Every time I look up the statistics, the average lawyer is graduating with more student loan debt. If you’ve graduated law school in the past three years, chances are pretty high that you’re dealing with a significant student loan burden.
I have readers write to me fairly frequently with questions about how to handle their debt. It’s no longer surprising when I come across a couple with a combine debt load of $350,000 or higher.
This makes me feel pretty lucky to have only incurred $190,000 of debt myself and, more importantly, to have paid it back and banished student loans from my life.
But I always encourage and applaud those that have done the reckoning and tallied up the debt.
You can’t pay it back until you know what you owe, so it’s important to take the first step on the long journey of student loan repayment. Eventually you’ll get to the point where they are paid off too.
Here’s a few things you can do to beat the Student Loan Debt Monster:
(1) Add it all up
Fear is simply your brain trying to deal with the unknown. I promise the reality is a lot less scary than you think. If you don’t know how much you owe, head on over to the National Student Loan Data System so you can see every federal loan outstanding. You’ll have to do the digging on the private loans yourself.
Once you get the data from the NSLDS, paste all of the information in a spreadsheet along with key information like your account number.
This is truly the first step to paying off your loans and if you haven’t done it, you’ll feel much better once the monster has been defined.
(2) Decide which path to pursue
You probably already know the answer to this but every borrower only has three ways out of student loans: (1) forgiveness, (2) repayment or (3) death. Let’s put aside the third option and focus on forgiveness or repayment.
If you’re pursuing forgiveness, then you’ll probably be doing it under Public Service Loan Forgiveness or an income-driven repayment plan like IBR, PAYE or REPAYE.
PSLF appears to be straight forward – just work for 10 years in public interest and you’re done – but we’re finding out all of the time that it’s really more complicated.
This means that you need to pay close attention to the PSLF program to ensure that it will work for your particular situation. And most importantly, fill out and file the PSLF Employment Certification Form each year.
(3) Refinance those loans!
If you’re not pursuing forgiveness and intend to repay the loans, there’s a compelling case for refinancing them in the private market so that you can save thousands of dollars of interest.
I’ve written about student loan refinancing for over a year now and am still amazed at how many lawyers are willingly paying 6.8% interest when they might qualify for a rate as low as 2.25% (you can even check rates quickly “Kayak” style by using a tool like Credible). On a $100,000 of debt, the savings could be over $4,500 a year. That’s a pretty big chunk of change to leave on the table!
Most of the lawyers that aren’t refinancing cling to the idea that they want to keep the federal loan protections “just in case” something happens in the future and they need to switch to an income-driven repayment plan.
While each individual needs to weigh the pros and cons, $4,500 a year strikes me as a pretty expensive insurance policy for keeping around your federal protections.
Since student loans are unsecured debt, it’s not like the refinance companies can do anything if you stop paying besides trash your credit anyway. And, if you’re in a position where you can’t make payments, does your credit really matter? At the point you’ll have bigger problems to deal with.
(4) Boost your debt repayment
I know this will sound strange but I made a debt repayment chain when I was paying off my loans.
I hung it up from the loft second floor so I could see it every day.
While that may sound extreme, it felt good to have a physical representation of my debt and it felt twice as good each month when I cut up certain chains and threw them away.
Sometimes a physical object is all you need to focus your attention and give yourself the confidence that you’re making progress each month.
The debt chain wasn’t some magical solution to repaying my student loans, but it did give me motivation to throw extra money toward the debt.
I cut up the last link on December 25th. I doubt I’ll ever forget that day.
(5) Save those raises
If you want to accelerate your debt repayment, an easy way to do it is to make sure all raises go toward paying off the student loans.
Since paying off your loans is usually a multi-year effort, you should have the opportunity to take advantage of several raises along the way.
By the time you’re done paying off the debt, you’ll have an added bonus of suddenly finding yourself with lots of extra money coming in each month.
Saving your raises has the double benefit of helping you build wealth.
Good luck and godspeed on slaying the student loan debt monster!
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He is always negotiating better student loan refinancing bonuses for readers of the site.