Bar News - May 20, 2015
NH Lawyers Upside Down with Debt
By: Dan Wise
Looming law school debt is a major factor in the lives of many New Hampshire lawyers who came into practice over the last 10 years. Debt of $100,000 or more influences their everyday decisions and clouds their view of the future.
The recent NH Bar Association Economics of Law Survey asked about the magnitude of law school debt, and part five of the survey report shows just how widespread this growing problem is among New Hampshire attorneys.
“The monthly student debt load is a significant difference between my generation and that of the baby boomer generation of lawyers,” said a 38-year-old attorney who pays more than $600 a month on loans, with a balance of more than $70,000. “The relatively high student debt, combined with other economic differences, such as the cost to buy a house, and comparatively low compensation, makes becoming a lawyer in New Hampshire today quite different than what it was in earlier times.”
Overall, the median amount currently owed among survey respondents is $68,000, which exceeds the median amount borrowed ($55,000). For the newest attorneys, the median amount owed exceeds $100,000. Due to the inability of many debt-payers to even keep up with the interest owed on their loans in the early part of their careers, the median amount owed of $130,000 for attorneys in practice three to five years was higher than the $120,000 owed by attorneys in practice for a only a year or two.
Of the roughly 715 attorneys who responded to the NHBA survey, 29 percent reported that they are still paying off law school debt. The median monthly payment is $500, with the top 25 percent of respondents paying an average of $800 per month.
Following the survey, a number of attorneys, including several who requested anonymity, responded to a query in the weekly NHBA e-Bulletin email newsletter about the impact of law school debt on their lives.
They described paying off their debt as a central focus of their lives, saying it affects everything from their grocery store budgets (Ramen noodles, anyone?) to the kinds of cases they take. The debt burden influences career choices and contributes to lateral movement by attorneys who, while otherwise satisfied with their circumstances, decide a bigger paycheck that pays down debt faster outweighs other considerations.
And while these lawyers are preoccupied by the size of their debt, often their older colleagues or employers are oblivious to its impact. But employers can afford to be oblivious, given the extremely difficult job market that has made getting a start even more difficult.
Rory Parnell graduated from law school in 2011, when the economic picture was just about the darkest. Fortunately, he was able to join his father’s practice, Parnell, Michels & McKay in Londonderry, where he practices today. He considers himself very fortunate to be practicing law.
He and his wife live in a small house and rarely take vacations. He drives a tired-looking 2005 Saturn sedan. And every month, he pays $1,000 combined for his student loans, including a small ($40) payment on an undergraduate loan, and two payments for law school – a consolidated private loan and two federal loans. And every month, because he refinanced his federal loans with an income-based repayment plan, the amount he owes increases.
Including the interest he’s accumulating, he will eventually repay a total of $200,000 on about $110,000 in student loans.
Still, he does not regret his choice of profession. “I pay what I can, and work hard to try to earn more money to pay more,” he says. “Yet, the simple fact is that while I made a choice and am happy with it, I will be paying for it for the rest of my life.”
Parnell’s situation is onerous but not atypical for lawyers entering the profession. Whether starting out as a first career or coming to the law later in life, beginning lawyers have in many cases borrowed in the six figures to obtain their JDs and then must balance their debt obligations with lower entering salaries, and the other expenses of raising a family, buying a house, and perhaps, paying for the loans of a professional spouse.
Lawyers who have been practicing for more than a decade may not fully appreciate the burden today’s tuition debt creates for new attorneys. Parnell may not regret his career choice, but he does wish older lawyers had a greater understanding of the financial circumstances that are different for lawyers who start their careers with the equivalent of a second mortgage to repay.
Then there are lawyers who came to the law later in life. “I still owe $85,000, and unless I pay it off early, I am scheduled to make my last payment at age 70,” wrote one lawyer who was admitted to the bar in the late 1990s at age 40. “For financial reasons, for the first 10 years after graduation, I had several deferrals for payments. Although I am now paying more than the minimum payment, I still think I will be 70 when I pay it off.”
Another later-in-life lawyer reported that she is determined to pay off the $91,500 debt she graduated with in 2010 in 10 years – “even if it means eating Ramen noodles.” Paying at least $1,200 a month, “the debt affects everything from where I work – not in the public sector – to the vacations I can’t afford to take, to the limited house purchase options I have. The debt load limits my ability to save for retirement and means I will retire several years later than most people.”
Some lawyers in the government or public interest sector are taking advantage of loan repayment assistance programs, but these are not universally available.
According to the association’s economic survey, median incomes for government lawyers tend to be on par with private practitioners at the start, but are less likely to rise as much over time. Some government lawyers have access to various repayment assistance programs aimed at retaining lawyers in public service or public interest positions.
The NH Bar Foundation, for example, annually makes IOLTA grants for student loan repayment assistance to staff attorneys for the major civil legal aid providers in New Hampshire, also IOLTA grantees. In the coming fiscal year, $60,000 is allocated for loan repayment assistance. These organizations say the repayment aid is essential to retain lawyers who have gained experience in civil legal issues for low-income individuals.
Parnell says that in addition to the gulf in understanding between generations, he’s frustrated that interest rates are so high for federal loans, and that deductions on student loan interest is limited to a measly $2,500 per year.
Parnell, however, remains an optimist. He has a strategy for eventually escaping his unsustainable situation of not keeping up with the interest owed on his loans. “I just try to keep my head above water, work as hard as I can, be active in in the bar, do pro bono, get better known, and grow my practice. Either you bust your ass to get a better income, or you’ll drown.”