Author Topic: How Should I Finance Law School?  (Read 7738 times)

bertrandhustle

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How Should I Finance Law School?
« on: June 16, 2015, 03:06:43 PM »
Iím 24 years old and will have ~$120,000 saved by the time school begins in August. How much debt should I take on?

Current plan is to liquidate my assets in the following order: cash, taxable, roth/after-tax, pre-tax. If I do this I should be able to cover the first year using only post-tax money. This seems like a no-brainer. However, the second year would require most of the pre-tax money and the 3rd will wipe out whateverís left and may require a small loan too. Is this how you would approach it? Or would you leave the retirement accounts to grow and take out loans instead?

My Finances:
- $73,000 in 401K (17,500 after-tax, remainder pre-tax) will be rolled over to a Roth to take advantage of edu exemption
- $17,600 in Roth IRA (can be used toward edu, penalty free)
- ~$30,000 in cash/taxable accounts
- No debt other than a credit card balance I pay in full monthly
- Iím frugal. Lived on a <$15,000 budget in the Bay Area in 2014. I imagine this will go up to $20,000/year due to increased insurance expense

My financial Aid:
- $32,000 need-based tuition grant (reassessed yearly) out of $56,000 tuition bill. This grant will likely be substantially smaller in my 2nd and 3rd years since most summer income is subtracted
- $8,000 subsidized Perkins loan (renewable yearly). A loan that doesnít accrue interest while Iím in school. I will be taking this out since it is essentially free.

Significant Other:
- Girlfriend and I will live together and split all shared expenses
- She makes >$70,000 per year and will not be paying for anything on my behalf
- Sheís awesome and on lifeís fast track so Iíll propose to her during school sometime

My Considerations:
- Loan forgiveness: I donít know whether I will choose a high paying corporate job or a moderate to low paying public interest/government job. I'm attending a school where the high paying job could be a fall-back option. If the latter at least part of the loans could be forgiven.
- Debt aversion: On the other hand, I despise the thought of being in debt and will only leverage myself if it makes objective sense to do so.
- Retirement accounts: Much of my money is in pre-tax retirement accounts. Once I roll them over to a Roth I will have to pay income tax. My income will be low when I need to do this (<$30,000 in other taxable income from summer work), but I wonder whether it would be smarter to let the pre-tax money grow and pay an origination fee/interest on a loan while in school instead.

Would you take out loans after the first year and incur interest/origination fees in case of loan forgiveness eligibility? Or, would you liquidate your assets and pay taxes to pay up front and start your legal career with little to no debt?

CommonCents

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Re: How Should I Finance Law School?
« Reply #1 on: June 16, 2015, 03:32:16 PM »
The school will expect a certain percentage of your taxable accounts each year (1/3?  Not sure of formula).  In my experience, they didn't really consider how much I had in loans.  So, I would pay for law school the first year with the cash/taxable accounts.   Then you'll have less in the bank for years 2 & 3.   Year 3 you may have a fat summer paycheck if you work for a large firm as well, to put to some expenses.

Don't cash out your 401k or Roth IRA.  You can't put that money back in later.

Rollover what you can of the 401k to the Roth while your income is low and you won't pay much if any taxes.

Note: The school I attended considered my parents income, even though I was independent at 25 and had been for years.  Know whether your school will consider it or not.  My financial aid grant got really messed up because they gave me an estimate based on the paperwork my folks filled out.  Turns out, the address (on the paperwork) to mail it to the school was wrong and it took 2 months for it to get from one department at the school to another.  When they looked at it, they reduced my award to virtually zero, because it turned out the school did not define terms/calculate the same as the IRS.  Specifically, my dad was in the process of starting a business and they only considered income, NOT expenses.  (Wholly ridiculous to exclude the expenses in a business, thus benefiting companies with low/no expenses and severely penalizing those with high expenses, rather than looking at the profit.)  I discovered this financial aid reduction about 2 days before I was supposed to start classes.  I met with the financial dean, and he ended up agreeing based on the 2 month delay that was their fault (leaving me with no time to choose another school) to give me the $ for year one, but not thereafter.

My school similarly screwed over a good friend doing a joint degree.  They refused to give her a grant estimate for the law school part, only the first med school part but assured it'd be very similar.  Time to do law school portion, it came out to be virtually nothing (rather than the fat med school aid), and she couldn't really transfer schools midway through the joint degree program at that point due to different requirements at school.  Moral of story: Don't bank on financial aid beyond the year in hand.  You may be able to negotiate it slightly (I knew someone who presented multiple aid offers and used that as leverage to get it up a little.)
« Last Edit: August 14, 2015, 04:26:12 PM by CommonCents »

Suit

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Re: How Should I Finance Law School?
« Reply #2 on: June 16, 2015, 08:33:49 PM »
I would not touch your 401k or Roth money.

I would take out loans to cover most of your expenses because the cash that you have on hand will be needed as emergency fund/bar study fund/unemployed after law school fund. Unfortunately law school also breaks up a lot of relationships and while I wouldn't wish that on anyone just be prepared that your plan to split costs may go awry.

I'd also suggest getting paid internships for at least the summers in between years and, if you can, work during the school year to help cover expenses out of pocket. Another idea that worked for me is that I studied abroad one summer for a few weeks and the credits I got allowed me to go part time my 3rd year which saved me more money than if I had gone full time for all 3 years.

Baron235

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Re: How Should I Finance Law School?
« Reply #3 on: June 16, 2015, 08:39:20 PM »
How much is tuition and what is your school ranked? 

And are you sure you want to go to law school? 

Law school for most people is not a quick path to wealth, but if you love it then go for it.  However, most people don't love it. 

LeRainDrop

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Re: How Should I Finance Law School?
« Reply #4 on: June 16, 2015, 11:32:39 PM »
How much is tuition and what is your school ranked? 

OP wrote $56k tuition, so this should be a T14 school.  Good.

And are you sure you want to go to law school? 

Law school for most people is not a quick path to wealth, but if you love it then go for it.  However, most people don't love it.

That is definitely a key question and probably an accurate observation.  Law school is a ton of pressure.  It can make you crazy at times.  It definitely can introduce some friction in a relationship, but that's not insurmountable.  If you stay grounded, study hard, and keep focused on the big picture of what you want out of these years in your life, it can be rewarding.

To OP's original question, I would not withdraw any amount from your 401(k) or your Roth IRA.  Taking only the cash reserves into consideration, I would accept as little in student loans as possible that still leaves a cash cushion amount that you are comfortable carrying.  Perhaps I would settle around keeping $15k in savings, but that's really a personal choice based on your obligations and comfort level.  Definitely get paying legal work between your 2L and 3L years (and hopefully also between 1L and 2L).  It sounds like you and the girlfriend live sensibly, so you should be well set to bear this, provided that you get good grades, follow-through on the education, and interview well.  Unfortunately, the legal market in general is still blah for entry level work; going to a T14 is very good, but attendance alone is no longer a guarantee of a great job, and you want to stay above the grading curve for sure.  DEFINITELY talk to a sampling of lawyers in the different sectors you could foreseeably consider BEFORE you commit to law school to really learn and understand what they actually do in day-to-day work.  So many people get out and realize that they hate it, but with the debt, they feel a commitment to making the degree pay off, even if that means a severe sacrifice in happiness.  I have many friends who regret going to law school.  Conversely, there must be many who really thrive in the profession.  Good luck!
« Last Edit: June 16, 2015, 11:38:56 PM by LeRainDrop »

CommonCents

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Re: How Should I Finance Law School?
« Reply #5 on: June 17, 2015, 12:18:11 AM »
Note that if you do not take out all of the loans offered to you in the term, you can (at least I could) take them out later if needed.  So I'd reiterate that you can spend down your cash now and not keep much of a savings buffer, with this ability to borrow as a buffer.  Why pay interest on money you aren't using?

YTProphet

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Re: How Should I Finance Law School?
« Reply #6 on: June 17, 2015, 06:22:49 AM »
Lawyer here (and recent grad).

Only pay for law school if you go to a T-14 and, if it's not T-14, only go if you get it free or nearly free. I went to a T-14 and paid full tuition and that degree saved my butt when the recession came.

Also, seems like you make pretty good money already. Are you sure you want to go to law school? Law is generally soul crushing work if you're getting compensated well. And for jobs that aren't soul crushing, you'll probably end up making less than you do now. There's a huge variance in salaries. I'd think long and hard about whether to go, and I hope for your sake that you've interned at a firm or gov't office to know what you're getting yourself into.


Baron235

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Re: How Should I Finance Law School?
« Reply #7 on: June 17, 2015, 06:30:34 AM »
How much is tuition and what is your school ranked? 

OP wrote $56k tuition, so this should be a T14 school.  Good.

And are you sure you want to go to law school? 

Law school for most people is not a quick path to wealth, but if you love it then go for it.  However, most people don't love it.

That is definitely a key question and probably an accurate observation.  Law school is a ton of pressure.  It can make you crazy at times.  It definitely can introduce some friction in a relationship, but that's not insurmountable.  If you stay grounded, study hard, and keep focused on the big picture of what you want out of these years in your life, it can be rewarding.

To OP's original question, I would not withdraw any amount from your 401(k) or your Roth IRA.  Taking only the cash reserves into consideration, I would accept as little in student loans as possible that still leaves a cash cushion amount that you are comfortable carrying.  Perhaps I would settle around keeping $15k in savings, but that's really a personal choice based on your obligations and comfort level.  Definitely get paying legal work between your 2L and 3L years (and hopefully also between 1L and 2L).  It sounds like you and the girlfriend live sensibly, so you should be well set to bear this, provided that you get good grades, follow-through on the education, and interview well.  Unfortunately, the legal market in general is still blah for entry level work; going to a T14 is very good, but attendance alone is no longer a guarantee of a great job, and you want to stay above the grading curve for sure.  DEFINITELY talk to a sampling of lawyers in the different sectors you could foreseeably consider BEFORE you commit to law school to really learn and understand what they actually do in day-to-day work.  So many people get out and realize that they hate it, but with the debt, they feel a commitment to making the degree pay off, even if that means a severe sacrifice in happiness.  I have many friends who regret going to law school.  Conversely, there must be many who really thrive in the profession.  Good luck!
I wouldn't assume T14 because of high tuition.  There are a lot of schools with high tuition outside the top 50.

ShoulderThingThatGoesUp

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Re: How Should I Finance Law School?
« Reply #8 on: June 17, 2015, 06:39:27 AM »
Do you wake up every morning and want to be a lawyer? If you can keep on doing whatever saved you that $120,000 already, are you absolutely against doing that?

Rpesek6904

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Re: How Should I Finance Law School?
« Reply #9 on: June 17, 2015, 06:45:29 AM »
Yeah, I know this is a little bit of a re-direct of the question - but why are you even going to law school? If you already have 120k saved, you are well on your way to financial freedom. If your law school education is going to cost you 160k + a three year opportunity cost of earning then this is an extremely expensive decision. It appears you are about to make a 250k+ decision. I suggest you really, really think about these things.

I don't know where you are planning on going to school, your flexibility in terms of location or your career ambitions. All of those things matter. Based on what you posted, you need to be extremely clear on your career ambitions. If you are gunning for a high paying corporate job then you will have to get to the top of your class and the higher ranked your school the better. Be aware, many (but not everyone) consider that path very stressful and not fulfilling. That path is also extremely competitive and you might fail to achieve your goal no matter how hard you try. Consider yourself on notice of the difficulty you face on that journey.

If you want to do basically anything else then the prestige of your school is much, much less important. If you start your own practice as a solo or in a small firm, the prestige of your education is basically useless. For the record, it is very possible to earn a lot of money (more than corporate attorneys) on your own or in a small firm. Be careful of the "prestige trap" of law schools. It is just like owning a Cadillac v. Toyota. Get the education you need to go where you want - not more. Legitimate, regionally respected state schools ranked in the Top 100 are more than enough for a rewarding legal career. Generally speaking, they don't cost 160k over three years.

Honestly, this strikes me as possibly a big misstep. I pray you listen to what all the other attorneys here are telling you.
« Last Edit: June 17, 2015, 07:04:46 AM by Rpesek6904 »

Dee18

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Re: How Should I Finance Law School?
« Reply #10 on: June 17, 2015, 07:36:49 AM »
The wise advice I received when going to law school was "only borrow tuition." Your actual tuition cost appears to be $ 72,000 and you have almost half of that available without using retirement funds.  If I were you I would limit borrowing to $40,000 max over three years.  What seems to be missing in the discussion is your earnings during law school.  Your first year grades matter so much that you might want to focus only on studying for those two semesters, although you might find working a bit on the weekends worth the time.  In the summers take the highest paying jobs you can get.  If you want experience in public interest areas of law, do it through externships during the semester for credit, rather than during the summer for low or no pay. If your first semester grades are great, you should be able to make enough in the first summer to cover your living expenses for the second year.  Repeat the next summer and you are set.

ReadySetMillionaire

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Re: How Should I Finance Law School?
« Reply #11 on: June 17, 2015, 07:58:56 AM »
OP: all the general advice provided thus far is pretty good, but you would certainly get better advice if you posted your LSAT score, school selection, all scholarship offers (including schools you don't plan on attending), and other factors that play into the decision process.

jackiechiles2

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Re: How Should I Finance Law School?
« Reply #12 on: June 17, 2015, 09:45:39 AM »
Don't go unless it's free.

KittyFooFoo

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Re: How Should I Finance Law School?
« Reply #13 on: June 17, 2015, 09:54:20 AM »
DO NOT GO TO LAW SCHOOL

MLKnits

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Re: How Should I Finance Law School?
« Reply #14 on: June 17, 2015, 10:00:15 AM »
I know this isn't what you asked, and I'm sorry about the pile-on, but seriously: you're 24 and have saved $120,000 already? Don't go to law school. You clearly have a much better path available to you. Unless you've literally been strangling orphans for a living, whatever job has allowed you to save that successfully is a better bet for lifelong happiness.

I have a pretty sweet deal as lawyer lifestyles go, and I still really, really, really wish I'd done something else. There's a reason so many lawyers are on this forum: we want to get out.

Please just seriously think about what aspect of lawyer life would be better than whatever you're doing now, and talk to a bunch of lawyers about whether it actually is. I know waaaaay too many 2012, 2013, 2014 law school grads with no job, no prospects, and their loans heading toward default.

forummm

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Re: How Should I Finance Law School?
« Reply #15 on: June 17, 2015, 10:29:09 AM »
There's too much here to really get into
1) Have a really good reason for going to law school before you actually to it. It's just too expensive (time and money and opportunity cost) to do it if your payback isn't going to be there. I got in to a top 5 school and had 67% off tuition and still decided not to go because it was the wrong decision for me. I am still glad that I didn't do it. Being a lawyer can really suck. And on a dollars per hour basis, it doesn't pay much or even any better than many other less stressful professions. I have a lawyer relative and I make more per hour than he does. And I have at least 10x more money than he does because I'm great with controlling my spending.
2) If you do go, control your spending like crazy. Some people see a loan check for $50k and then blow it on booze, cable, rent, other crap. That's not new income--it's interest accruing debt. Live like a pauper.
3) Don't take a penny out of any tax-advantaged accounts. Much better to borrow at student loan interest rates. You can't put those funds back in the tax-advantaged accounts.
4) There are too many lawyers out there now relative to jobs. You might not have a lot of great job opportunities. Especially if you're not going to a top 10 school.
5) Think about the math. How much income during those 3 years are you giving up by going to law school? How much will you be paying of that tuition bill (borrowed or cash)? How much interest will that total amount have provided for you for the rest of your life if you had invested it? That's the cost.

jackiechiles2

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Re: How Should I Finance Law School?
« Reply #16 on: June 17, 2015, 11:20:15 AM »
There's too much here to really get into
1) Have a really good reason for going to law school before you actually to it. It's just too expensive (time and money and opportunity cost) to do it if your payback isn't going to be there. I got in to a top 5 school and had 67% off tuition and still decided not to go because it was the wrong decision for me. I am still glad that I didn't do it. Being a lawyer can really suck. And on a dollars per hour basis, it doesn't pay much or even any better than many other less stressful professions. I have a lawyer relative and I make more per hour than he does. And I have at least 10x more money than he does because I'm great with controlling my spending.
2) If you do go, control your spending like crazy. Some people see a loan check for $50k and then blow it on booze, cable, rent, other crap. That's not new income--it's interest accruing debt. Live like a pauper.
3) Don't take a penny out of any tax-advantaged accounts. Much better to borrow at student loan interest rates. You can't put those funds back in the tax-advantaged accounts.
4) There are too many lawyers out there now relative to jobs. You might not have a lot of great job opportunities. Especially if you're not going to a top 10 school.
5) Think about the math. How much income during those 3 years are you giving up by going to law school? How much will you be paying of that tuition bill (borrowed or cash)? How much interest will that total amount have provided for you for the rest of your life if you had invested it? That's the cost.

EXACTLY- on all points.  Google "law school scam" and you'll discover thousands of unemployed, heavily indebted, bitter lawyers wishing they'd done anything but go to law school.  For the love of God, research this before you spend $120k on less than a 50% chance of getting a job that pays, on average, $60k.

YTProphet

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Re: How Should I Finance Law School?
« Reply #17 on: June 17, 2015, 11:22:25 AM »
DO NOT GO TO LAW SCHOOL
This. I make good money (mid 6-figures) and have a cushy job and I still regret going.

bertrandhustle

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Re: How Should I Finance Law School?
« Reply #18 on: June 17, 2015, 11:47:03 AM »
Thanks for all the replies so far. For those of you saying don't go unless it's free, that is not in the realm of possibilities for someone attending Harvard/Stanford/Yale, since their max grant is roughly what I will receive. The advice I've received is that I'd be an idiot to turn down a 2/3 tuition grant to any of the aforementioned schools unless I loved what I was previously doing, which I didn't.

I've posted about my dilemma of whether to stay at my previous job or go to school here before and decided I would regret not going more so than leaving. My interest is in litigation/labor & employment/academia. I have the work experience and undergraduate credentials to do L&E work for the govt, a firm or a company once I graduate. My long-term goals are to go into academia if grades pan out, or start a solo L&E ADR practice once I gain enough experience.

I am currently interning at a corporate firm and find the work at least as palatable as what I did before. Granted, my hours are nowhere near what they'd be as a real associate.

My plan is to take the highest paying jobs during summers. I am an under-represented minority so there is a small chance I will be able secure a market-paying SA my first summer. After the first quarter/semester I plan to do some type of paying work during the year too.

Sounds like the collective wisdom is to take loans instead of using money in retirement accounts. I'm kind of surprised by this since it seems easier to rebuild assets than to pay down debt. Am I missing something?

 

peeps_be_peeping

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Re: How Should I Finance Law School?
« Reply #19 on: June 17, 2015, 12:04:37 PM »
DO NOT GO TO LAW SCHOOL

Repeat: Do not go to law school. Think about spending three years surrounded by aspiring lawyers and how horrible that must be. I went to a T14, now have a "cushy" law job, make low 6-figures, and I regret going. It was a complete waste of time. But I'm not a quitter so I finished school and now I'm trying to plan my exit after ~10 years.

However, congratulations on getting into Stanford and your grant package. If you must go to law school, you're doing it right. And since you presumably are a grownup who's thought long and hard about this decision and are set on going, I'll chime in on taking loans. Don't spend your retirement accounts. You can always liquidate your retirement accounts later to pay the loans off if necessary.

jackiechiles2

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Re: How Should I Finance Law School?
« Reply #20 on: June 17, 2015, 12:05:40 PM »
Thanks for all the replies so far. For those of you saying don't go unless it's free, that is not in the realm of possibilities for someone attending Harvard/Stanford/Yale, since their max grant is roughly what I will receive. The advice I've received is that I'd be an idiot to turn down a 2/3 tuition grant to any of the aforementioned schools unless I loved what I was previously doing, which I didn't.

I've posted about my dilemma of whether to stay at my previous job or go to school here before and decided I would regret not going more so than leaving. My interest is in litigation/labor & employment/academia. I have the work experience and undergraduate credentials to do L&E work for the govt, a firm or a company once I graduate. My long-term goals are to go into academia if grades pan out, or start a solo L&E ADR practice once I gain enough experience.

I am currently interning at a corporate firm and find the work at least as palatable as what I did before. Granted, my hours are nowhere near what they'd be as a real associate.

My plan is to take the highest paying jobs during summers. I am an under-represented minority so there is a small chance I will be able secure a market-paying SA my first summer. After the first quarter/semester I plan to do some type of paying work during the year too.

Sounds like the collective wisdom is to take loans instead of using money in retirement accounts. I'm kind of surprised by this since it seems easier to rebuild assets than to pay down debt. Am I missing something?

If you're going to Harvard/Stanford/Yale, I'd say you should go.  However, you need to evaluate what your plan is after graduation.  You won't have much of a problem finding employment out of those three law schools.  That said, you need to consider the realities of your post-graduation job prospects.  If you've got debt, you're going to need to get a job that pays enough to repay it.  Those jobs will not likely be in government.  A solo practice will also not be an option for a LONG time-especially if you work at a large firm.  Most large firms don't like younger associates getting too cozy with clients. 

If you're dead set on going to law school, which it seems you are, you may want to explore PAYE/IBR/PSLF for repayment on your debt.  If you did want to go into government after graduation, you could sign up for PSLF, pay 10% of your discretionary income in loan payments for 10 years, then have the balance forgiven at the end (as the plan is currently.  Obama recently proposed limiting the forgiveness under this plan to $57k).  The problem with that is, if you're not making enough to pay the loans down, you're basically trapped in that payment plan because the loan will have actually grown during the years you were paying 10%. 

You need to examine the scholarship closely as well.  Is it guaranteed for all 3 years?  Some law schools require scholarship recipients to keep a 3.0 or higher GPA to keep their scholarships.  Then they put all the recipients in the same section.  Since law schools grade on a curve, only the top 25% of the scholarship recipients keep their scholarships going into year 2 (or whatever the curve is above the minimum GPA).  You could end up paying full price for years 2-3, which will dramatically change the calculation.

Living expenses are also going to be astronomical for those schools, so that's something to consider as well.

I've rambled, but the tl;dr version of my post is-be sure you can calculate the amount you're going to end up owing.  Be sure you're going to be able to get a job to repay that debt, or you'll be trapped into keeping a job you don't like to pay for it back or you'll be trapped working for nonprofits/government entities with the hope that PSLF is never tinkered with by Congress. 

Check2400

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Re: How Should I Finance Law School?
« Reply #21 on: June 17, 2015, 12:11:43 PM »
As much as lawyers all love to play the "don't go to law school card" (which I second), being told no generally just energizes people to prove others wrong.  If FIRE is your goal, the comment about current savings and opportunity costs is a real consideration.  Add in 2 years afterwards to repay loans if you save aggressively, and you are still removing your best compounded earning years from your life.  (I mean, if you simply stay on track with your earnings until 29, you'll have $300K.  If that is all 401k, and you double your savings every ten years as is the rule, you'll have almost 2.5 million at 59.  You never have to do 401k again!).  But I digress. 

That being said, your last comment at least addresses the most telling variable on actually practicing law-you have experience in the legal world.

I've linked this before, but I've found this article to be, hands down, the best article for pragmatically assessing whether or not law school is right for you. 

http://www.artofmanliness.com/2012/02/27/faq-should-i-go-to-law-school/

As for financing, I would say use grants and interest free loans for year one, then work during year two and three.  Working will get you connections, experience, and money.  Working will get you jobs.  Working will actually teach you practicing law.  Being on Journal will not.  Mock Trial is the only exception-but you don't want to do litigation (good idea). 

Best of luck to you, I do hope you are one of those applicants who truly wants to practice law instead just wanting to "be a lawyer."

Edit to your last comment:  Paying down debt is linear.  Maintaining your assets is compounding.  You'll have 5 years of growth to add to the pot if you leave the money alone.

forummm

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Re: How Should I Finance Law School?
« Reply #22 on: June 17, 2015, 12:33:19 PM »
Thanks for all the replies so far. For those of you saying don't go unless it's free, that is not in the realm of possibilities for someone attending Harvard/Stanford/Yale, since their max grant is roughly what I will receive. The advice I've received is that I'd be an idiot to turn down a 2/3 tuition grant to any of the aforementioned schools unless I loved what I was previously doing, which I didn't.

I've posted about my dilemma of whether to stay at my previous job or go to school here before and decided I would regret not going more so than leaving. My interest is in litigation/labor & employment/academia. I have the work experience and undergraduate credentials to do L&E work for the govt, a firm or a company once I graduate. My long-term goals are to go into academia if grades pan out, or start a solo L&E ADR practice once I gain enough experience.

I am currently interning at a corporate firm and find the work at least as palatable as what I did before. Granted, my hours are nowhere near what they'd be as a real associate.

My plan is to take the highest paying jobs during summers. I am an under-represented minority so there is a small chance I will be able secure a market-paying SA my first summer. After the first quarter/semester I plan to do some type of paying work during the year too.

Sounds like the collective wisdom is to take loans instead of using money in retirement accounts. I'm kind of surprised by this since it seems easier to rebuild assets than to pay down debt. Am I missing something?

 

OK. You didn't mention any of this in this thread (and I haven't seen your others). Since you're talking about a top 3 school and public interest work that makes things much better. First, because you will have a lot more options when you graduate. Second because they also have public service loan forgiveness programs that will pay off your loans if you do public interest work. With this information, if you are definitely going to work for the government or another nonprofit, I would borrow as much money as possible that meets the loan forgiveness program criteria, and then use your cash next.

Public interest work will be much more fulfilling than doing 100 hours a week of corporate stuff.

If you have $100k of debt and $100k of retirement account value, you aren't in debt. You have a $0 net worth. It's much easier to pay off debt than it is to go back in time and make retirement account contributions (i.e. you can't do it).

MLKnits

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Re: How Should I Finance Law School?
« Reply #23 on: June 17, 2015, 12:41:49 PM »
Thanks for the extra info, OP. You have a much more solid plan than most. I'd still generally advise against, on the grounds that if you're someone Harvard/Yale/etc WANTS, you can do literally anything else--better, brighter things!--buttttttt, the chance that you'll really harm your future by going that route is much slimmer than if you were headed to a mid-tier school with no good plan.

I agree that taking out the loans is better than pulling money out of your savings. You're so far ahead of the compound-interest game with what you have at your age, you'll be doing well even if you don't add to it for years because of the debt repayment taking up your spare income.

Good luck!

Dee18

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Re: How Should I Finance Law School?
« Reply #24 on: June 17, 2015, 01:19:03 PM »
Am I the only MMMer who is happy about having attended law school?  Perhaps it's because I only did private practice as a summer associate. I can recall one of my federal prosecutor colleagues saying to me, "can you believe they pay us to do this?" because we were having so much fun on a case.

gReed Smith

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Re: How Should I Finance Law School?
« Reply #25 on: June 17, 2015, 01:24:30 PM »
I like being a lawyer; I just hate other lawyers.  It would be a much better job if I never had to talk to another lawyer.

But, I can't imagine what else I would be doing right now if I hadn't gone to law school.  I actually turned down a scholarship at a tier 1 school in order to go to the 15th ranked school and graduated with $50k in debt instead of $0. Mistake! t14 is a weird cutoff, but it is true that no one cares that my school was 15 at the time.

Oh, and I don't think $40k debt is life crushing debt, but it probably isn't worth it if you have lower cost options.  The rankings aren't all they're cracked up to be.  In fact, going to a slightly lower ranked school in order to get a higher class rank may be a smart move to consider.
« Last Edit: June 17, 2015, 01:26:57 PM by gReed Smith »

MLKnits

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Re: How Should I Finance Law School?
« Reply #26 on: June 17, 2015, 01:41:19 PM »
I like being a lawyer; I just hate other lawyers.  It would be a much better job if I never had to talk to another lawyer.

Interesting; I'd say the exact opposite of this. Other lawyers are the best part of my job. But then, the family bar is typically a friendly sort (at least the under-60s)--I don't envy what my civil colleagues deal with. I see a lot of vitriol and sharp practice on my partners' desks, coming in from civil lawyers of all ages and stripes.

My ideal work day is chit-chatting with opposing counsel while we wait to be heard, having a nice contested motion, and shaking hands and wishing each other well as we head out.

Non-lawyers are great too, but let's face it: you have to explain your "war stories" in a way that tends to take the punch out of them. "So the judge was so appalled, he asked him to read the whole thing into the record--oh, sorry, I mean, read it out loud so the person who transcribes everything we say would type it out, uh, if a transcript was ordered. Which it won't be. It was more the principle of the thing. ... You know what, why don't we just talk about your cat some more?"

Cycling Stache

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Re: How Should I Finance Law School?
« Reply #27 on: June 17, 2015, 02:00:56 PM »
Bertrandhustle, if you're going to Harvard/Stanford/Yale, there's no way you're not going to go.  But what many of the posters are saying about the practice of law is right.  The takeaway for anyone considering an MMM-type existence is to minimize expenses as much as possible, plow summer earnings back into tuition and expenses, and avoid lifestyle creep.

It can be done.  I graduated from Harvard with $36k debt using those tactics, and I don't regret having become a lawyer.  But I would love to go back in time and capitalize fully on the big-firm salaries I made to get to financial independence rather than buying the fancy car, fancy house, and fancy clothes that almost every young lawyer gets sucked into.  And really, the much better option would have been to pick the job I wanted from the very beginning and live on less rather than go to the firm for prestige, money, etc. 

People are warning against law school because most lawyers are unhappy in their jobs.  I was as well.  But law school can be a good experience, you can get through it without racking up totally ridiculous debt, and there are a lot of great things you can do and jobs you can get if you don't need to make a ton of money or don't care about proving how many hours you can work to some law firm partner.

Good luck with it!  I now have what I believe to be one of the best law jobs there is, but I'm still posting on the MMM forum and making my spreadsheets for early retirement.  That's why you're getting so many comments about not going to law school! 

mrshudson

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Re: How Should I Finance Law School?
« Reply #28 on: June 17, 2015, 02:38:12 PM »
Want to add that the legal profession is entering unchartered territory, and is not a safe bet for financial/professional success that it once represented, especially when you add in not just the actual cost, but the opportunity cost of going to law school. Here's a TNR article on the issue that got passed around by my legal colleagues a couple of years ago:

http://www.newrepublic.com/article/113941/big-law-firms-trouble-when-money-dries

What is your undergraduate background in? If it's engineering or sciences, you might be able to work for the U.S. Patent Office who will pay your law school tuition (assuming you can manage the workload of being a Patent Examiner and studying). The program's been disappearing and reappearing, but last I heard it's back in. And they opened a new Silicon Valley office in San Jose, so I'd look into that.

tomsang

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Re: How Should I Finance Law School?
« Reply #29 on: June 17, 2015, 03:29:34 PM »
I hire lawyers all of the time with $100k to $250k of student loans.  They are all crying about their loans.  The stress and understanding that they have dug themselves a huge hole is on their mind 24/7.  In California they are coming out making $55k -$60k, the same as someone without the additional education.  The ROI is terrible.  You are in a different situation, but you should figure out the ROI and make sure you fully understand what you are giving up and what you are getting.  Those with a law degree are a dime a dozen. 

SeanMC

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Re: How Should I Finance Law School?
« Reply #30 on: June 17, 2015, 03:45:11 PM »
Coming out of lurker-dom to chime in.

I loved law school. It was enough time ago that it wasn't quite so expensive. I took some loans out to go T-6 instead of taking a full ride at T-1 (outside T-14) school with strings. This was the best thing I could have done for what I wanted to do (academia, if I had the grades). Being at/near top of my T-6 school, I was able to earn $$ during both summers & it led to the career I wanted. Then I paid off loans as early as possible. But I was on job market at time when there were many more hiring lines to fill and not nearly as many candidates with years of fellowships and publications waiting for the market to come back around.

No one else can know whether going to law school is the right call for the OP, but he sounds like someone who has considered what practice of law is like, what his options are, and how he wants to spend his time.

Here is what I would add:
As someone else has said, those first year grades matter a lot (and they are a lot harder to "game" the way you can as a 2L or 3L), so make that your priority above all else. However, you have no idea how you will do. Law school exams test a very specific ability that is not just how well you know the law. At a T-6 school, almost everyone has "tested well" in the past. That is how you all got there. A lot can happen with mandatory curves and often arbitrary section assignments (my "small" 1L section for one course had multiple future Supreme Court clerks in it and this was by chance).

What this means is that you need to have a plan A, plan B and a plan C based on how you perform.

Plan A is discovering that you can write your ticket anywhere. Then you just have to decide what you're really shooting for - private or public (and if it is a non-profit or government position, you do need to build that into your internship/externships, networking and plan for debt-forgiveness). It also might mean exploring whether you are serious about academia and what that looks like long-term planning. Tight now, it means getting a PhD or spending years in various VAPs and fellowships so you can publish, get paid little, and move frequently. In other words, a bit of a pipe dream.

Plan B is discovering that you are doing well enough to get a job that you'd be happy having, and then focusing your attention on making that happen. 

Plan C is discovering that you are not doing well enough to get a job that you will be happy with OR that there simply is not job you will be happy with that comes from the law degree. You need to do your best to investigate if this is so from Day 1. If and when this happens, leave law school ASAP. Do not pass go. Do not wait it out. Do not be fooled by sunk costs or thinking that people will view you as a quitter.

It is really important to allow yourself to try law school and still be willing to leave if it is not right for you or not heading in the correct direction. I think all the advice here makes it seem like once you start, you are committed to finishing. That is not true.

The other really important thing to think about is the indoctrination you will receive both in law school and as an attorney. Top law schools have a train that is marching you along to specific jobs. If you want something different, you will have to swim against the current. The schools depend on alumni giving and positive relationships and reputation with alumni that are making the big $$$.

There is a specific mindset about money and finances that will be prevalent among your classmates, professors, and future colleagues. There is a mindset of spending money to make problems go away because this is THE philosophy underlying much of legal practice. There will be expectations on the choices you can make for work-life balance that presume that you will hire other people to do things for you in your personal life rather than doing them yourself, because you will have the money and not the time. If you try to make the time or carve it out for yourself or even espouse the value that outsourcing "living" is not an acceptable value, again - swimming upstream against current. Like in many other professions or workplaces, if you mention your interest in being FIRE, it is likely to be viewed as demonstrating a "lack of commitment."

Not only is the profession like this once you graduate, law school WILL change you and affect your values. It is designed to do this, on purpose. It is important to recognize that this is part of the picture, and that you will need to set up constant check-ins with people who share your values so you do not feel isolated or frustrated (or brainwashed) just because you are entering this profession or learning how to analyze problems in a specific way.

I realize that this can come off as ominous sounding. I just feel that more people need to be candid about this aspect of law school, beyond the "how much debt, what job do you get?" question here.
 







Wilson Hall

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Re: How Should I Finance Law School?
« Reply #31 on: June 17, 2015, 04:34:20 PM »

LouLou

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Re: How Should I Finance Law School?
« Reply #32 on: June 20, 2015, 12:24:22 PM »

I am currently interning at a corporate firm and find the work at least as palatable as what I did before. Granted, my hours are nowhere near what they'd be as a real associate.


This makes me think that you should not go to law school at all.  Spending tons of money and years doing something you find "at least as palatable" as other jobs makes 0 sense.  And I say this as a happy lawyer!

Other things to keep in mind:
- Out of my close friends who went to law school, I was the only firm-bound one.  The rest went with the specific purpose of getting public interest jobs in various fields.  None of them, I repeat none of them, got jobs in the fields they wanted.  In fact, a few couldn't even get public interest jobs and work at firms or did doc review for more than a year.  (Hello unexpected loan repayments).
- Government jobs are affected by...the government.  Budget and pension crises? Lawyer layoffs and hiring freezes.  Shutdown? No paycheck for you.
- I was a 2013 grad.  Per ABA data, less than 65% of us have jobs that require bar passage.  You know, lawyer jobs.  Those are not good odds.
- Many young lawyers I know who got the precise jobs they wanted now really dislike those jobs.
- The legal market is in the midst of a major change and it's hard to predict how things will land.


My advice: think about whether you would still want to be a lawyer if had to take a lawyer job that you specifically don't want, or live in a city you don't want.  If you would still think it was worth it to get into debt (or raid your retirement), go to school for years, only to have a job in an area you are not aiming for (traffic tickets?), then go to law school.  I realized that I would think it was still worth it, so I went.