my basic question is this: How do I manage my federal student loan debt (~$200K) while maintaining the flexibility to take a lower-paying job (say, $100K) in government or business in two or three years? I like my job, but the golden handcuffs are very real -- I do not want to be trapped as a corporate lawyer, and interesting opportunities may come along sooner rather than later.
Hey there JD!
I am said "wife" from ioseftavi's post, above, and also the person trulystashin mentioned. I love seeing fellow biglaw associates on MMM because I feel like biglaw life and culture is so skewed towards making people feel dependent on their jobs - the golden handcuffs you mentioned. We had HR people tell us at orientation, "your free time is so precious - live walking distance from the office," and "You're going to work so much. Use the money we pay you to hire someone to clean your apartment or to send your laundry out."
The fact is, you do work a lot, but the best way to be able to NOT work like that forever isn't the far-off carrot of a partnership down the line - something you don't really seem interested in anyway - it's to avoid becoming dependent on the salary. You're going to get tons of great advice from people here about how to allocate your badass resources or manage the interest rates on your debt. I agree with the priorities you're gleaning from this thread.
(2) Refinance
(3) Max 401(k)
(4) Build a modest emergency fund, maybe $10-20K?
(5) Plow into loans
The single most important thing I would add here is
SNOWBALL. Pay the absolute minimum on every loan except the one with the highest interest rate. Sock every cent you can manage every single month into the one with the highest rate until it's dead. Then repeat with the next highest rate loan. Check out
www.whatsthecost.com for a calculator that will show you how much you will save over your repayment term by doing this. It is absolutely staggering. Further, even if you don't pay them off completely during your tenure in biglaw, when you leave, you'll have MUCH lower principal and the principal you have will cost a lower weighted average interest rate, making the remaining debt easier to pay off on a lower salary.
The second most important point I want to make is that the best way to avoid golden handcuffs is not to allow yourself to shift into thinking that you "need" the luxuries people will tell you that you deserve because you work so hard. Avoiding the "why am I working this hard if not to afford the things that I want?" pattern of thinking is crucial. For me, the easiest way to do that was to set an extremely high monthly loan repayment number. I chose a repayment goal and eliminated that money from what I considered my "discretionary" income. Right now, that number is about $5,000 of my $7,700 (though I built up to that, starting at $1600 and adding until it felt a little tight). After I pay my rent and other fixed expenses, I still have around $1500/month just for my living expenses. That's a lot of money, especially by the standards set 'round these parts. And by practicing living with $1500/month of "fun money" I'm avoiding the pitfalls that befall the coworkers who slowly expand their cost of living by getting the blue apron meals or the equinox memberships with the personal trainers and the etc etc, and find themselves wondering every month where all their very-hard-earned money went. I'm going to finish paying off my $110k of loans in about two weeks. For me it's a mindset shift. On my 30 minute commute to the outer boroughs (or 10 minute, reimbursed cab ride if its after 9), I think about how freedom is the greatest luxury for a biglaw associate. Most of the stuff my coworkers spend their money on is the illusion of freedom (conveniences that free up a few minutes here and there). When my loans are gone, I will be free to take a job that pays less than half of what I make now without having to adjust my standard of living. That's pretty great.