By Ali Teske
BridgeTower Media Newswires
MILWAUKEE — “You’re set up for failure,” said Jaclyn Kallie as she reflected on her student loans.
An attorney with Gimbel, Reilly, Guerin & Brown, Kallie graduated from Marquette Law School in 2012. “I’ve been making payments for almost 10 years, but my loan amount has gone up,” she said as interest rates pile onto her initial loan balance of about $140,000.
This is the case for law school graduates as they earn their degree and a staggering pile of loans. According to the American Bar Association Student Loan Debt survey, 95% of lawyers took out loans with the average debt balance $164,742, including undergraduate loans at the time of graduation.
“My personal story is that when I got out, I tried to do the standard repayment for almost two years. I had $900 in interest a month. I was throwing a minimum of $2,000 a month to try and make a dent,” said Kallie. “It was pretty crazy trying to not spend money on anything — lowering my grocery bill, not going out. I wasn’t really living. I signed up eventually for the income-based repayment program.”
In recent months, President Joe Biden’s administration and the Department of Education has issued student loan forgiveness to certain borrowers. For example, $5.8 billion of federal student loan relief for 560,000 former Corinthian Colleges students. Biden announced earlier in June that the administration was closing in on a decision for more widespread forgiveness of $10,000 per borrower. It is unclear if undergraduate restrictions will apply to this plan.
“I don’t think at $10,000 forgiveness is going to change anything when it comes to lawyers in general because it’s such a small percentage in terms of the larger portion,” said James Miller, co-founder of bankruptcy firm Miller & Miller.
With the average student debt balance for lawyers topping over $160,000, dropping it to $150,000 isn’t going to move the curve on monthly payments, Miller and Kallie both agreed. Both attorneys referenced the income-based repayment system that law graduates most often sign on for.
“I have lawyers who request compensation packages that fit in with allowing them to have the lowest income-based repayment possible,” said Miller. “It doesn’t make sense for me to start paying them more if that increase in wages on the other side of things is going to increase their repayment more than the raise they are getting.”
Kallie echoed Miller’s point, saying “Part of the problem with this in the legal community, is that the tuition amounts keep escalating so significantly, but the average salary for new lawyers is the same it was a decade ago.”
With the legal industry’s hiring market remaining hot, 79% of firms reported hiring new lawyers from other law firms in the 2021 Bright Insight Survey conducted by Cushman & Wakefield’s Legal Sector Advisory Group. The number one factor hiring firms are using to recruit differently over past years is work flexibility to support work-life balance, 49% of respondents reported. But to Kallie, work-life balance is a luxury when student debt controls your career choices. She said that she left a previous firm that had a great work-life balance and company culture to seek out a higher salary, those considerations always in the back of her mind still today. She said former colleagues and alumni she still keeps in contact with left the legal profession altogether to chase a higher salary for loan repayment.
“Even the rising costs of life right now, even a competitive firm that gives you what used to be a raise or bonus that was in line with cost of living, they can’t keep up with it because cost of living is growing exponentially,” said Kallie.
Biden extended the student loan payment moratorium until August, a move first enacted by former president Donald Trump in March 2020. Since the first pause on repayments, a few major loan servicers have gone out of business and there have been various others that have seen lawsuits for deceptive policies.
“It’s become exceedingly apparent, as I talk to clients and lawyers, what they are able to do financially differently,” said Miller. “They are watching the news very closely when it comes to the Biden administration’s decision to lift the moratorium. They are all hoping that there will be a greater loan forgiveness.”
Current inflation and rising costs are impacting lawyers and their ability to repay their loans. Miller expressed concern on whether borrowers are going to be able to budget loan payments back into their income if and when the moratorium lifts.
“I fear that the mindset has changed from, you know, ‘I have to pay this back’ to more of an optional mindset which (borrowers) still have the legal obligation to do it. I’m looking at that $10,000 forgiveness to see if it’s a carrot dangled out there to encourage people to start paying the loans again,” he said. “The default rate once they come back is going to be very high.”
Miller indicated that he could see the Biden administration using the $10,000 as an incentive to make perhaps one year of payments and then allot borrowers the forgiveness amount.
Debt not only impacts the regularities of daily life spending, but it also impacts the mental health of the lawyers still carrying the weight of loans that may never be able to repay in their lifetime. The ABA survey did not provide specific mental health questions in relation to student debt, but it was the most-cited affect of student loan debt among lawyer respondents.
“It makes you question your life choices a little bit,” Kallie said. “I wish that someone would have had a real talk with me before I signed up for all this.”
