Is Debt Enslaving You?

Kent Anderson posted an article on this subject on Bankruptcy Law Network.  Working in the bankruptcy area, and having been a consumer bankruptcy attorney for many years, I have always worried about the nondischargeablilty of student loans on law school graduates.  I have placed too many attorneys in bankruptcy in the past, only now student loans are through the roof because of massive increases in tuition and a decline in federal aid other than loans.  Unless you are rich, or your parents are rich or very dedicated to your cause and are willing to sacrifice, it is almost impossible to get through law school without debt.  Kent Anderson's point is that the way in which student loans are collected, and the fact that they are not dischargeable subjects us to involuntary servitude.

In Texas, an most places, if you default on your law school student loans, not only can you have your income tax refunds and salary garnished, the Texas Bar will revoke your license to practice law in the state.

What I have noticed in recent years is that it is this debt service that often discourages lawyers from going solo.  Why?  Not only do they have the fear of not making ends meet for a while, but they are overly concerned about being placed in a position where they cannot service their student loans.  Many of these loan repayments today are the size of house payments and they are for almost as long.

I truly think the worst thing about student loans is that lawyers are afraid to leave jobs in which they are under compensated, in which they have few benefits, or in which they are stuck practicing law outside of their interest or concerns, because of the fear of how they might not be able to service their student loans.

I am not sure how to solve the problem.  The laws and the economics are simply out of control.  I, for example, struggle mightily to pay my children's college tuition and book, including those of my oldest daughter who is in law school, precisely because I do not wish to see them inhibited or harassed in any way in the future.  Whether I can continue to do so is always a question because it takes about a third of what I have been earning.

But, the truth of the matter is that debt limits your options.  My daughter had the opportunity to go to Japan for a year and work before beginning law school.  She would have likely been denied this opportunity if she had student loans because they would have become payable and would have taken up almost all of what she made, leaving her nothing on which to live.

This is why I have advocated for my children to attend state colleges and universities.  It is also the reason that I have encouraged all of you potential law students to carefully consider the value aspects of a law school before agreeing to attend.  How much is the tuition?  How much are the typical living expenses in the are in which the school is located?  What is the bar passage rate?

As far as a solo practice is concerned, however, I would not like you to feel inhibited by your student loans.  I would remind you that all jobs are commission jobs (with the possible exception of some government jobs).  If you, as a lawyers, do not perform or make money for the law firm, you will be out the door eventually.  Then what?  Successful law firms only pay you a small percentage of what you make for the firm.

The Third Wave practice of law tries to teach you that it is possible to keep most of what you earn and how to succeed with little in the way of investment or overhead.  Hopefully, it allows you to make less money than what you would at a traditional firm, but take home more to pay things like student loans.