From Law School to BigLaw to BigFI(RE?), Part 2 – The Great Student Loan War

Every lawyer follows a path. The point of this blog is to hopefully help young BigLaw lawyers (and others looking to achieve financial independence… but I’m going to write about what I know) find a path that leads to financial independence–and early retirement, if desired–rather than the golden handcuffs of overspending and trying to keep up with your (way, way, WAY richer) clients, banking colleagues, and so on.

Part 1 went through a common beginning of that path, where a young, bright-eyed, hard-working kid finds themselves in a job paying a ridiculous amount of amount of money in exchange for a constant and harsh demand on your life. Oh, and they have a freaking crazy amount of student loan debt.

So, the question becomes: Is it time for the Great Student Loan War to begin?

The first part of this war is determining whether you agree that it is actually a war. To answer “yes,” there are two decisions you have to make. One of those questions, discussed in this Part 2, clearly has a right answer.

The other decision is harder, and that one will be Part 3.

Decision #1: Should I focus on limiting my spending so that I can proceed to Decision #2, or should I spend freely, because I work hard, I deserve it, and I make a ton of money.

Look, I get it. Law school sucks. Being poor sucks. Working a lot of hours and being perpetually “on call,” which you’re having to do in order to make your tons of money, sucks. Perhaps the thought of cooking your own meals instead of eating out all the time, given how busy you always are, sucks. Perhaps the thought of doing your own chores (laundry, cleaning, etc.) instead of hiring someone to do some or all of those things, given how busy you always are, sucks. Perhaps the thought of not indulging your fashionista tendencies after a long period of deprivation sucks (and you must look the part, amirite). Perhaps the thought of not moving into swanky new digs in the best part of town to match your new station in life sucks. Perhaps the thought of not buying a nice car (or, even more unfathomable, not owning a car and relying on public transportation and Uber/Lyft/Cabs/Bikes/Walking/Etc.) sucks.

I get it. And I’ve indulged in some of this too–yes, to some extent, even before I finished paying off my own loans (though in a later post, I’ll explain exactly the measures I personally took to deal with my loans very early on). For all but the strongest, most determined souls, it would be impossible for most people to survive BigLaw–especially the grind of some of the early years of BigLaw–without some level of self-indulgence.

But you know what would suck a lot more than all of those above deprivations?

You find yourself in year 3 of BigLaw. You’re now making $220k annually, on top of expecting an end-of-year bonus of $50k, based on what people received in 2018. You’ve obviously been at least making your mandatory payments on your student loans. Maybe you’re even putting a little extra toward them, or you’re putting a little extra into investment accounts as a debt repayment fund. But you’re still years away from paying them off–you still owe way more than $100k, perhaps more than $200k (especially if you had UG loans or you went to Law School in New York or California).

A couple of things could happen now.

  • You may realize that you you cannot stand the job. And it’s not just that you can’t stand your firm, because let’s be crystal clear, almost every BigLaw firm is mostly the same. You can’t stand BigLaw. So merely lateraling to some other BigLaw firm isn’t going to address the fundamental problem (though often people who lateral feel “refreshed” for a year–doesn’t hurt that it often will take some time for you to get to full utilization at your new firm–so maybe it will buy you some time while still collecting the big paychecks). Or maybe it’s worse than that: you can’t stand the legal field. Uh oh.
  • You are to the point where non-BigLaw legal jobs start to potentially open up to you, depending on what practice area you’re in. So, maybe you’re ok staying in BigLaw, but you’d rather move onto a different kind of legal job. Some junior in-house positions may be available, especially if you’re a corporate lawyer. Some government positions start to open up. Maybe a think tank. Or maybe something that is legal-adjacent piques your interest. There are a ton of potential options. Can you actually follow any of your dreams at this stage?
  • Year 3 is typically the year where there becomes a more realistic chance of actually being shown the door involuntarily (though it’s certainly possible for this to happen earlier on), and it becomes a more persistent risk as time goes on if your colleagues see you as someone unlikely to make partner when the time comes. BigLaw generally doesn’t fire people without notice (though it does happen sometimes), so if this is you, you may have a few months to get your situation in order, and you may find a landing pad at another BigLaw firm. But you may not.

Guess what? You, my lavishly-spending friend, are probably screwed. No other job is going to pay you anywhere close to what BigLaw is paying you. So, either:

  • If you haven’t been shown the door, then you decide you’re unable to go anywhere, because no other job is going to pay you enough to keep up with your still-crazy loan payments.
    • Maybe you now take the opportunity to change gears to make progress. But you’re going to have to hit downspeed on that hedonistic treadmill that you’ve had going. It’s a heck of a lot harder to downshift your spending after it’s gotten started. That is especially if you’ve acquired a bunch of fixed expenses like housing, car loans, difficult-to-cancel memberships, etc. But it can still be extremely difficult even if the costs are hypothetically costs you could eliminate tomorrow–it will feel much more like deprivation of something you are entitled and accustomed to. In fact, it’s deprivation of something that you fundamentally debt-financed and therefore you weren’t really entitled to it and shouldn’t have become accustomed to it, but that’s not how our brain deals with things.
    • Maybe you say, screw it, I’ll just keep working here for a couple of years, maybe slightly increase what I’m putting toward the loans. It’ll work out OK. I can tough it through, and I’ll be in a better position by the time I’m a senior associate. And I’ll be making more money for each additional year. No problem, right? Well, that all assumes 2008-style layoffs don’t happen, you don’t otherwise get shown the door, and you don’t burn out entirely.
    • Dream jobs only get posted every so often. Your lack of flexibility to move now may mean that you’ll never have another opportunity to apply for that particular government position or that particular think tank or that particular in-house job. Whoops.
  • You leave BigLaw and take a different job. Maybe it’s a legal job, maybe it’s not, but no matter what, it’s basically certain that you have taken a huge pay cut to make this change. Heck, going from the $270k all-in salary of a third-year associate, you could be taking a $200k pay-cut. Even some of the best-paying government jobs, which you’re not likely to be eligible for as a third-year associate, cap out in a way that you’ll be taking a haircut of 50% or more. If you did not refinance your student loans (more on that in a later post), you are able to go into an income-based repayment plan, pursuant to which you will probably never pay off your loans (though they may be forgiven eventually). Even with an income-based repayment plan, you’re going to have some significant lifestyle downshifting to do. Oh, and if you’re moving states to accomplish this, you may have to take the bar exam again. Have fun…
  • You could pull an Elie Mystal (of Above the Law fame), default on your loans, and hope to someday find yourself back on your feet. This route could, at a minimum, pose a significant problem for the rest of your legal career: whether you agree with it or not, stiffing your creditors is a serious issue with character and fitness folks in the state bars.

Hold on a second, you say. These are all a lot of what-ifs. You should be more optimistic. I know I’m cut out for BigLaw, I’m going to be here for years, I’m not going to have any problem paying off my loans. No need to deprive myself now.

Ok, buddy. I think the hordes of lawyers that were laid off in 2008 have a message for you. And if you have this kind of crystal ball, you should be making your money off playing the stock market, rather than slugging away as a BigLaw attorney. If you want to take your financial well-being out of your own hands and place it into an assumption that you’ll keep your BigLaw job for long enough to pay off your loans on an 8-year plan (you’d better have it paid off by then, because if you’re banking on making partner for any planning purpose whatsoever, you’re off your rocker), all the power to you. You’re being foolish, but that’s your right, I suppose.

Anyway, if it hasn’t become crystal-clear to you by now what the right decision is on Decision #1, you should probably find another line of work.

Part 3 of this series will explore what to do once you’ve gotten to the right answer on this initial decision.

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