Financial Strategist for Lawyers | Biglaw Escapee | Speaker | Accredited Financial Counselor® helping lawyers find the fiscal freedom to pursue their dreams
Many of you may now know that I graduated law school with over $200,000 in student loans. What you may not know is that I took my time in paying them off. And this was an intentional choice. I started my career with a mix of private and federal loans and I did all I could to get those private ones paid off…but I took a different strategy with my federal loans. Those were all locked in at 1.75% interest, and the payments didn't cramp my lifestyle. I chose to use any additional funds to increase our investments, save up for our dream RV, the land we needed to start our vineyard, and really anything else in the world given the insanely low interest rate. I also had help paying down my federal loans for part of my career (thanks, SEC) and I remember more than a few colleagues upset they couldn't take advantage of that benefit because they had already paid theirs off. Now I'm not saying if you have the opportunity, interest, and financial priority that you should keep your loans...all those folks were happy to be rid of them! But what I am saying is that paying off your student loans as quickly as possible may not be the best financial decision for your situation. And the only person who should make that decision is you. There's no one-size fits all student loan repayment strategy, no matter what the blogs, pundits, and know-it-all finance gurus tell you. Because they don't know your situation. They don't know your career trajectory. They don't know your mix of federal and private loans. They don't know your other financial obligations. They just don't know. So you don't have to listen to them. There's a way to figure it out, of course, but there's so many factors that go into it. And some of them are emotional and not easily calculated. As an Accredited Financial Counselor who helps lawyers pursue their dreams, I carried around student loan debt, but believe me, it didn’t stop me from doing what I wanted to do. I understood and was perfectly confident in my choice. And that makes all the difference. If you want help on figuring out what attack plan is best for your personal situation click the link in the comments to see how we can get started and do this work together.
Math speaks for itself. I paid my 8.5 and 6.8 off as quickly as possible. My MA is at 2.75…that’s 25 year payment plan city for me! Even the 6.8 can be a bit iffy because over time in the market I would expect to do better than that, so I did make the choice to also max out my 401k while I still had some 6.8 left, but I paid the 6.8 down at an accelerated rate. There’s no guarantee with the market…a reason “past performance does not guarantee future results” is all over the place, so that’s when you have to bring in that comfort zone aspect. It would be so nice if all the interest was deductible regardless of income! I remember my first year out of law school I paid over $16,000 in interest. The tiny deduction was a joke. I wasn’t even in a high enough tax bracket back then for it to mean anything. Like, thanks for the latte.
Miranda Rollins
8mo
1.75%??? I could be debt free by now if that were the case. Mine range anywhere from 5-7%, and don’t get me started on the amount of $ I pay in taxes to boot.
Dana K.
8mo
1.75% damn... That's a whole different ball game. My loans were 5.5% up to 6.8%. I paid them off ASAP. I thought I was going to buy a condo (until unemployment ruined that dream 😭), and I didn't want to have any debt. So, as you said, Jessica, it's a personal decision everyone needs to make. But you must have a plan.
So many lawyers need to hear this message Jessica Medina ❤️ there is so much guilt that goes around regarding student loan debt. I definitely felt guilty that by year ten I still hadn’t paid off all my law school loans. The guilt never helps to pay off the loans and instead, makes you want to hide from these obligations. I love that you take the guilt out for your clients so that they can more easily pay off those loans and not hide from them.
1.75% interest?!?!?!?! a dream.
I love that you are discussing how you need to tailor a financial repayment plan that works with your lifestyle. When you don't feel resentful, it makes it so much easier to stick to a financial goal. Your clients are so luck to have you in their corner!
Heather Moulder
8mo
This is a really great point. Sometimes, we think the thing to do is to pay every piece of debt down NOW. Which makes it hard to live. That's not always the best plan and it will depend upon the money you're making, the lifestyle you want, how much debt you feel ok with and so on. Each person is different.
Rho Thomas
8mo
Your story underscores that common saying: “Personal finance is personal.” Also, can we go back to the days of 1.75% federal loans? The rates these days are outrageous.
Olivia Vizachero
8mo
I love you laid this out to demonstrate that there are different approaches and it's all about finding the one that makes the most sense for you and being intentional and decided about that plan. So good Jessica Medina
Financial Advisor for Busy Attorneys | Founder of SharpEdge Financial LLC
8moYou are 100% right that there isn’t a one-size fits all plan. On the flip side of your story, I am working with a young couple who has over $300K of combined student loan debt. They both work in big law, so they currently have high income, but they expect one of the spouses to leave big law at some point while they start a family. Their goal is to pay off their student loan debt (or a large portion of it) before going down to one big law salary. Even though their interest rate is not extremely high (average around 6%), they prefer paying off their debt early and take that burden off their shoulders even though they know they could be saving more money elsewhere. I’m a numbers guy, so I sometimes have to stop and ask myself, what does the client want 😅.