Monday, February 9, 2009

Law Firms Freeze Salaries

The NY Times talks about salary freezes at law firms:

I found the section on legal salaries illuminating:

According to the National Association for Law Placement, 16 percent of the class of 2007 law school graduates employed full time make $160,000 or more, while 38 percent make $55,000 or less.

If you do the math, 46% of new lawyers make between 55K and 160K. Assuming most mid-sized and small law firms pay around 70K starting, 84% of new lawyers probably make between 25K and 70K. If you're a law school student, remember those salary numbers when you're taking out loans and dining out. Cut back on expenses while in law school, and you'll have an easier time paying off debt if you don't land the big firm position or the big money position right away.

I managed to pay off my loans fairly soon after law school because I practiced self-denial religiously. For example, I ate PB&J almost every day in law school and for a year after law school. I also didn't go to Starbucks or Peet's more than once a month while in law school. Anyway, I haven't had a PB&J sandwich in a long time. Like the 99 cent Jack in the Box chicken sandwich I ate all the time while at UC Davis, it tastes like poverty--disgusting and dry. But these days, I go to Peet's and drop three bucks on coffee almost every day. It doesn't sound like much, but if I hadn't denied myself the good things in life while in law school, I'd still be eating PB&J and drinking fountain water for lunch and dinner.


Anonymous said...

What does "fairly soon after law school" mean? Two years? Five years?

How much debt were you in? $20,000? $50,000? $100,000? $150,000? Paying off a $20,000 loan in a couple years is doable if you're working at a decent paying job. But paying off $150,000 in a couple years is impossible unless you inherit some money or something like that.

What was your living situation? Did you have your own place? Did you share with roommates? What was your rent? Or did you live at a relative's house where you didn't have to pay any rent?

All this makes a difference how long it takes to pay off student loans.

K_Yew said...

This is in response to the above comment. I lived with a relative and did not have to pay any rent; however, even if I had to pay 500/mo for rent, I would have still paid off my loans in the same time period. The first few years out of law school, all I did was work. I didn't spend much time at home, so it made no sense to pay much rent or get my own place.

Anonymous said...

You only partially answered my question about how much debt you were in. The reason why I'm asking is that I'm thinking of going to law school.

I'm in my mid-thirties and debt free. I have no kids and no obligations. I was laid off back in June.

The job market is bleak. I've sent out hundreds of resumes and only have gotten a handful interviews. Nothing has panned out.

Because my savings is dwindling, I need to find a new plan of action. I took the LSAT and scored quite well. I also had top grades as a undergrad. So getting in law school shouldn't be a problem.

I don't want to get into a lot debt. I want to try to get as many grants as possible with little loans as possible. By little I mean less 50 grand if possible. I figure the lower my debt load the faster I'll be able to pay it off.

Do you think this is realistic? How long do you think it would take me pay off $50,000? Was this what you paid off or was it less or more?

K_Yew said...

To answer your question, I think I was in debt around 75K when I graduated from Santa Clara Law School. My debt load was lower than average for two reasons: 1) a partial scholarship; and 2) I worked while in law school, which enabled me to make payments on my loans during the time I was enrolled.

Working part-time at a small law firm my third year helped a lot. I applied almost all my wages to my loans. My first year, however, I didn't find a legal job. That summer, I ended up working in Montgomery Wards making about $10/hr loading heavy items into customers' cars. Even that small hourly wage helped keep my loan obligations lower, and it also helped psychologically. Once loans get to a certain level, they seem unreal, which makes it harder to focus on paying them off. I was lucky never to reach that psychological breaking point.

Keep in mind, I went to a private school, so I had no access to state grants--if you can get into a public school, like King Hall or Boalt, you get access to grants, which can reduce your debt loan even more.

One important note about loans. I avoided private bank loans, which was a huge advantage. I can't remember the name of the government loan now, but there was one particular loan program that gave me a very low interest rate, with no accrual during law school ("Perkins" loans?). If you can get into a work-study program, that will also reduce your debt load. (I was unable to gain acceptance into a work-study program.)

Even with grants, however, it's going to be hard to keep your debt load below $50,000. First, books and bar prep courses are very, very expensive. Most law students don't just buy the required books--they also buy Emanuel's, flashcards (esp for Property Law), and hornbooks. Here's one example of a study guide I helped write:

For me, hornbooks were the biggest expense, but they were worth every penny. In any case, remember that books and other publications will be a very large expense. BarBri and PMBR courses will also cost you thousands of dollars.

Second, stress causes people to do funny and expensive things. I saw many of my peers spend lots of money on alcohol and other de-stressing activities, including ill-advised Vegas trips. If you use the gym and exercise to de-stress, you will be okay, but not everyone has that discipline. Personally, I played so much basketball, I joke that my time in law school was basically a self-financed basketball scholarship program. Even so, playing basketball is inexpensive--going out to the bar every night adds up, especially if you want to meet female companions.

I hope this helps. You sound like you have your head in the right place, and I am sure you will do well. Keep in touch, and let me know if you have any questions.