Here are 3 Strategies for Paying off Law School Debt
First, the bad news: students are graduating from law school with an average debt of more than $139,000.
Now the good news: paying off a debt that big is not only possible, but it can be done without undue agony or years of financial insecurity.
It takes discipline, patience and a strict budget. Most important, it takes a plan.
“Graduating with six figures of debt isn’t easy,” according to the website Student Loan Hero. “With the average amount of law school debt coming in at more than $139,000, it’s the second-most expensive graduate degree out there. Only medical school beats it. The high cost doesn’t have to mean a lifetime of debt, though.”
Have you checked out Lawyers Mutual Consulting & Services? Founded by Camille Stell, who also serves as president, LMCS is a subsidiary of Lawyers Mutual. Its mission is to help firms build a modern law practice. It does that by offering expert advice and assistance into law firm trends and best practices. Camille and LMCS helps lawyers and firms create strategic plans and succession plans. A popular speaker and writer, Camille loves to guide lawyers through succession planning and into Life after Law. Contact her today.
Three Strategies for Law School Debt Success
Here’s how three recent law grads managed to pay off big debts, courtesy of Shannon Insler and Student Loan Hero:
#1: Using Your Home to Pay Off Your Loan
Amount of debt: $125,000
How long it took to pay off: 8 years
What the lawyer did: He and his wife bought a house in a flourishing real estate market. Eighteen months later, when the home’s value had increased, he refinanced the mortgage, cashed out the equity, and paid off the loan.
Analysis from Student Loan Hero: “Although this payoff method might be untraditional, his student loan interest rate was 7.785% — much higher than his new mortgage rate of 3.50%. That fact speaks to the important question of whether you should pay off your student loans or invest your money. Many times, the answer reveals itself in the interest rates. Of course, it’s not easy to buy a home when you’re deep in debt. He and his wife chose to buy a foreclosure from a contractor, who then renovated the home. They also designed a basement apartment for his brother to live in for one year, which he was willing to pay for in advance so they’d have enough cash to close on the home. Between those factors and the gift money he and his wife received from their wedding, they were able to purchase the house that would eventually enable them to pay off his law school debt.”
The big takeaway: This story “highlights the changing tides of luck — and the importance of making the most of every opportunity you have,” according to Student Loan Hero.
#2: Use the Debt Avalanche Method
Amount of debt: $120,000
How long it took to pay off: 3 years
What the lawyer did: After listing all his debts and obligations, he began paying down the loans with the highest interest rate first – starting with the smallest balance, then moving to the next-smallest. He also adhered to a strict weekly expense budget.
Analysis from Student Loan Hero: “Even with a strategy in hand, it wasn’t always easy. During that intense three-year repayment period, [the new lawyer] drove an old beater car, and his wife covered the rent, utilities and groceries — without having anything extra to save.”
The big takeaway: Discipline and a supportive spouse are key assets.
#3: Cut expenses
Amount of debt: $70,000
How long it took to pay off: 8 years
What the lawyer did: He chose a 30-year student loan repayment plan rather than a 20-year plan. This lowered his monthly payments. Whenever he had extra money, he paid an individual loan in full rather than applying it toward his total debt. He considered his student debt as a “mortgage” for his career. That inspired him to stay current on his loans.
Analysis from Student Loan Hero: He and his wife also made lifestyle sacrifices – such as not travelling as often – to pay off their debt.
The big takeaway: The new lawyer’s personal experience with student debt has inspired his career. His practice concentrates on helping others settle their tax debts.
Source: Student Loan Hero
Have you checked out Lawyers Mutual Consulting & Services? Founded by Camille Stell, who also serves as president, LMCS is a subsidiary of Lawyers Mutual. Its mission is to help firms build a modern law practice. It does that by offering expert advice and assistance into law firm trends and best practices. Camille and LMCS helps lawyers and firms create strategic plans and succession plans. A popular speaker and writer, Camille loves to guide lawyers through succession planning and into Life after Law. Contact her today.
