The problem with debt Forum

[Meowaka]

If it's been asked before, or is in the wrong forum, please tell me.

So, I'm new here. I've been looking into the forum a bit more, but I didn't find the answer to my question. I get that in general, debt takes a long time to pay off, and, of course, the interest rates make things 10X harder. (Especially if they balloon on a non-fixed rate).

There is a lot of pressure to get law school paid for via scholarships and grants. I get that, it'd be super nice to come out of law school without debt so the majority of what you earn afterwards is all yours. That's the nice thing.

But, what about being in debt is so awful? It makes sense to me why it's awful for people who want to purchase a house, or get married, or have children on their own dollars. Debt makes those things WAY harder to have without piles of stress and good bargaining skills.

Say for someone who is already married, doesn't want children, and can't see themselves buying a house for quite some time... what is the downside to debt, aside from the fact that paying off debt will consume a lot of your paycheck depending on what school you manage to get into?

Sure, it's a bummer to owe a bank or the government, but what's the worst thing about debt?

- I'd like to add that I've never had sholastic debt before, and no matter what the future holds for me, I may have to incur some at some point.

[ph14]

If it's been asked before, or is in the wrong forum, please tell me.

So, I'm new here. I've been looking into the forum a bit more, but I didn't find the answer to my question. I get that in general, debt takes a long time to pay off, and, of course, the interest rates make things 10X harder. (Especially if they balloon on a non-fixed rate).

There is a lot of pressure to get law school paid for via scholarships and grants. I get that, it'd be super nice to come out of law school without debt so the majority of what you earn afterwards is all yours. That's the nice thing.

But, what about being in debt is so awful? It makes sense to me why it's awful for people who want to purchase a house, or get married, or have children on their own dollars. Debt makes those things WAY harder to have without piles of stress and good bargaining skills.

Say for someone who is already married, doesn't want children, and can't see themselves buying a house for quite some time... what is the downside to debt, aside from the fact that paying off debt will consume a lot of your paycheck depending on what school you manage to get into?

Sure, it's a bummer to owe a bank or the government, but what's the worst thing about debt?

That, plus the fact you might not even get a job that would enable you to service that debt. If we're talking about $200k in debt you need a biglaw job. Plus, you're limited to high-paying law firm jobs when you might want to be, say, a public defender, etc.

[Meowaka]

That, plus the fact you might not even get a job that would enable you to service that debt. If we're talking about $200k in debt you need a biglaw job. Plus, you're limited to high-paying law firm jobs when you might want to be, say, a public defender, etc.

Sure, but hardly anyone starts at their dream job... most people, debt or otherwise, probably do have to make sacrifices for the first few years of a vocation. I mean, unless I'm wrong there...?

[ph14]

That, plus the fact you might not even get a job that would enable you to service that debt. If we're talking about $200k in debt you need a biglaw job. Plus, you're limited to high-paying law firm jobs when you might want to be, say, a public defender, etc.

Sure, but hardly anyone starts at their dream job... most people, debt or otherwise, probably do have to make sacrifices for the first few years of a vocation. I mean, unless I'm wrong there...?

Option 1: Work in big law, billing 2000 hours a year for 5 years just to get back to 0 net worth.
Option 2: Don't get big law, stuck paying back $200k (or however much) in debt back on a $45k-60k job, if you can get it.

If you don't at least see how the potential of a large amount of debt can negatively impact your life, you need to do some more research and think about the implications of owing a significant amount of non-dischargeable debt. Now if, after all things considered, you think that you can handle the debt burden and that it is the best decision for you, that's one thing. But to not even see the problem of debt is another.

[Meowaka]

Option 1: Work in big law, billing 2000 hours a year for 5 years just to get back to 0 net worth.
Option 2: Don't get big law, stuck paying back $200k (or however much) in debt back on a $45k-60k job, if you can get it.

If you don't at least see how the potential of a large amount of debt can negatively impact your life, you need to do some more research and think about the implications of owing a significant amount of non-dischargeable debt. Now if, after all things considered, you think that you can handle the debt burden and that it is the best decision for you, that's one thing. But to not even see the problem of debt is another.

Right, I see how it's a problem for a certain lifestyle, absolutely. Debt can seriously cripple people who want a certian kind of life. And that would suck greatly.

One of the major reasons to go to law school in the first place is to earn higher wages. That's also true, and so I imagine it's disappointing for people who are giving half their earned money back to a bank. But great schools, even without grants or scholarships, brag about making sure their students have the opportunity for paying gigs inside and out of the classroom, though many are more like unpaid internships. Maybe that's a lie to make the whole thing more attractive?

I've done a little research, and all I can seem to find is that debt is almost a certainty in this vocation, and in this life. The worst that can happen, so I've read, is that the bank takes your house (maybe), or you can't rent a car, or an apartment, maybe. At least, it's harder. And that's if you try to avoid your debt. The worst consequences of debt, well, don't seem so apocolyptic to me.

[ph14]

Option 1: Work in big law, billing 2000 hours a year for 5 years just to get back to 0 net worth.
Option 2: Don't get big law, stuck paying back $200k (or however much) in debt back on a $45k-60k job, if you can get it.

If you don't at least see how the potential of a large amount of debt can negatively impact your life, you need to do some more research and think about the implications of owing a significant amount of non-dischargeable debt. Now if, after all things considered, you think that you can handle the debt burden and that it is the best decision for you, that's one thing. But to not even see the problem of debt is another.

Right, I see how it's a problem for a certain lifestyle, absolutely. Debt can seriously cripple people who want a certian kind of life. And that would suck greatly.

One of the major reasons to go to law school in the first place is to earn higher wages. That's also true, and so I imagine it's disappointing for people who are giving half their earned money back to a bank. But great schools, even without grants or scholarships, brag about making sure their students have the opportunity for paying gigs inside and out of the classroom, though many are more like unpaid internships. Maybe that's a lie to make the whole thing more attractive?

I've done a little research, and all I can seem to find is that debt is almost a certainty in this vocation, and in this life. The worst that can happen, so I've read, is that the bank takes your house (maybe), or you can't rent a car, or an apartment, maybe. At least, it's harder. The worst consequences of debt, well, don't seem so apocolyptic to me.

Well then you might be someone then who is a candidate for financing their law degree through student loans. Though, i've never heard someone say "the worst that can happen ... is that the bank takes your house" so nonchalantly.

You should also be careful about schools claims about "making sure their students have the opportunity for paying gigs inside and outside of the classroom." Check out http://www.lawschooltransparency.com/ if you haven't already.

[Lord Randolph McDuff]

Unless you actually want big law, don't spend 200k on law school. Don't spend 100k. With an average LSAT, say 158-160, you can get money at cheaper regionals and only graduate with 60-70k debt. The monthly payment on that is doable, you can still finance a house a few years out of law school, etc.. The largest firm in most towns of 50,000-100,000 is like 5-8 attorneys, sometimes smaller. There is no "big law" and no one talks about it. Where I am the starting salary is 55-60k for small 2-5 people shops, and for DA/PD. State agency maybe 60k or just over.

This is all completely doable. People on this site who attend top schools don't often know much about this, assume it's not so doable. I think they mean well but probably overestimate the competition for grades and jobs at smaller schools, among other factors. I bring this up because you sound like your trying to talk yourself into 200k debt and I want to let you know there are other options. I'm graduating in a few weeks with 60k debt and a 60k job lined up. Entirely possible.

[Meowaka]

Well then you might be someone then who is a candidate for financing their law degree through student loans. Though, i've never heard someone say "the worst that can happen ... is that the bank takes your house" so nonchalantly.

You should also be careful about schools claims about "making sure their students have the opportunity for paying gigs inside and outside of the classroom." Check out http://www.lawschooltransparency.com/ if you haven't already.

What I'm saying is that for people who want a home, taking on that much debt would certainly be really shit. But if you don't plan to own a home, or have kids, or live that lifestyle where that worst consequence is literally the worst possible thing...

Maybe I just have a different lifestyle choice, and maybe the consequences of debt in that instance aren't so dire as someone elses. Does that make sense?

[Meowaka]

Unless you actually want big law, don't spend 200k on law school. Don't spend 100k. With an average LSAT, say 158-160, you can get money at cheaper regionals and only graduate with 60-70k debt. The monthly payment on that is doable, you can still finance a house a few years out of law school, etc.. The largest firm in most towns of 50,000-100,000 is like 5-8 attorneys, sometimes smaller. There is no "big law" and no one talks about it. Where I am the starting salary is 55-60k for small 2-5 people shops, and for DA/PD. State agency maybe 60k or just over.

This is all completely doable. People on this site who attend top schools don't often know much about this, assume it's not so doable. I think they mean well but probably overestimate the competition for grades and jobs at smaller schools, among other factors. I bring this up because you sound like your trying to talk yourself into 200k debt and I want to let you know there are other options. I'm graduating in a few weeks with 60k debt and a 60k job lined up. Entirely possible.

I'm not trying to talk myself into debt necessarily, but I am genuinely curious about why people get so upset at the prospect. But your explanation makes a lot of sense to me. Thank you very much, and I will keep it in mind.

[rwhyAn]

Well then you might be someone then who is a candidate for financing their law degree through student loans. Though, i've never heard someone say "the worst that can happen ... is that the bank takes your house" so nonchalantly.

You should also be careful about schools claims about "making sure their students have the opportunity for paying gigs inside and outside of the classroom." Check out http://www.lawschooltransparency.com/ if you haven't already.

What I'm saying is that for people who want a home, taking on that much debt would certainly be really shit. But if you don't plan to own a home, or have kids, or live that lifestyle where that worst consequence is literally the worst possible thing...

Maybe I just have a different lifestyle choice, and maybe the consequences of debt in that instance aren't so dire as someone elses. Does that make sense?

I get where you're coming from, but imagine having every single decision impacted by the debt you have. Want to buy a house? Can't afford it because of debt. Need to rent a place because you can't afford a house? Your credit blows so no landlord will give you a lease. Want to get married or have kids? Can't. Need to get a new car because your other one died? No bank will give you the loan. Yes, there are certainly worse things in the world, but why would you want to spend your entire adult life paying down a ridiculous debt you acquired in your twenties with nothing to show for it in the end?

[Nomo]

From a therapist who was once an associate at a biglaw firm:

"When your parents die some day, they’ll also leave money to you both. Your share of that, too, would disappear down the drain of your school loans, without making much of a dent. On the other hand, the deaths of your grandparents and parents might enable you to pay the loans off sooner – before you reach your fifties – which is a disturbing thought that keeps entering your head when you wish it wouldn’t."
--LinkRemoved--

This is real. This is what his clients are telling him. This will be you if for whatever reason you find it hard to pay down heavy debt. Its a burden that affects you in every moment of your life.

[kaiser]

Huge student debt is a problem for many reasons:

1. It is not dischargeable and there is literally nothing you can do aside from pay the damn thing off

2. It forces you to take certain jobs (assuming a high paying job is even available), rather than start on the career trajectory you may truly desire (which can seriously set you back in your career if others on your chosen route have a leg up via extra experience)

3. It forces you to stay in that job, and adds another nagging pressure to what is already a stressful and pressure-filled environment. The job becomes a life-line since it is the only way to pay off the debt, and it makes you question every decision, every day. You worry that one screw up, and your life-line is gone. And even if you have the option to stay, you may hate the job immensely, but rather than move onto something you enjoy, you are forced to stay

4. It sets back and harms so many future life decisions and events such as buying a house, buying a car, getting married, having kids, and countless others. It literally shapes your financial future, and largely for the worse

5. The realization that the debt may not have been necessary. So many grads realize after the fact that we were naive as 0L's, and placed too much weight on differences between top schools. For example, I know multiple Harvard grads who sincerely wish they had taken full scholarship offers from lower T10 or T14 schools. Of course, its water under the bridge at this point, but it hurts to know that you far overpaid for the marginal safety net you purchased by choosing the higher ranked school, especially if you post-gradution goal was to work for a big firm.

6. The short-term after graduation can be pretty terrible once huge monthly payments become a reality. You realize that your QOL is pretty low, and in no way reflective of the salary you make. And then you come to the further realization that this will be the case for many years to come. You realize pretty quickly that the simple budget math you did to justify the debt as a 0L was really shoddy, and failed to take into account many things that life throws your way

I could go on and on about why big debt is not adviseable, but hopefully this gives you an idea

[crazycanuck]

Option 1: Work in big law, billing 2000 hours a year for 5 years just to get back to 0 net worth.
Option 2: Don't get big law, stuck paying back $200k (or however much) in debt back on a $45k-60k job, if you can get it.

If you don't at least see how the potential of a large amount of debt can negatively impact your life, you need to do some more research and think about the implications of owing a significant amount of non-dischargeable debt. Now if, after all things considered, you think that you can handle the debt burden and that it is the best decision for you, that's one thing. But to not even see the problem of debt is another.

I've done a little research, and all I can seem to find is that debt is almost a certainty in this vocation, and in this life. The worst that can happen, so I've read, is that the bank takes your house (maybe), or you can't rent a car, or an apartment, maybe. At least, it's harder. And that's if you try to avoid your debt. The worst consequences of debt, well, don't seem so apocolyptic to me.

Yeah having no where to live is totally NBD.

[drevo]

I've done a little research, and all I can seem to find is that debt is almost a certainty in this vocation, and in this life. The worst that can happen, so I've read, is that the bank takes your house (maybe), or you can't rent a car, or an apartment, maybe. At least, it's harder. And that's if you try to avoid your debt. The worst consequences of debt, well, don't seem so apocolyptic to me.

I think this severely understates what happens to the average person's life when their credit goes to shit and they have nondischargeable debts they default on. As with any sort of default or hit to your credit, the consequence isn't just a one time hit of losing some property. You may think that having bad credit and claims against you isn't the end of the world, but in reality it creates huge issues.

[Meowaka]

I get where you're coming from, but imagine having every single decision impacted by the debt you have. Want to buy a house? Can't afford it because of debt. Need to rent a place because you can't afford a house? Your credit blows so no landlord will give you a lease. Want to get married or have kids? Can't. Need to get a new car because your other one died? No bank will give you the loan. Yes, there are certainly worse things in the world, but why would you want to spend your entire adult life paying down a ridiculous debt you acquired in your twenties with nothing to show for it in the end?

Makes sense to me.

Are these the consequences of simply being in debt in general, or not making payments?

[Meowaka]

From a therapist who was once an associate at a biglaw firm:

"When your parents die some day, they’ll also leave money to you both. Your share of that, too, would disappear down the drain of your school loans, without making much of a dent. On the other hand, the deaths of your grandparents and parents might enable you to pay the loans off sooner – before you reach your fifties – which is a disturbing thought that keeps entering your head when you wish it wouldn’t."
--LinkRemoved--

This is real. This is what his clients are telling him. This will be you if for whatever reason you find it hard to pay down heavy debt. Its a burden that affects you in every moment of your life.

Right, that makes sense too.

[Meowaka]

Huge student debt is a problem for many reasons:

1. It is not dischargeable and there is literally nothing you can do aside from pay the damn thing off

2. It forces you to take certain jobs (assuming a high paying job is even available), rather than start on the career trajectory you may truly desire (which can seriously set you back in your career if others on your chosen route have a leg up via extra experience)

3. It forces you to stay in that job, and adds another nagging pressure to what is already a stressful and pressure-filled environment. The job becomes a life-line since it is the only way to pay off the debt, and it makes you question every decision, every day. You worry that one screw up, and your life-line is gone. And even if you have the option to stay, you may hate the job immensely, but rather than move onto something you enjoy, you are forced to stay

1&2 I already knew.

As for 3, my life feels that way right now, and I have no debt. I'm working at the moment, but I'm not enjoying the work I do. Law school is attractive because even if the job environment is stressful, the degree I'll have will allow me to use my brain and doing something I really believe I'll enjoy. I have talked to many attorneys and even the "bad" parts I'm told about seem more attractive to me than my current job. There are a lot of shitty jobs out there, don't get me wrong. There is no reason to believe I'm guaranteed to get a job I'll enjoy or one I'll despise either way. No matter whether law school is in the cards or not.

4. It sets back and harms so many future life decisions and events such as buying a house, buying a car, getting married, having kids, and countless others. It literally shapes your financial future, and largely for the worse

5. The realization that the debt may not have been necessary. So many grads realize after the fact that we were naive as 0L's, and placed too much weight on differences between top schools. For example, I know multiple Harvard grads who sincerely wish they had taken full scholarship offers from lower T10 or T14 schools. Of course, its water under the bridge at this point, but it hurts to know that you far overpaid for the marginal safety net you purchased by choosing the higher ranked school, especially if you post-gradution goal was to work for a big firm.

6. The short-term after graduation can be pretty terrible once huge monthly payments become a reality. You realize that your QOL is pretty low, and in no way reflective of the salary you make. And then you come to the further realization that this will be the case for many years to come. You realize pretty quickly that the simple budget math you did to justify the debt as a 0L was really shoddy, and failed to take into account many things that life throws your way

I could go on and on about why big debt is not adviseable, but hopefully this gives you an idea

Ok. So were I to do anything remotely like take debt out, would a good plan to seek financial counsel to get a really good "plan" set up before taking out loans, rather than relying on my own shoddy guesstimates in finance?

[Meowaka]

Yeah having no where to live is totally NBD.

I didn't mean to imply that.

[Meowaka]

I think this severely understates what happens to the average person's life when their credit goes to shit and they have nondischargeable debts they default on. As with any sort of default or hit to your credit, the consequence isn't just a one time hit of losing some property. You may think that having bad credit and claims against you isn't the end of the world, but in reality it creates huge issues.

That's why I'm asking. Having never been confronted with the idea itself before this year, I just want to get a sense of the realities of the whole thing before making some potentially huge mistakes.

[crazycanuck]

I think this severely understates what happens to the average person's life when their credit goes to shit and they have nondischargeable debts they default on. As with any sort of default or hit to your credit, the consequence isn't just a one time hit of losing some property. You may think that having bad credit and claims against you isn't the end of the world, but in reality it creates huge issues.

That's why I'm asking. Having never been confronted with the idea itself before this year, I just want to get a sense of the realities of the whole thing before making some potentially huge mistakes.

Why don't you look for a job at a law firm first? When I was considering law school I worked at a law firm as a clerk/assistant for 3 months and realized that law firms and the work they do was not for me. Saved me a lot of $. I know wearing a suit, advising clients, and "running a practice" sounds really cool, but you should really get some experience before deciding if it is or not. It's a big decision.

Also don't get sucked into the "jd opens doors" bullshit. It doesnt unless you are at Harvard and even then I'm not convinced it opens doors that wouldn't have been opened through other paths.

[rwhyAn]

I get where you're coming from, but imagine having every single decision impacted by the debt you have. Want to buy a house? Can't afford it because of debt. Need to rent a place because you can't afford a house? Your credit blows so no landlord will give you a lease. Want to get married or have kids? Can't. Need to get a new car because your other one died? No bank will give you the loan. Yes, there are certainly worse things in the world, but why would you want to spend your entire adult life paying down a ridiculous debt you acquired in your twenties with nothing to show for it in the end?

Makes sense to me.

Are these the consequences of simply being in debt in general, or not making payments?

No, these aren't the consequences of being in debt in general, but they are the consequences of being in massive debt, which many law school students are in nowadays. I'll use myself as an example. I'm not a law student, but I have around $20k in debt total, $10k from undergrad loans and $10k from car loans. While the best debt is no debt, my debts aren't bad, per se, because (1) they're manageable, and (2) they were needed to get my current job. If I didn't have an undergrad degree, I wouldn't have the job I have now, and if I didn't have transportation, I couldn't get to said job. The biggest problem with student loan debt is that you don't have any physical assets to show for it, unlike a house or car that you could resell once you can no longer make payments.

[NYSprague]

You said you understand that debt from student loans is non-dischargable, but the example you gave was losing your house when you can't pay the mortgage. You realize that student loans aren't like that, right? Walking away from a house means the debt is discharged in bankruptcy. You can never walk away from your student loan debt plus interest unless you become profoundly disabled, like maybe a coma. Or if you die.

Just think about that for a while. You will be repaying this debt plus interest for what is it, 20 or 25 years? And then if the amount you owe is forgiven by the government, you will be paying taxes on that amount. Some people think the tax bomb will disappear, but I don't see the American public going for that.

Before IBR, your only option if you couldn't make the payment was to default. Now if you qualify, you can make lower payments, but you are never going to pay back the amount you owe.

[Meowaka]

Why don't you look for a job at a law firm first? When I was considering law school I worked at a law firm as a clerk/assistant for 3 months and realized that law firms and the work they do was not for me. Saved me a lot of $. I know wearing a suit, advising clients, and "running a practice" sounds really cool, but you should really get some experience before deciding if it is or not. It's a big decision.

I am working in a law firm currently, as a receptionist. I've been here for over a year, and I still find law as a job attractive.

Also don't get sucked into the "jd opens doors" bullshit. It doesnt unless you are at Harvard and even then I'm not convinced it opens doors that wouldn't have been opened through other paths.

I have heard that, but I've also heard that it closes as many doors as it opens, so I do have realism about JDs in general, just no previous personal knowledge concerning debt.

[Meowaka]

No, these aren't the consequences of being in debt in general, but they are the consequences of being in massive debt, which many law school students are in nowadays. I'll use myself as an example. I'm not a law student, but I have around $20k in debt total, $10k from undergrad loans and $10k from car loans. While the best debt is no debt, my debts aren't bad, per se, because (1) they're manageable, and (2) they were needed to get my current job. If I didn't have an undergrad degree, I wouldn't have the job I have now, and if I didn't have transportation, I couldn't get to said job. The biggest problem with student loan debt is that you don't have any physical assets to show for it, unlike a house or car that you could resell once you can no longer make payments.

Right. It's a piece of paper with a huge pricetag.

[Meowaka]

You said you understand that debt from student loans is non-dischargable, but the example you gave was losing your house when you can't pay the mortgage. You realize that student loans aren't like that, right? Walking away from a house means the debt is discharged in bankruptcy. You can never walk away from your student loan debt plus interest unless you become profoundly disabled, like maybe a coma. Or if you die.

Just think about that for a while. You will be repaying this debt plus interest for what is it, 20 or 25 years? And then if the amount you owe is forgiven by the government, you will be paying taxes on that amount. Some people think the tax bomb will disappear, but I don't see the American public going for that.

Will do. Thank you for the insight.