Saturday, September 17, 2011

Netflix Corner: Maxed Out

For those of you living with minuscule entertainment budgets due to crushing student loan debt (or any other kind of debt for that matter), leaving you chained to Netflix streaming or youtube on  the weekends, check out Maxed Out, a 2006 documentary that eerily predicts the collapse of the housing market, and the economy as a whole, after far too many years of access to easy credit.  A major portion of the documentary focuses on credit card debt, but it also touches on the real estate bubble, predatory lending tactics employed on college campuses, and interviews with some pond scum, aka "collection agents."  

This is not the sort of movie to watch alone at night, since it is quite dark at times (stories of two students with outrageous credit card bills who eventually committed suicide are included), and because we all know what happened just a couple years after the movie was filmed. 

On the other hand, there are some lighter moments that highlight just how valuable an education is when it comes to succeeding in the marketplace.  Listen closely at about an hour and five minutes in as a real estate broker who doubled her money during the housing bubble describes a "track" home and informs us that the "medium" price of a house is $268,000. 

I wish someone would make a similar documentary based entirely on student loan debt in the U.S.  It is truly frightening that many people carry student loan balances equal to or greater than a typical mortgage.

Any other movie suggestions that will keep people like me motivated to pay off their student loans early and stay out of debt permanently? 

Friday, September 9, 2011

How Many Doors Did Your JD Open?

For anyone who's bitter about high student loan debt and/or the dearth of (paying) legal jobs out there, check out this piece from Nando of Third Tier Reality, which sheds some unflattering light on the higher education scam.  It includes some sobering statistics regarding the glut of student loan debt in the U.S., the lack of available jobs that require advanced degrees, as well as the frighteningly inflated tuition prices some law schools are charging their "customers" these days.  

Also, if you feel like getting involved in protesting or sharing your views on the higher education scam, check out the upcoming protest scheduled to take place October 8th in San Diego, California. 

Wednesday, September 7, 2011

The Things You Only Read About

Ask Again Later by Davis, Jill A. [Paperback] (Google Affiliate Ad) 

Ask Again Later is Jill Davis' "chick lit" novel about a woman who suddenly quits her job as an attorney and goes to work for her father's law firm as a receptionist.  There are reasons for her drastic actions, which I won't spoil for you here.  The central themes of the book involve the main character's fear of commitment (to her relationship and to a career), and how unfinished business with our parents can sometimes keep us stuck in limbo.  

The book is entertaining in a fluffy, Cosmo's "Fearless Female of the Year" sort of way.  But I did have a little trouble with the main character's inability to take a simple phone message (it's as if the book would like us to think they only teach that in secretary school or something) and with the writing structure, which tends to be a bit pared down, even for chick lit.  But if you're up for reading about an attorney's brush with life on the other side, check it out. 


This is a terrific article by Phyllis Coletta.  She is a former attorney who quit the law in order to become a cowgirl.  It is truly inspiring and funny.  I would read it occasionally when I was still practicing law.  It gave me great comfort to know that people with her kind of courage and humor had been where I was and had successfully gotten out.  Thanks, Phyllis.  

What are some of the roadblocks keeping you from leaving the law?  What would you be doing if you no longer practiced?   

Tuesday, September 6, 2011

The Trap of Student Loan Debt, Part II: Do You Want to Get Out?

Many unhappy attorneys feel they cannot quit practicing law because of the enormous burden of student loan debt.  If you have been considering leaving the law for another field or to start your own business, paying off your student loans affords more opportunity to take risks (perhaps in the form of a lower-paying but more satisfying position), as well as the feeling of hope that comes from building a future, rather than paying for past mistakes.  

A little over a year ago, I found myself in the position of having left my attorney job for a lower-paying one, but still carrying a large student loan balance of over $100K (between my husband's loans and mine).  Since then, I have gained more control over my finances, and my husband and I have decided to take radical steps in order to pay off both of our student loans once and for all.  Before you begin your own journey out of student loan debt, you first need to ask yourself whether you really want out because getting out involves a great deal of sacrifice.  Let's talk a little bit about some obstacles that might be standing your way.

The Lawyer Lifestyle

When you graduate from law school and land your first attorney gig, one of the first things you will probably do is buy some new clothes.  I know I did.  I believe I spent about $800 in my first month as a new attorney on new suits, shoes, and blouses.  How sharp I must have looked while dying a thousand little deaths every time I logged onto westlaw and looked with dread at the number of cases I would have to read that day. 

Another expense many new attorneys take on is that of a car loan.  If only law schools offered a course like Personal Finance 101.  Perhaps I, along with many other would-be attorneys, would have learned the sheer stupidity of financing a depreciating asset.  Ah well.  I made this mistake, but not until I had practiced for almost three years.  Toward the end of my illustrious career, I financed a big, shiny new car in order to assuage some of my depression.  It worked for a little while, but once the new car smell wore off the leather, I was back to pouring myself glass after glass of alcohol when I arrived home in the evening. 

Some other attorneys from white shoe firms might even go out and join a country club or buy a boat, or some other such nonsense.  All I can say about the many trappings of the lawyer lifestyle is that if you want to leave the law for good, you first need to decide that you are not going to be a miserable workhorse the rest of your life. 

You Don't Understand the Difference Between "Want" and "Need"

Many Americans, lawyers and non-lawyers alike, equate their need for certain  luxury items with their need to breathe oxygen.  To name just a few examples:
  • cable TV (guilty)
  • smart phones (guilty)
  • restaurant lunches
  • gym memberships (guilty)
  • new cars every three years
  • a car for every member of the household over the age of 16
  • Starbucks (guilty)
  • "stuff" from Target (guilty)
  • the latest gadgets for the kids
  • vacations at Disneyland
  • stainless steel appliances
This list is certainly not exhaustive, but you get the idea. 

If you want to get out of student loan debt so you can leave the law, or just to have some peace of mind, you need to evaluate your lifestyle and start labeling things as "wants" and "needs."  In no time, you will see that most of the things in our lives are really just wants.  One way to start evaluating is to focus on what Dave Ramsey calls "the four walls."  This would be food, shelter, utilities, and transportation.  Anything beyond that is not a need.  (Clothing fits in there, too, but most Americans have an abundance of it.) 

One of the first things my husband and I cut out when we decided to get out of debt is cable.  For the time being, we get by on Internet (which he needs for his job), netflix streaming, and hulu.  We used to pay over a hundred dollars per month on cable and now we pay about $40 (which is mainly Internet). 

Another expense we cut was transportation.  We used to have two cars, but when we moved, we cut back to just one.  This may not work for everyone, especially if you do not have reliable public transportation where you live.  But you certainly do not need two car payments, or even one car payment, in order to get to work and back.  What we did was sell my husband's car, which was almost paid off, and we used the proceeds toward our emergency fund (about five months of living expenses in the bank).  When we sold our house, we used those proceeds toward the emergency fund as well.

As for my car, we have been making extra payments on it for the last five months and I am proud to say we just sent in the last payment a few days ago.  It is actually "our" car now, and it is enough for us. 

You Justify Student Loan Debt Because of the Tax Break

While some borrowers are eligible for a tax break on their student loan payments, please do not justify hanging onto these loans simply for the tax break.  A few considerations:
  • There are income limits on who can claim it.  (In 2010, the income limits were $60K for  individuals or $120K for couples before the credit was phased out.)
  • You can only deduct a maximum of $2,500 no matter how much interest you paid on your loans.  (My husband and I paid over $5,000 in interest in 2010, so the tax break didn't help all that much.)
  • Beginning 2013, you will only be able to deduct student loan interest for the first 60 months (5 years) of repayment.  Many people with advanced degrees are on 20-30 year plans (myself included).
  • Student loans are generally not dischargeable in bankruptcy. 

The Bottom Line

If you want to put student loan debt behind you, you need to decide you are not going to keep up with the Joneses, you are going to cut back on luxuries, and you are not going to chase a soon-to-be-obsolete tax deduction.  Ready?  Stay tuned for my next entry on how to start budgeting and make extra cash to put toward those loans.