Soon to be sad worker ant

December 10, 2008 9:26 AM

How can/does (student) debt constrain life choices?

I rather arbitrarily did the law school thing and now have in excess of $100,000 debt to my name. As my gpa is below a 3.0, I will not be making a salary on graduation that is significantly higher than had I not gone to ls (although right now I am still without a job). I would consider 50k/yr to be high.

I often hear people say to people considering law school, "oh you may want to be a [low-paying social justice type lawyer] now but with $100k debt you'll have to take a corporate law job!" My question is, what is the mechanism of this forcing? As far as debt goes, I can only pay back what I have coming in. It doesn't seem the banks or whoever are going to be forcing me to live in a slum or eat Ramen noodles, nor do I see how they would even have that power.

Assuming the banks are complete a-holes, according to this website the most they can do legally is withhold your federal income tax returns and garnish 15% of your disposable income.

Does anybody have any experience in this area? Has anybody been forced to drastically reduce their standard of living due to student loan debt? Are lenders generally willing to work with you?

posted by norabarnacl3 to work & money (16 comments total)

Mostly the 'force' resides in the desire to pay back the loan according to the agreed-upon terms, either out of a sense of duty/honour or in order to avoid a tarnished credit history -- i.e., good luck getting a loan for a home, a car, or to start up a practice of your own after defaulting on your student loans. Also, this may not apply to you, but some jurisdictions' bar associations will not look favourably upon (for example) personal bankruptcy as an indicator of your ability to manage your clients affairs (e.g. escrow accounts) professionally.
posted by onshi at 9:42 AM on December 10, 2008

They can also destroy your credit making it impossible for you to get a car loan, mortgage, or credit card.

Incidentally, while those big cushy Firm jobs sound great, they don't factor in the looooooooooooooooong hours or the expensive lifestyle expectations imposed by the Firm.

Hey, didn't you go to law school? Shouldn't you be able to research bankrupcy law on your own?
posted by Pollomacho at 9:42 AM on December 10, 2008

Meh. Same story-ish.

Now I work as a grantwriter for an environmental nonprofit and I make $30k/year. I'm happy. I enjoy going to work every day. And so what if I have a huge debt hanging over my head. They can't haul me off to debtors prison because I don't make enough money (especially since it is unlikely that I'd find much better in this economy - even working in the legal profession!).

I live in a large east coast city where home and car ownership are both unnecessary and economically ridiculous to contemplate. So it isn't as if they are foreclosing on those opportunities for me by marking down my credit rating.

I'm not very concerned about this. To me, the most vital fact is that I am happy, I love my work, and I make enough money to live alone and eat regularly. What more do I need?
posted by greekphilosophy at 9:52 AM on December 10, 2008

Just some quick ideas that come to mind: Take it one payment at a time. Don't brood over the full sum, the amount of time it'll take to repay, interest, etc. Always be clear and up front with the lender. Don't evade payments or think they won't find you. If you find the lifestyle of less-is-more then avoid NP. You are already doing research about the law here, and you are a lawyer --explore the issue, negotiate, have fun with the project. My personal experience is that I've started over financially about three times now. I've paid tens of thousands in debt in short periods of time. Only time will give you perspective. Life can deal harsh blows but the most important thing is to not evade but confront, fight back by being honest and smart. Consider the life challenges of some of your heroes/heroines and see this is just money. Give time to time. Learn to not fear money or lack thereof.

http://yourmoneyoryourlife.org -- read just the intro
http://www.simpleliving.net -- it's the cool new thing
posted by ezekieldas at 9:59 AM on December 10, 2008

It's a bit different in the UK, as student loans are centrally managed by a single, government-appointed company, and repayments are done automatically when your income reaches a certain level, but here's my perspective.

Whatever your income level, the best possible thing to do is create a 'set it and forget it' repayment schedule, and just forget about it. Do the work you want to do first of all, then everything else will flow from that. If you choose to do lower-paying work because you're interested in it, then it will take you longer to repay your loans. Or you can choose to go for corporate work, put extra income toward repayments and clear a chunk of it (and probably gain lots of useful experience) then go into lower-paying work.

Myself, I'm planning on a severe reduction in pay sometime in the next ten years. In the meantime, I'm stashing away money like a fiend with the aim of paying off my student loans entirely and saving a stack of cash for the lean years in the future.

Your loans will limit you as much as you let them. The only thing you shouldn't do is not pay them back at all (because it's kind of a dick thing to do, and it'll fuck your credit rating for years). Put it this way, the bank would rather let you pay 'em off over ten years on a low salary than have you renege on the lot.
posted by Happy Dave at 10:09 AM on December 10, 2008

Collections agencies are also notoriously relentless about hounding people who have completely stopped paying. If you owe a large amount of money, it makes sense for the creditor to spent large amounts of time and money trying to make your life miserable.

There are no such things as debtors prisons any more, so you can't get thrown in jail, but you have a personal responsibility to pay back loans that you have taken out. As a lawyer you should understand the importance of legal agreements and acting ethically. Even if you don't absolutely need to make sacrifices in your lifestyle, you should do whatever is possible to fulfill your obligations and pay back the money that helped you get an education.

I live in a large east coast city where home and car ownership are both unnecessary and economically ridiculous to contemplate. So it isn't as if they are foreclosing on those opportunities for me by marking down my credit rating.

But you may run into problems if your next landlord checks your credit before letting you sign the lease. And as onshi said, many employers check credit ratings when hiring people, especially for jobs that deal with anything related to finance.
posted by burnmp3s at 10:12 AM on December 10, 2008

For a lot of people, debt is one of those things that limits options. For many people, those options are ones they've already discarded so the lack of them doesn't matter. For many people, the obligations this debt puts on them are real and non-malleable either because they have a personal/ethical relationship with debt or because they've entered into it with another person who may have other restrictions (think co-signing on a loan, if your co-signer has a house or car or cares about thir credit rating). For many people as well, they may not care about things like a mortgage or a car NOW but could anticipate caring about such things in the future. In the long-range future, planning for things like a family may also be something that is hindered by overwhelming debt.

So, for example, if you owe a lot of money and have a regular payment plan to deal with, this means you have a lot less flexibility in your work options. You HAVE to remain employed to be able to make payments or risk defaulting and suffering consequences that may be embarassing or impractical. I don't have student loan debt, for example. This means I can say "fuck you" to all my jobs and just walk away if I have enough money in the bank to support myself for the forseeable future. No creditors will chase me down. Literally, nothing will happen to me. That sort of freedom matters to me, a lot, but may not matter to you much at all.

As another example, suppose you want to get married. Your debts automatically become the debts of your spouse [in the US, at least in the states I am familiar with] and masive debt might be something that the two of you didn't see eye to eye on.

Having a debt obligation may make saving for long term things -- kids college fund, house down payment, big spendy vacation, medical bills of yourself or your family members -- nearly impossible or something that you have to accomplish in squirrely quasi-legal ways. For many people this is not a genuine option for how they want to run their lives. Other people don't care as much.

So I think generally speaking, it's the sort of thing that matters if these are the sorts of things that matter to you. I think many people make assumptions that even if they don't care about a particular thing like a car or house loan NOW, they might in the future and they try to make less-restrictive choices in the present to prepare them for a future that might potentially be more restricting.
posted by jessamyn at 10:17 AM on December 10, 2008

Your debts automatically become the debts of your spouse

Actually, no, unless they were incurred during the marriage. See community property on the NOLO site. I'm not responsible for my husband's student loans, nor he for mine, though I'm sure collection agencies would make every attempt to make us think so, should either of us default. (IANAL)
posted by desjardins at 10:52 AM on December 10, 2008

Like others said, start out by taking it one payment at a time. They usually base your monthy payment amount on your income. The less you make, the less you'll have to pay each month. You can get hardship deferrals, too, but interest will keep accruing during those times.

Your earning power will likely increase over time, and so will your ability to pay more at a time on your loans. It's not like you have to pay it all back immediately.

It's my understanding that with some student debt, if you get a job with the government (including things like teaching), there are more opportunties for loan forgiveness/deferrals than if you're in the private sector.

Don't let this ruin your optimism for your future. A LOT of people have student debt, you're not alone in your situation.
posted by fructose at 11:19 AM on December 10, 2008

Don't ask me how I know this, but if you just ignore them, they will not only track you down, they will track anyone (or at least anyone whose info you included on the paperwork) who can shame you into paying down. There's nothing like a call from your mom asking why the loan company called your aunt about your non-payment. That said, (at least direct loans) student loan people are somewhat understanding if you're upfront with them.

With federal loans at least, the nice thing is that they give you plenty of options on both how to repay and when. If you're not making much money, it's usually pretty easy to get your loans deferred for a few years (though usually you have to renew each year). There are also payment plans available that let you pay less now, in exchange for paying more later.

As far as how the debt effects your life. Between my wife and I, we have a little less than 40K in student loans left to pay off. Our payments (though my wife is trying to pay the loan off quickly) were as much as our rent was earlier this year. If we didn't have to pay our student loans, we could afford a second car, a nicer apartment, or to save more towards a house.
posted by drezdn at 12:05 PM on December 10, 2008

Lenders are definitely willing to work with you. Look into the available payment plans -- there are some graduated payment plans which are quite gentle during the first years of the loan. Also, it's worth noting that you may defer repayment on your loans if you are a full-time student; I've known people who always take a full load of classes at a small college (in addition to their work) in order to avoid triggering repayment.

Lastly, there is such a thing as student loan forgiveness. As a lawyer, you have a particularly great option: if you are interested in spending ten years working in a public service position, and you can afford to make loan payments at 15% of your discretionary income during that time, you can get the remainder of your loans forgiven. Other debt forgiveness programs include the Peace Corps and the Navy.
posted by vorfeed at 12:40 PM on December 10, 2008

I feel for you. Our son went to automotive technical school, which costs as much as a private college, but without the advantage of useful government loans (something about the tech school not being on a traditional semester/year schedule...I forget. All I know is the government loans only covered a drop of the cost.) He had to resort to higher-cost private loans and came out 30k in debt into a career that doesn't pay very well at all, especially in this economy.

So, he's working the night grille at Steak n Shake to make the loan payments. If anyone's hiring custom upholsterers, please let us know.

Oh, and, because we had to co-sign the loans, if he defaults, they come after mom and dad.
posted by Thorzdad at 1:03 PM on December 10, 2008

I had a roommate who worked as a stripper in a lesbian strip club and then did some shifts as a dominatrix to pay down $90k in law school loans. (this was 10+ years ago when $90k was even scarier).

it drove her nuts that she owed that much money. she wanted to do small-town law, and she couldn't. when I say "couldn't" it meant that when she looked at her monthly expenses, such as rent, food, utilities, phone (this was before cell phones), she had almost nothing left if she worked at ye old mom and pop law firm (and she was a roommate in a shared house, not like she had a lavish lifestyle). she had to work a law job she didn't think much of to make a wage that she viewed as livable.

so she took the mom and pop job and she took some drastic measures to pay the debt down further with the non-traditional second jobs (until it got difficult to appear in court since there were one or two regulars).

she wanted it done quicker. so she did. she's now happy, owns a house, married, and is practicing the kind of law she always wanted to.

walking away from student loans when you're perfectly healthy, sentient and able to make a decent living is bad karma. if you were ill, if you had a sick child or spouse or parent, if there was some horrible circumstance that was a significant burden, i'd feel for you. I mean, you filled out the forms. you went to classes. you don't have a real excuse here for not paying it back. you could have stopped going to law school at any time.

i didn't have student loans, but i made some business decisions that put me in a position where one day i was literally at the point where i was going to be driving my car down to the "we pay cash!" place in order to make rent. i got out of it. i have debt to pay, and it seems like it's going to take forever, but i am a free human who made choices and that's the breaks. i took a chance on myself and invested in myself and it didn't turn out the way i wanted it to. you invested in yourself as well, also with suboptimal results. you still got the education. you can't take it back.
posted by micawber at 4:21 PM on December 10, 2008

No suggestions but I'm in the exact same place you are. I would consider 50k this time next year a blessing. I think the companies will work with us you if you have some kind of income and show some interest in repayment. You can't repay what you dont have, and they should be willing to extend the terms to 30yrs, give you a few forbearances, etc. If worse comes to worse, making even a small payment will help you more than simply walking away.

Long-term, you still have good career earning potential. Crappy law school grades don't doom you to a life of making 35k a year- there are plenty of successful lawyers who weren't even in the top half of their law class. A few years of networking and building your professional skills/reputation can easily put you right where you thought that BigLaw job was going to before you realized what a load of horseshit they fed you at admissions and how much of a joke OCI actually is for most people. Trust me, Im counting on it too.

Also, start hoping (or lobbying) that Obama supports repeal of the 2005 bankruptcy reforms.
posted by T.D. Strange at 9:43 PM on December 10, 2008

"nor do I see how they would even have that power"

They have the power to ruin your credit history/score and make it difficult or impossible for you to ever buy a house, car, get a credit card, qualify to rent at many places, qualify for some jobs, etc.
posted by Jacqueline at 8:38 PM on December 11, 2008

I was not fortunate enough to get a high-paying job and I had student loan debt that I still had to pay. I enrolled in grad school to get a deferrment, but lost my job during grad school, was unsuccessful in job-hunting, and I ended up with still more student loans which eventually came due. I will be living with my parents for the forseeable future.
posted by bunky at 10:55 AM on December 13, 2008