Author Topic: Paycheck to paycheck on 230k in Biglaw  (Read 9932 times)

Wexler

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Paycheck to paycheck on 230k in Biglaw
« on: July 25, 2013, 09:23:53 AM »
I de-lurked just to post this, which I think is basically a case study in the golden handcuffs.  The associate worked at a six-figure plus salary for about 8 years, but couldn't make house payments once her severance ended.

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

In May, I spoke to a former Mayer Brown associate who joined the firm’s finance group out of law school in 2001 before transferring to the pensions department so she could work saner hours. The associate, call her Helen (not her real name), survived two rounds of layoffs, then got pregnant in 2009. Helen had previously felt she was on track to make partner—her performance reviews were consistently strong—but she began to worry as she was preparing to go on maternity leave. “We would have these group meetings where we’d talk about billable hours, how down they were for our group. I knew that, if there was another layoff, we were going to be hit.”

Helen’s son was born on March 19, 2010. Just before he turned three weeks old, she received the call she’d been dreading. Mayer Brown gave her the rest of her maternity leave, plus another three months pay as severance. It was, under most circumstances, a fair offer. But Helen was in a bind. Her husband was a stay-at-home dad, and the couple owned a condominium in downtown Chicago. “I sent out a ridiculous number of resumés,” she says. “If I didn’t have a job lined up by time the time the severance ended, I didn’t have a way to make payments on my house.” She landed two or three interviews and no offers. “The market was so bad in the spring of 2010. Not a single law firm was hiring.”

Inevitably, the bank foreclosed on her condo. She and her husband relocated to the Michigan town where he grew up, and she eventually joined a local firm. Her annual salary when she left Mayer Brown was $230,000. Last year she made $40,000. It was barely enough to put food on the table and clothe her children, much less keep up with tens of thousands of dollars in law school debt. “There’s probably a bankruptcy in our future. I don’t think there’s a way out of it,” Helen told me. “In ten years, hopefully we’ll be financially recovered, we can buy a house, have a credit card again.” Before we hung up, I pointed out that the legal market had improved since 2010. Why not look for another fancy job in Chicago? “There’s no way I would go back to Big Law,” she said. “I’m doing a lot of criminal law now. I love it. It’s originally what I’d intended to do when I went to law school.”

Rebecca Stapler

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #1 on: July 25, 2013, 09:37:50 AM »
She apparently doesn't work in bankruptcy law, or else she'd know that bankruptcy is not going to get her out of her law school loans. :/

oldtoyota

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #2 on: July 25, 2013, 09:55:31 AM »
Wow. What terrible news. The law school gravy train appears to be over, which I realized when even friends who had attended fancy law schools could not get jobs at firms.

Mayer wasn't the only company to keep spending in the face of a recession, unfortunately.


Tony_SS

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #3 on: July 25, 2013, 10:00:04 AM »
When you get in bed with the fed govt, using student loans, be warned. They are modern day debtor prisons.

SwordGuy

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #4 on: July 25, 2013, 10:15:41 AM »
When you get in bed with the fed govt, using student loans, be warned. They are modern day debtor prisons.

That's because so many people defaulted on their student loans before they did that.

The options were not to let people default, cancel the entire student loan program, or let people continue to steal from the taxpayers by freely defaulting on their loans.  There is no repo option on knowledge learned.

I don't like people stealing from me and I want people who need the loans to get them, so I'm cool with the current process.

 

Donovan

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #5 on: July 25, 2013, 10:24:08 AM »
Makes me rather glad I changed over to computer science my freshman year.  I almost joined in on this little law party.

I think it's odd that they don't go into her finances more.  She was clearly doing some things very wrong if she was working at a high salary for almost 9 years, topping off at $230K, and yet still had student loans to pay off when she was fired. I know law school is expensive, but that just seems like terrible planning to me.

Tony_SS

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #6 on: July 25, 2013, 10:30:26 AM »
When you get in bed with the fed govt, using student loans, be warned. They are modern day debtor prisons.

That's because so many people defaulted on their student loans before they did that.

The options were not to let people default, cancel the entire student loan program, or let people continue to steal from the taxpayers by freely defaulting on their loans.  There is no repo option on knowledge learned.

I don't like people stealing from me and I want people who need the loans to get them, so I'm cool with the current process.

When the bank loans money it must assume the risk, I don't believe in taxpayers having to bail out banks because they made took risks.

It's voluntary, so that's cool. I just think that private banks should be doing student loans, the cost would be a lot cheaper to go to school since they now they have the fed govt backing them, they raise their prices.

Jamesqf

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #7 on: July 25, 2013, 11:08:24 AM »
When you get in bed with the fed govt, using student loans, be warned. They are modern day debtor prisons.

If you misuse them, yes.  If you use them sensibly - only borrow the absolute minimum, major in something you can earn a living at, and pay them off as soon as possible after you graduate - then they are a useful tool.  I certainly wouldn't have been able to attend college without loans, and without attending college I wouldn't be making a more-than-decent living doing work I enjoy.

Tony_SS

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #8 on: July 25, 2013, 11:34:15 AM »
When you get in bed with the fed govt, using student loans, be warned. They are modern day debtor prisons.

If you misuse them, yes.  If you use them sensibly - only borrow the absolute minimum, major in something you can earn a living at, and pay them off as soon as possible after you graduate - then they are a useful tool.  I certainly wouldn't have been able to attend college without loans, and without attending college I wouldn't be making a more-than-decent living doing work I enjoy.

Same here! Mine was a good investment in my future. People just need to be careful what they invest in.

My brother got his degree in sports medicine. He sells roofing equipment now. Kids that borrow this money and go into college automatically think they will be able to use their degree's. So its borrower beware for sure.

Wexler

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #9 on: July 25, 2013, 12:12:18 PM »
Makes me rather glad I changed over to computer science my freshman year.  I almost joined in on this little law party.

I think it's odd that they don't go into her finances more.  She was clearly doing some things very wrong if she was working at a high salary for almost 9 years, topping off at $230K, and yet still had student loans to pay off when she was fired. I know law school is expensive, but that just seems like terrible planning to me.

This is exactly my thought.  Her situation was described as being so knife's edge that the moment her severance stopped, they could not make house payments.  Thus, they didn't even have a one-month cushion with a salary of almost a quarter million a year and a long, high-earning work history.   Regardless of the amount of the student loans, which is not given, this is the main mystery for me.  Even if the student loans are huge, I just can't believe that they didn't have any liquid savings whatsoever at that income level.  We already know that her husband stayed home with the baby, so they didn't have daycare expenses.

I agree with the caution on excess student loans, but I am speculating that the main driver of this situation described here is 1) lack of savings and 2) lifestyle inflation.  If the family had been more diligent about savings, they could have come out ahead even after paying back a big chunk of the student loans.

oldtoyota

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #10 on: July 25, 2013, 12:52:05 PM »
Makes me rather glad I changed over to computer science my freshman year.  I almost joined in on this little law party.

I think it's odd that they don't go into her finances more.  She was clearly doing some things very wrong if she was working at a high salary for almost 9 years, topping off at $230K, and yet still had student loans to pay off when she was fired. I know law school is expensive, but that just seems like terrible planning to me.

This is exactly my thought.  Her situation was described as being so knife's edge that the moment her severance stopped, they could not make house payments.  Thus, they didn't even have a one-month cushion with a salary of almost a quarter million a year and a long, high-earning work history.   Regardless of the amount of the student loans, which is not given, this is the main mystery for me.  Even if the student loans are huge, I just can't believe that they didn't have any liquid savings whatsoever at that income level.  We already know that her husband stayed home with the baby, so they didn't have daycare expenses.

I agree with the caution on excess student loans, but I am speculating that the main driver of this situation described here is 1) lack of savings and 2) lifestyle inflation.  If the family had been more diligent about savings, they could have come out ahead even after paying back a big chunk of the student loans.

Exactly. And the family did not treat paying off her loans as an emergency.


Jamesqf

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #11 on: July 25, 2013, 01:23:05 PM »
Same here! Mine was a good investment in my future. People just need to be careful what they invest in.

Yes, indeed.  And we need to remember that the student loan horror stories come from just a small fraction of those who've taken out loans.  It's like pit bulls or airplane crashes: the vatst majority of friendly pit bulls or flights that land safely aren't news, just as it isn't news when people pay off their loans on time (or even early) without undue stress.

Tony_SS

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #12 on: July 25, 2013, 01:29:40 PM »
Agreed, it was her lifestyle that was the problem, not the student loan.

dragoncar

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #13 on: July 25, 2013, 06:04:52 PM »
Holy crap where did the money go??

AlmostIndependent

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #14 on: July 26, 2013, 02:53:02 AM »
I have a REALLY hard time feeling even a little bit sorry for these people.

lisahi

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #15 on: July 26, 2013, 09:08:47 AM »
The article says she has "tens of thousands" of dollars in student loans. I make a fraction of what she did at Big Law as an attorney for the Government, with $120,000 in student loans, yet I'm doing just fine paying those back. So, I agree as well, it's not the loans, it's the lifestyle. They obviously had no liquid savings. Their condo was probably extravagant. They probably ate out a lot, spent without regard to money, etc. And it looks like they didn't consider selling the condo and moving before the home was foreclosed, which given their circumstances (no savings and 3 months to find a job) would be the only logical thing to do.

Self-employed-swami

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #16 on: July 26, 2013, 09:26:11 AM »
I love how Saul Goodman is in the pictures, on the original article!

MissStache

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #17 on: July 26, 2013, 09:30:23 AM »
I have a REALLY hard time feeling even a little bit sorry for these people.

YEP

dragoncar

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #18 on: July 26, 2013, 01:04:55 PM »
The article says she has "tens of thousands" of dollars in student loans. I make a fraction of what she did at Big Law as an attorney for the Government, with $120,000 in student loans, yet I'm doing just fine paying those back. So, I agree as well, it's not the loans, it's the lifestyle. They obviously had no liquid savings. Their condo was probably extravagant. They probably ate out a lot, spent without regard to money, etc. And it looks like they didn't consider selling the condo and moving before the home was foreclosed, which given their circumstances (no savings and 3 months to find a job) would be the only logical thing to do.

OT, but by "paying them back" does that mean makin more than the absolute minimum income based payments?  Cause someone like you is a perfect candidate for loan forgiveness.

ender

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #19 on: July 26, 2013, 05:51:14 PM »
This is exactly my thought.  Her situation was described as being so knife's edge that the moment her severance stopped, they could not make house payments.  Thus, they didn't even have a one-month cushion with a salary of almost a quarter million a year and a long, high-earning work history.   Regardless of the amount of the student loans, which is not given, this is the main mystery for me.  Even if the student loans are huge, I just can't believe that they didn't have any liquid savings whatsoever at that income level.  We already know that her husband stayed home with the baby, so they didn't have daycare expenses.

I agree with the caution on excess student loans, but I am speculating that the main driver of this situation described here is 1) lack of savings and 2) lifestyle inflation.  If the family had been more diligent about savings, they could have come out ahead even after paying back a big chunk of the student loans.

Even worse, they didn't bother to change or adjust their lifestyle for the 3+ months they maintained the 230k income (not sure how long her maternity leave was).

It sounds like they lived in complete denial for those months. And currently, it sounds like.

AlmostIndependent

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Re: Paycheck to paycheck on 230k in Biglaw
« Reply #20 on: July 26, 2013, 06:08:16 PM »
I wouldn't wish financial trouble on anyone, but seriously WTF? You are obviously not mentally challenged if you make it through law school and get yourself hired by a law firm. I don't understand how you can do those things and then get yourself in such a shitty financial position. I just don't get it. Am I missing something?