Law school is billed as a “safe” bet but I’m telling you – don’t go to law school without a financial plan! When I looked at law school tuition prices recently, I was shocked. Prices have doubled since I went to school 10 years ago. And even when I was in school, the tuition prices and student loan loads were burdensome. Meanwhile, BigLaw salaries (the highest salaries a law graduate can expect when she graduates) have only increased slightly.
The rising cost of law school tuition should give any potential law student pause. My last post touched on how the rising cost of college should encourage more students to think critically before attending – and the same is true for law school.
What I hope you’ll find by the end of this post, is that even if you end up with a high salary, attending law school is a risky investment. That doesn’t mean you shouldn’t go, but you must go in with open eyes and a financial plan.
The Best and Worst Case Scenarios
|Low Salary||High Salary|
|Low Loans||Low Salary, Low Loans||High Salary, Low Loans|
|High Loans||Low Salary, High Loans||High Salary, High Loans|
I tried to work out whether paying list price for law school could still make sense mathematically, living in a big city. Obviously the best case scenario is having a full-ride scholarship and a high salary (top-right). The worst case scenario is having high loans and a low salary (lower-left). I think we know the best case scenario is good, the worst case scenario is bad, but the other scenarios are still up for grabs. I’m going to deal with the lower-right scenario – high salary and high loans. For my hypothetical, this is a graduate who plays full freight but ends up with a BigLaw salary.
At T14 law schools, between 36-84% of the class receive grants, but the vast majority are for less than half of tuition. I don’t want to sugarcoat it – a lot of students will not receive any financial aid and will pay full freight.
Granted, if someone can make it on a BigLaw salary, that doesn’t mean that those with lower salaries will also make it. BUT if those with BigLaw salaries are struggling, those with lesser salaries will struggle even more. If the bottom right is struggling, the whole left side should be worried. This post is for those people and for those planning to be them.
The Best Case Scenario with High Loans
How I Arrived At These Numbers
This is a hypothetical 20-something single lawyer, who we shall call Pisa. Pisa works in BigLaw and has no dependents. She received no scholarships or financial aid for law school and she graduated with average college debt. She went directly from undergrad to law school and thus hasn’t made any progress on her college loans. To come up with this budget, I was using average numbers for an average middle class single person (not a high-income person) and rounded DOWN where I could. For more details, see below.
This number represents Pisa’s first year’s income, including bonus. Most BigLaw firms pay a standard rate and the first year bonus is pretty standard. Pisa does not have time for side hustles and does not realize any other significant income.
Law School Debt ($3,823)
A law student can expect to pay between $82,773 tuition for three years at an in-state public school and $147,285 at a private school. These numbers are based on averages and are actually on the low side. For instance, most of the top 10 law schools are hovering around $65,000/year and the rates rise every year. Thus, $195,000 is the low-end just for three years of tuition at one of these schools. Pisa went to one of these schools. She did not get any financial aid.
Pisa spends $20,000/year on living expenses during law school – which is on the low end, particularly if attending law school in an expensive area. Let’s say she got a roommate, and had minimal expenses. Let’s say she worked at a nonprofit her first summer, she has a part-time job during law school, and she makes a BigLaw salary her 2L summer to ensure that she can live on $20,000/year for three years.
Thus, Pisa graduates with debt totaling $195,000 + $20,000 x 3 years = $255,000. This debt earns interest at 6.8%.
I’m estimating Pisa, always the go-getter, wants to pay off her student loans in 7 years rather than the full 10. After all, she will likely leave BigLaw and move on to a lower-paying position, perhaps in a smaller law firm. To do this, she will make payments of $3,823/month or $45,876/year.
College Debt ($420)
Average student loan debt after college is $37,172. Pisa went straight through from undergrad to law school and hasn’t paid any money towards her college loans yet.
These loans are at an average rate of 4.5%. Pisa wants to pay these loans off in 9 years, instead of the standard 10. To do this, she will make payments of $420/month or $5,040/year.
The average rent for an apartment in Washington, DC is $2,233. Rents in New York City or San Francisco would be much higher. And yes, I know one can save money by having a roommate, but Pisa wants to come home to an empty apartment. I know I love having my own apartment and when you’re making $200k, this seems like a very reasonable expense.
Transportation ($542/month post tax for car/cabs and $100/month pre tax for metro)
Average car ownership costs are $8,469/year or $706/month. This includes a car payment (about $400), insurance ($100), registration ($12), gas ($94) and maintenance ($100). Pisa lives in the DC-area where it’s likely that someone would own a car, but also use public transportation and take cabs. I put the total transportation cost as $8,200 accounting for all of this – $6,000 for a car, $1,200 for public transit (pre-tax money), and $500 for cabs.
$6,000 is about the cost of owning and maintaining a 3-year old Honda Accord with parking at your apartment ($600/year or $50/month for parking). A Honda Accord is not a luxury car, but a solid, reasonable one.
An estimated monthly spend on food in DC is $471/month or $5,600/year. Lawyers tend not to have much time to cook or shop for food and urban singles love eating out and getting coffee. It’s true that Pisa’s law firm might cover some costs if she works late but I don’t think it will make that big a difference to her bottom line.
Home Expenses ($333)
During Pisa’s first year, she’s furnishing her first solo apartment. For her home, $4,000 annual expenses might include a monthly maid service ($1,800), renter’s insurance ($120), random decor purchases like towels, sheets, pillows, candles, a new duvet or comforter, etc. ($580), cleaning supplies ($100), and maybe one piece of furniture like a new mattress, a new couch, or some end tables and lamps ($1,400).
I’m putting about $4,000 for the year for Pisa’s travel and vacation expenses. Let’s say Pisa flies home to visit her family three times a year – over Thanksgiving, Christmas, and one other time ($1,000). She goes on one one-week vacation ($1,500), attends five weddings or bachelorette parties or long weekends (about $300 each time for flights and hotels). She turns down other wedding or bachelorette party invites because she doesn’t have time or it’s not in her budget.
Clothing Expenses ($300)
The average person spends $161/month on clothing (though women tend to spend more). $161/month = $1,932 so $2,000/year is right in line with being average and is on the low-end for a highly-paid lawyer creating her first work wardrobe. Then I added $500/year for dry cleaning, detergent, mending, tailoring, etc. and $1,100/year on shoes and accessories. That comes to $3,600/year or $300/month.
When I was thinking of being a lawyer, I imagined having an investment purse. Those things cost $2,000/each so that’s clearly not feasible on this budget.
Personal Care ($300)
This includes soap, haircare, skincare, makeup, styling tools. This also includes any services like haircuts, waxing, blowouts, massages, mani/pedis. For highly-paid women, it can be easy to blow this budget on one ridiculously expensive magazine-sponsored skin cream or a few blowouts, but on this budget, Pisa has to show restraint.
The average monthly cost for utilities in the Washington, DC area is about $100/month. Internet is somewhere between $50-100. I put utilities at $200month.
I don’t know about you but I always have random irregular expenses that I can’t quite put into categories. Things like postage, books, impulse buys, unexpected fees, tools, tax prep, dating, new tech etc. I’m estimating Pisa spends $125 on these expenses.
Pisa spends on Christmas or other holiday gifts, birthday gifts, give to some charities, etc. It amounts to $125/month. She would like to give more but feels that’s all she can afford at this point while paying off her debt.
In a big city, you have limitless options for expensive entertainment. I’m assuming Pisa is a pretty chill entertainment spender. She has some streaming services ($20/month), sees a monthly movie ($15), magazines ($10/month), and then goes to two cheap social or networking events a month ($30 each).
So many people are going to say “you can just run outside for free!” I run outside. I biked to work. I still think physical fitness is so important. I belong to the local rock climbing gym where I also take yoga classes because climbing outside is terrible on the east coast and I hate doing yoga by myself. Boxing classes have also become popular – and are a great way to release pent up tension from work.
Anyway, stop judging all of Pisa’s choices. =D Even if she’s making a home gym, this is the time when she has the most startup costs – some free weights, a yoga mat, some exercise clothes, some drop-in exercise classes etc. Or maybe Pisa wants to take a class to learn improv, or a foreign language.
I pay about $50/month for 2GB of data on GoogleFi. I assume that a law student probably didn’t have a ton of money to upgrade her phone during law school, so she would want a new phone. Thus, I included $600 to buy a “new to her” phone. This is enough to buy a refurbished iPhone X. It’s not the latest model, and it’s not new, but it should last a few more years.
This is just a snapshot of this young lawyer’s life. Her salary will increase dramatically over the next few years, but her expenses will also likely increase. If she’s 27 when she starts at BigLaw, she might get married and have children in a few years. Pisa is a smart cookie and knows she wants to plow as much money into loan payoff and savings now when she doesn’t have dependents so she has options later on in life.
A $200,000 Salary Doesn’t Go as Far As One Would Expect
This is the best case scenario budget. I know you may be thinking, there’s a lot of fat to cut in that budget! Pisa isn’t scrimping, but her choices aren’t lavish either. And you have to realize that first-year associates in BigLaw do not have a lot of time to grocery shop or coupon. And there’s a little bit of entitlement to have some fun when you’re earning $200,000 and are young and live in a big city for the first time !
You can see that the weight of her loans sucks up most of Pisa’s paychecks. And even if Pisa makes a lot of good decisions, she doesn’t have a lot of leeway to make big mistakes. If she takes a salary cut, she would have to cut some of her expenses. Because Pisa only saves less than $2,000/year, there isn’t a lot of room to dip into savings. (She could cut her 401k contributions but I wouldn’t recommend it at such a high salary level. You pay quite a lot of taxes at this income).
So does this mean forgo law school altogether? Not necessarily. You just need a plan.
Don’t Go To Law School (Without a Plan!)
Maybe the plan is getting scholarships. Maybe the plan is working and saving. Maybe the plan is being born wealthy. =D My point with this post is to show that a high salary doesn’t mean you are set for life. You have to anticipate your total loan burden and figure out how you will be able to live on your salary while paying those loans back
I would recommend you prepare for the worst case scenario (good practice for being a lawyer!). Prepare for higher tuition prices – because they rise every year. Prepare for higher living costs, because you might move to a more expensive city and your city’s costs will likely increase. And prepare that you’re young and have the world as your oyster – you want to be able to have some fun, be able to get married, start a family, move across country or take other opportunities. It’s not all doom and gloom – so long as you prepare!