A Matter of Life and Debt

You can have strong reasoning skills, a gift for argument, and a passion for justice, but that’s not all you need to get through law school. You also need a bunch of money. And most law students borrow it—about 70 percent nationwide. On average, they rack up about $160,000 in cumulative debt, confident that they will command high salaries once they graduate. Statistics support that assumption. Lawyers earn an average salary of about $145,000 in the United States. But many start out earning less, particularly those who accept positions in the public sector. Struggles with law school debt may persist for years and, for that reason, debt has a profound impact on new lawyers’ life decisions. 

Consider the choice to marry—the average wedding costs more than $33,000. According to the American Bar Association’s research, 28.8 percent of new attorneys decide to postpone getting married or forgo marriage altogether. Student debt also influences the decision to start a family. Just the cost of bringing a baby into the world averages $4,500—even with health insurance that substantially covers maternity bills. Raising children to maturity is another financial story altogether. It’s not surprising that 48 percent of new lawyers decide to put off having children or choose not to have them at all. Student debt also influences new lawyers’ career decisions, with many selecting positions and employers based on salary or the possibility of loan forgiveness rather than taking a job they love.

But what if you don’t want to postpone buying a home? Or you need to buy a new car? Having student loan debt doesn’t necessarily preclude achieving those goals. Having a well-reasoned, long-term financial strategy in place, particularly related to managing debt, can make those decisions less risky.

Check Your Credit-Worthiness

When was the last time you checked your credit score? Credit history is the single most influential factor lenders consider when deciding whether to extend a loan and under what terms. Higher credit scores command lower interest rates. Download a free copy of your credit report and review it carefully. Many credit reports contain mistakes, and correcting them can bring your score up. You can improve your score by closing accounts you’re no longer using. But the single easiest way to improve your score is by paying your bills on time. Don’t plan on paying them en masse “when you have time.” Open your bills the day they arrive and file them in order of payment due date. Keep your bills separate from the rest of your email in their own folder, and do the same with any paper bills you may still get. It’s easy to fall behind on payments accidentally by being disorganized.

Open New Cards Judiciously

Many retail outlets train their cashiers to tempt you with new credit card offers at checkout. But every time you save 10 percent on your purchase by opening a new account, you’ll get dinged by credit reporting agencies in the short term. You may be trying your best to save a buck, but credit agencies interpret opening too many accounts quickly as you living beyond your means. Instead, try opening a couple of accounts each year and paying off each balance monthly. Using less of your available credit can improve your score.

Prioritize Your Credit Accounts

Once you’ve scheduled payments to meet every due date, check the fine print on your bills. Many of us take out credit cards based on low-interest introductory offers. But offers expire, and you may be paying higher rates now. Pay off your high-interest credit balances first. Consider credit card offers that charge no interest for 12 or 18 months and offer the option of transferring balances from your high-interest accounts.

Be a Smart Credit Shopper

Rates and loan fees run the gamut. If you’re considering buying a home, for example, take time to research all loan types and the best mortgage lender for your needs. VA and USDA loans offer low-interest rates and the option of foregoing a down payment for eligible borrowers. You can use the cash you save on a no-down payment loan to pay down student debt. Credit unions often offer lower interest rates to members than you might find through a commercial bank.

Consider Refinancing Student Debt

Recent credit trends spurred by COVID-19 have driven interest rates lower on many loans. You may be able to find a much lower interest rate than you’re paying now. You can lower or pay your loans off more quickly to avoid more cumulative debt. Think long-term but act now. Rates are unpredictable and may not be so favorable in a few months.