Many Law School Graduates Are Dealing with Debt Inflation
Of the respondents who borrowed to finance their law school education, the median amount of debt was $112,500, and the median amount of all student loan debt at graduation was $137,500. Young lawyers also reported borrowing to take the bar exam, with the median bar loan amount being $7,500.
As if that six-figure debt wasn’t enough, about 27 percent of respondents reported having a current student loan balance that is higher now than when they graduated—a phenomenon known as debt inflation. The reasons for debt inflation varied, including:
- 71 percent of respondents indicated that their balance has grown because they are in an income-driven repayment plan and their monthly payments do not cover the principal on their loans,
- 46 percent said it is because their loans were placed into deferment or forbearance, and
- 39 percent said that interest on their loans accrued faster than they expected.
Economic Inflation and Rising Cost of Living Creates Significant Negative Impact
Coupled with recent economic inflation and wages that have not kept pace with the rising cost of living, young lawyers are really feeling the effects of taking on so much debt. Most young lawyers (75 percent) who borrowed report that their debt altered their career plans when they entered law school.
Over half of the respondents indicated their debt has prevented them from reaching savings, investment, and retirement goals. As a result of their debt, some respondents decided not to pursue jobs they otherwise would have 31 percent reported taking a job less focused on public service work than they intended. Moreover, 60 percent of respondents said that salary factored more heavily in their job selection than they anticipated when they began law school. This high debt burden may contribute to the rise in legal deserts across many states.
Payment Pause Did Not Have Meaningful Effect on Long-Term Financial Goals
The survey also suggests that even the COVID-19 repayment pause, during which there was 0 percent interest on all federal student loans, did not significantly help many young lawyers achieve more long-term financial goals because day-to-day expenses were the priority.
Most respondents (76 percent) indicated that the money they would have spent on monthly student loan payments instead went to essential expenses, and 54 percent reported using it to pay down other debts. Roughly 30 percent of respondents noted they saved or invested the money. Respondents from racially underrepresented backgrounds were more likely to report leveraging their student debt relief to pay down other debts (62 percent) and less likely to indicate they saved or invested the money (22 percent) compared to respondents from racially represented backgrounds (52 percent and 31 percent, respectively).
Substantial Debt Creates Negative Consequences for Well-Being
What’s worse is all of this student loan debt negatively affects well-being. In fact, 68 percent of young lawyers reported feeling stressed and anxious because of their student loan debt. A sizable number of respondents (39 percent) said their student loan debt caused them to feel depressed or hopeless. These results were much higher for respondents with more than $100,000 in debt. Roughly half of respondents said they worry at least sometimes about meeting normal monthly expenses, and 23 percent said they worry all the time.
To combat some of that stress and anxiety, young lawyers report working hard to get promoted and make more money to pay off their debt. However, this may come at the cost of their well-being. Many respondents (54 percent) reported spending less time vacationing, socializing with family and friends, or engaging in exercise or self-care because doing so would jeopardize their prospects for a promotion or salary increase. These impacts on mental health and well-being are an unfortunate side effect of the rising cost of education and high student loan debt.
How Did Student Loan Debt Become So Unmanageable?
As the ABA Young Lawyers Division’s director of student debt and financial well-being, I helped craft this survey and develop some of the questions, including those aimed at better understanding how young lawyers, including myself, got into such a mess with student loan debt. Part of the problem is inadequate financial training and awareness of the impacts of debt.
For example, although 70 percent of respondents who borrowed reported they were aware of their student loan balance each year they were enrolled in law school, only 42 percent reported being aware of the impact of compound interest and other fees associated with deferring loan payments while in school. Awareness was even lower for first-generation and racially underrepresented respondents at 33 percent each compared to 45 percent of continuing-generation respondents and 44 percent of racially represented respondents.
2024 Student Debt Survey Report Recommendations
The report outlines several recommendations, including bolstering student loan counseling and related financial education programming in law schools to help fill the knowledge gaps and ensure students are better equipped to manage their finances. Additionally, enhancing education for students considering law school so they better understand the legal job market, salary expectations, and the financial realities of student loan repayments could foster a more prepared generation of young lawyers. Law schools can and should do more to support law students and alumni in developing and prioritizing wellness to improve young lawyers’ ability to manage the burden of student loan debt, start their careers, and grow in their personal lives.
The ABA YLD is hopeful that this survey report and related educational resources can help improve overall awareness of the impacts of student loan debt on the legal profession, encourage law schools to be more proactive in their financial and wellness education, and urge lawmakers to make meaningful changes to the existing federal student loan programs and the treatment of student loan debt.
