A few years ago, the dean of a law school asked me about my goals for my TPG students. I instantly responded that I want my students to avoid becoming “broke ass 30 year olds.”
To that end, I not only help students increase their scores, but I also help them play the law school application game. Further, I now want to help you understand the financial impact of your law school decision as most of you face this difficult life decision.
Projected Student Loan Need
Cost of Attendance. Almost all law schools have a widely published Cost of Attendance estimate (COA). To find this estimate just google “Baylor Law Cost of Attendance” to find the information, which the law schools occasionally break down by year. Insert those number into a spreadsheet as in the first image below.
Financial Resources. Develop a list of your scholarship offers, personal savings, and other education funds that you will use for law school. Use your spreadsheet to subtract these numbers from the total COA.
Student Loan Need. Once you subtract the financial resources, you will have your projected student loan need. Good News: No matter how large this numbers is, almost everyone who applies to law school will qualify for loans to cover this amount – no matter how large. However, this gets some of you in trouble as you choose a very expensive law school and you live large on student loans while in law school.
Note. The “Total Loans” row represents the projected loans needed after accounting for personal and other financial resources devoted to law school education.
Loan Impact
Once you have established total projected loan need, you need to determine the typical monthly payment on this loan. Use an online amortization calculator with the following parameters to calculate your monthly payment.
- 10 Year Term
- 6.5%
- Principle = Total projected loan need
- Set all other parameters to zero.
Note. The above terms are common the last time I checked. If anyone has updated information, then please let me know. Also, you can always refinance via a private bank once you have established a strong credit history.
Note Re Loan Repayment Assistance. Many law schools and even government agencies tout their student loan repayment assistance programs to help those in public interest law. Almost all of these programs underwhelm the beneficiary once real life begins and payments come due.
Monthly Payments. Once you have entered the information above, the online calculator will produce your monthly payment.
Take Home Pay
Too many law school applicants do not understand the impact of payroll deductions on their future take home pay. Even many Big Law lawyers have become shocked by the impact of Uncle Sam and other deductions. Please remember that you will be paying your own rents, buying your own food, and maybe even trying to save for retirement.
With all these variables, any estimate of your future take home pay will err in some way. However, you should still create an estimate of your future take home pay with the following online take home pay calculator. That calculator allows you to adjust several variables. You should NOT set the following variables to zero for the payment calculator. Set these to $1,000 per month (total) because you want to save for retirement and have access to health care.
- Retirement Contribution
- Health Insurance
- Dental Insurance
The three estimates below represent typical starting salaries for various types of legal jobs. Although Big Law starting pay is very standardized, salaries for the other sectors vary wildly. The starting pay that I used for public service is probably higher than the average.
Please do not rely on my estimates below. You need to research the starting pay for the types of careers that you desire and enter that data in the online take home pay calculator.
Note. All three samples below have Illinois as the state. You can change that setting because states have different tax systems.
Typical Big Law Starting Pay
Typical Medium-Sized Firm Starting Pay
Typical Public Service Starting Pay
Debt v Career Goals Feasibility
Now that you have the data that you need, start subtracting the monthly loan payment from your take home pay to determine your monthly living allowance as an young attorney. Then, consider the cost of living in the location that you want live in and practice law. Also, consider your own financial inclinations and remember that almost all of us develop more sophisticated (expensive) tastes as we grow past our lower 20s. Natty Light and André Champagne will not suffice down the road!
I hope that you see that certain debt loads are completely incompatible with certain career aspirations – think public service.
Other Financial Variables
Other variables can affect your financial position four years from now.
- Big Law Summer Jobs. These jobs tend to pay very well, enough to mitigate some of the costs of law school.
- Increased Scholarships. If you finish your first year very highly ranked in your law school class, most law school fear that you would transfer to a higher ranked law school. So, most law schools have certain scholarships they offer or increase based on very high end first year performance. However, do not count on this!
- Decreased Scholarships. Some law schools still have minimum GPA or class rank requirements that students must maintain to keep their initial scholarship offers. You should know of these requirements before making your law school choice. Law schools caught significant bad press several years ago for reducing a very high number of scholarships by the second year. So, almost all law schools have eliminated the minimums or significantly reduced them, making this less of a concern than it was.
- Wardrobe. Most undergraduates do not have an adequate lawyer wardrobe and acquiring one can get very pricy.