risen for you and you can no longer settle for dreaming small.  As you excel in your job (or entrepreneurial ventures), you will, over time, start making more and more money. Your monthly student loan payment will get smaller and smaller as a percentage of your total income. You will start thinking about buying a car, a house and investing money for the future. In a sense, your debt provides you with discipline, forcing you to make smart career choices that will increase your annual earnings.

And it is for this reason that I think fear of debt alone should not drive your decision as to whether to attend law school. Further, I don’t think it should affect your decision as to where to go to law school. If you are passionate about the law, if it is a perfect fit for your personality, you will find a way to pay off the debt. Each month when you write a check to service your student loans, you will write “Thank you!” in the memo line because you will feel the satisfaction of having had an excellent legal education. Trust that your smarts, your tenacity and your resourcefulness will guide you to the opportunities you need to pay your student loans easily. While your loans, in a certain sense, constrain your options, they also force you to think expansively and creatively about what is possible for you in life. And that is a gift.

There are certain people for whom this advice does not apply. First off, if the thought of being in debt ties your stomach in knots, going deeply in debt may make you very unhappy. In this case, I would consider postponing your law school decision until you feel more comfortable about the financial requirements. Second, if it is painful, even heart-breaking, to give up the option of living on the beach and sleeping under the stars, taking on a lot of debt could be a bad idea.

But if you are willing to dream big and put a little hustle into your step, law school loans won’t stop you from having a rewarding and personally enriching life.