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HarrySkywalker

Line of Credits - What I Wish I Was Told - Perspective from a 2nd year lawyer

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Hey everyone, 

Ever since I finished articling and started practicing, I can't help but think that I wish I had known more about how much and just how difficult line of credits are to pay back once you start working. If someone had sat me down and gave me a sober and honest take on the reality of the interest costs, etc., I'd like to think I would have spent less on my LOC and have been more cognizant of what all this means when it comes to payback time (that time comes a lot sooner than you think). 

I came across this great article posted by a friend that was one of the more honest takes on interest costs and timelines for repayment. I found the numbers used in this article to be on the low side ($54,000 spent on a LOC). Personally, and many of my friends who were on their own for law school, are closer to the $100,000 mark. Regardless, I found the article gave me a new perspective (I just wish I had read this 5 years ago). 

If you're starting law school, or at some point through it, YOU NEED TO READ THIS AND YOU NEED TO START THINKING WHAT ALL OF THIS FREE MONEY REALLY MEANS!!! I can't stress this enough. The money that you will have available to start paying back debt is much less than you think (taxes, deductions, living costs, etc.). 

I started looking at the site and noticed that it was started by two lawyers as well which makes sense given the amount of content on there specifically geared for young people/students/just starting their careers. 

If anyone has similar thoughts, please leave them below and let me know about your experiences. AND IF ANYONE IS IN LAW SCHOOL OR JUST STARTING, PLEASE FEEL FREE TO REACH OUT AND I'LL GLADLY CONNECT WITH YOU TO HOPEFULLY ANSWER ANY QUESTIONS YOU MAY HAVE.

Just trying to help people avoid making the mistakes that I did.

Article here: https://modernmoney.ca/personal-finance/professional-insights-what-does-law-school-really-cost/

Edited by HarrySkywalker
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Given fixed costs, how could you have spent less? Were you frittering away borrowed money on luxuries you would have forgone? What were these “mistakes”? 
 

I borrowed a significant sum to become a lawyer. One of the best decisions I ever made. 

With respect to the article: 

"If you haven’t been told already, someone will likely tell you prior to, or during your academic career, not to worry about the cost of law school because the profession is lucrative, and paying back debt will be quick and easy. It may be your financial advisor (as in my experience), your colleagues, your family or your friends. Similarly, once you begin practicing, you will likely be told not to worry about affording that new house, new car, expensive vacation, etc., again because of your high earning potential.

 

😆

Paying back six figures of debt will be "quick and easy"? I have not, during law school, or before, or subsequently, heard anyone say this. Ever. 

Edited by QuincyWagstaff
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I have a hard time finding sympathy for people surprised by the interest on their student LOC. The bank will literally sit you down and pull out a fun infographic showing you exactly how much the interest is going to cost based on how long you take to pay it back, then look you square in the eye and tell you the total cost of the loan if you take all 20 years to pay it back. If that's not enough to tell people "hey this is going to cost you" i'm not sure what is.

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Also, it's not a credit card for your vacation bill. It's financing for a significant life event and (in most cases) a significant change in career trajectory. Yes, debt is scary. But nobody expects to pay off a mortgage in 5 years. It's a long term financing and everyone needs to make a cost/benefit analysis of what that looks like. Keeping your LOC low to start with is a good plan, by minimizing non-school expenses (ie., keep that tab on student bar night under control). After that, if people want to pay it down faster, all the power to them. There are lots of way of limiting expenses and putting more towards clearing that debt. 

The article is just doing basic math that I would hope people are already doing for themselves. If they aren't, and this helps them focus on it, then I guess it is a good article. Also, I can't really tell how the author handled it but many of these types of analysis err by including general cost of living as a "cost of law school". Cost of living is basically fixed, law school or not, unless you were living with your parents before moving for school and would have continued living at home for those 3 years. Given this article is using 18k/yr on the LOC, I assume that's school only. 

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In other words, if you are bad at money management and repaying debt, be very careful with LOCs. Don't go to a steakhouse while you are in law school. Be prepared to put over 20% of your income aside for debt repayment after law school.

If you have dealt with major debt and repayment before (ex. a mortgage, business loan, etc), you'll be fine.

Edited by SNAILS

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