The Hidden Cost of Law School Loans

For many attorneys, student loans are just a fact of life. Law school isn’t cheap, and most lawyers graduate carrying six figures of debt. But while student loans may seem like a necessary evil, they’re also a financial anchor that can impact everything from career choices to homeownership and retirement savings.

Ignoring the problem won’t make it go away, and aggressively throwing every spare dollar at debt may not be the smartest strategy either. The key is balancing repayment with long-term financial goals so that loans don’t derail financial stability.

The True Cost of Law School Debt

A typical law graduate leaves school with an average of $150,000 to $200,000 in student loan debt. Factor in interest rates between 6% and 8%, and the real cost of that education climbs significantly. Over a 20-year period, an attorney with $200,000 in debt at 7% interest will pay nearly $335,000 before the loans are gone.

That’s a major financial burden, and one that attorneys must manage carefully. The real problem isn’t just the number—it’s the impact that debt has on financial decisions, career opportunities, and long-term wealth-building.

How Student Loans Affect an Attorney’s Finances

Many lawyers don’t realize the ripple effect student debt has on their financial future. Here are some of the hidden costs of carrying large loans:

1. Delaying Retirement Savings – Many attorneys prioritize loan repayment over 401(k) contributions, missing out on valuable employer matches and compound interest.

2. Limited Career Flexibility – Attorneys with large loans often feel trapped in high-paying but high-stress positions because they can’t afford a pay cut.

3. Homeownership Delays – High debt-to-income ratios can make qualifying for a mortgage more difficult.

4. Tax Burden from Loan Forgiveness – Certain loan forgiveness programs, such as Income-Driven Repayment (IDR) forgiveness, come with a tax bomb—any forgiven balance is treated as taxable income.

Smart Strategies for Managing Law School Debt

The goal isn’t just paying off loans—it’s making sure they don’t cripple your financial future. Here’s how attorneys can take control:

1. Refinance or Consolidate for Lower Interest Rates

If your loans are private or you don’t plan to pursue forgiveness, refinancing can save thousands in interest. Many lenders offer rates as low as 3-5%, which can significantly reduce monthly payments.

• Best for: Attorneys with stable income and good credit

• Avoid if: You’re pursuing Public Service Loan Forgiveness (PSLF)

2. Consider Income-Driven Repayment (IDR) Plans

If your goal is to keep payments manageable, an IDR plan like PAYE, REPAYE, or IBR bases payments on income and family size.

• Best for: Attorneys working in government or lower-paying legal roles

• Avoid if: You can afford to pay off loans aggressively

3. Maximize Public Service Loan Forgiveness (PSLF)

PSLF forgives student loans tax-free after 120 qualifying payments while working for a government agency or nonprofit.

• Best for: Attorneys working in public defense, government, or nonprofits

• Avoid if: You plan to stay in private practice

4. Use Bonus Money and Raises Wisely

Each year, attorneys receive bonuses and salary increases. Instead of letting lifestyle creep eat up that extra income, allocate a portion toward student loans.

• 50% to loans

• 30% to investments

• 20% to discretionary spending

This ensures debt is shrinking while wealth is growing.

5. Contribute to Retirement While Paying Loans

A common mistake attorneys make is focusing solely on loans while neglecting retirement. Even if you have debt, never skip free money from an employer 401(k) match.

• Contribute at least enough to get the match

• Increase savings as loans decrease

6. Set a Payoff Deadline and Stick to It

Without a firm strategy, loans can linger for decades. Decide whether you want to:

• Pay aggressively in 5-7 years (if you want debt gone quickly)

• Stick to IDR or PSLF (if you qualify for forgiveness)

Having a concrete plan removes uncertainty and stress.

Final Thoughts: Balance is Key

Student loans don’t have to control your financial future, but ignoring them or focusing on them at the expense of wealth-building is a mistake. The right approach depends on your career path, financial goals, and personal risk tolerance.

By being proactive, strategic, and balanced, attorneys can pay off debt efficiently while still building financial security for the future.