Vol. 39 No. 2
By G.M. Filisko
G.M. Filisko (firstname.lastname@example.org) is a lawyer and freelance writer in Chicago.
Law school is not for the financially faint of heart. But that does not mean you have to mire yourself in debt that will dictate your every move for years to come. With careful research, planning, and diligence, you can shrink both large and small school expenses—and even lay the groundwork to build wealth in the future.
SLASH BIG EXPENSES
One of the most effective ways to push down the cost of law school is to slash your tuition. Sound impossible? Afam Onyema is proof that it is not.
Onyema fully expected to graduate from Stanford University Law School in Palo Alto, California, and step right into a high-paying law firm job. But Onyema, the son of a Nigerian couple who immigrated to Chicago, changed his plans after he got immersed in developmental work in the African country. “As I learned more about the situation, I had to make a decision between working for a law firm or continuing the work I was already engaged in,” says Onyema. “The opportunity to make an impact and the need was too great, and I decided to work on this full-time.”
After graduating in 2007, Onyema and his father cofounded The GEANCO Foundation in Los Angeles, whose mission is to develop and manage world-class medical, educational, and athletic facilities in Nigeria. Onyema’s decision came at great financial sacrifice. He turned down a $160,000-a-year job and now earns roughly a third of that salary. However, smart moves during law school eased Onyema’s financial pain.
“It is very important for people to think about money even before they step foot on campus,” says Onyema. “Once they get that acceptance letter, they are excited and feel honored, so not a lot of negotiation is done beforehand.”
But negotiate Onyema did. “Stanford offered me $2,000 per year of fellowship money,” he explains. “But I was getting offers from other law schools as high as $20,000 and $30,000. I felt I was leaving so much money on the table. So I called Stanford’s financial aid office and said, ‘I love Stanford, but I have these other offers.’ They said, ‘Send us the award letters so we can confirm them.’ The day after I sent the letters, Stanford sent me an offer of $20,000. Imagine if I had said I did not want to rock the boat!”
Is it too late to negotiate now that you are on campus? “I would still take a shot at it,” suggests Onyema. “It is important the minute you get to school to develop a relationship with the dean or whoever controls financial aid. Invite that person to lunch. Students may be a little afraid, but engaging with the faculty will make those conversations go more smoothly because then you are not just a nameless or faceless person asking for more money.
“Explain your situation,” adds Onyema. “Be honest. Do not threaten to transfer, but ask what opportunities you are missing. Say, ‘Is there anything you can do in my case to lessen the burden and make me a little more comfortable while I am going through law school?’ Once the school has you, your leverage is diminished. But it still has a long-term investment in you.”
PUBLIC SERVICE A SMART FINANCIAL INVESTMENT?
One path toward building wealth is to start your career in a public service job that qualifies you for a debt-forgiveness program. “Although public service jobs are typically lower-paying gigs, they may enable students to waive debt and gain invaluable experience that allows them to transition into the private sector at a more advanced pay rate due to their experience,” says Zenovia Evans, a lawyer and president of Lifeline Legal Media LLC in Denver.
But is the pay sacrifice worth the debt forgiveness? “I think so because you have to think about the long term,” says Evans. “Maybe you came out as a BigLaw associate making in the six figures, though all you have done is write memos. Then you get let go. If you have to hang your own shingle, you must have practical skills that matter. In public service, you have some of your debt forgiven, you get the skills you need, and then you can go wherever you want to go.”
Afam Onyema, cofounder of The GEANCO Foundation in Los Angeles, whose mission is to develop and manage world-class medical, educational, and athletic facilities in Nigeria, suggests crafting your own debt forgiveness program. “Explore what type of loan-payment assistance is available at your school or on the federal level,” says the 2007 graduate of Stanford University Law School in Palo Alto, California. “I really advocate developing a relationship with faculty. My work is public interest, but not in the same way as a lawyer working at the American Civil Liberties Union. It did not quite fit with Stanford’s debt-forgiveness program, and the administrators had a couple of questions when I applied for this assistance. Because they were familiar with me, they approved it.”
For the past three years, Onyema has received a check for almost $11,000, nearly the full amount of his student loan payments. The annual checks will continue for the next seven years as long as Onyema’s roughly $50,000 annual income does not jump significantly. “My law school debt can be paid off in the next seven years if I stay where I am,” he says. “That is a huge weight off my chest.”
SECURE LITTLE-KNOWN FUNDS
Onyema says getting to know key administrators also helped him get additional funds he would have never known
existed. “I negotiated as well between my first and second year,” he explains. “Public interest fellowships were available. I did not know that, but I got to know the administrator who handled them. I was talking about helping my dad with the hospital project, and she said, ‘Your interests should qualify you for this public interest fellowship.’ That added another $2,000 to my scholarships and fellowships.”
Root around to unearth buried freebies. “Everybody focuses on national scholarships, but every community has smaller, related organizations you can also get scholarships from,” says Zenovia Evans, a lawyer and president of Lifeline Legal Media LLC in Denver. “To find them, your first resource will be your law school. The second will be your local bar associations. The third is Internet research. During your first term, search ‘law associations’ and your city, and put together a list of scholarships and the deadlines for applying.”
Onyema still had to rely on student loans to fund law school. But his debt load is much lower because he kept his eyes open for financial aid opportunities. “The fellowships and awards I got probably cut my overall debt burden by one-third,” he estimates.
If you also need to borrow, the key is to borrow smartly. “Some students think loans are free money, but you should avoid taking on debt if you can,” says Elaine King, a certified financial planner and director of financial planning at Gibraltar Private Bank in Coral Gables, Florida, who has hosted financial planning seminars for law students and law firm associates. “Just because you can get a loan does not mean you should.”
If you must borrow, turn to private loans through companies like Sallie Mae, advises King. But do not sign up for the first student loan you are offered. Seek the lowest interest rate, she says, and look for flexible terms that allow you to avoid penalties as you begin paying after graduation.
“Credit cards are your worst option for funding law school expenses because you may never pay them back,” adds King. “I explain to students that if you rack up $1,000 in credit card debt at a 19 percent annual percentage rate, it will take you 20 years to pay that amount off if you pay only the minimum each month.”
WHITTLE AWAY SMALLER EXPENSES
Also work hard to cut smaller expenses, which can add up to big savings. “When I tell students to keep their expenses down, they say, ‘Yeah, I have heard that 100 times. How do I do it?’” says King. “Get a roommate because living on your own is very expensive. And while new students want to buy everything new, garage sales are good for purchasing furniture. Avoid getting a car if you live by campus.”
Onyema and his fellow students banded together to keep their book costs down. “I was amazed by how much books cost,” he says. “Students may not know this, but a lot of professors have course guides available at the library. If you want to have those books handy, pool with other members of the class. Say, ‘I will buy all the property course guides if you buy the constitutional law guides; we will switch books in the middle of the week. You can save half the money you would spend on books, and that adds up.”
Be sure to create a budget while in law school. “Make a list of all your fixed expenses, and track your spending on websites like www.mint.com or www.smartpiggy.com,” advises King. “Stick to your budget, and do not overspend.”
One way to stay within a budget is through coupons, says Nicole Wiseberg, a lawyer at Florida Rural Legal Services in Fort Pierce, Florida, and author of www.nicolesnickels.com, a money-making and -saving blog. “There are a lot of places to print coupons online— www.coupons.com ,www.smartsource.com, and company websites. But do not use a coupon as soon as you get it. Wait until you find a sale, and then buy a ton of that product. Also sign up for reward programs at the stores you shop.”
King suggests www.upromise.com, which allows students to earn contributions to a savings account, money to pay down student loans, or cash for school expenses by shopping at participating grocers, gas stations, and retailers.
Also start thinking about which states you will take the bar exam in. “Sitting for a bar exam takes time, money, and effort,” says Joseph Kapp, a financial planner at Lincoln Financial Advisors Corp. in Bethesda, Maryland, which specializes in advising lawyers. “Check whether the states you are considering have reciprocity. If one does, and the other does not, taking the bar in the state that does not offer reciprocity and waiving into the other state will reduce the overall costs associated with sitting for the bar.”
BEGIN BUILDING YOUR NEST EGG
It may be hard to believe, but law school is the perfect time to begin building financial wealth. Do that by spending as little as possible and setting aside funds as often as you can. Eventually, little savings become large nest eggs.
“Live as cheaply as you can,” says Andrea Travillian, president of Smart Step Inc. in Houston, which teaches people how to make financial decisions. “Buy generic, and skip the Starbucks. The more you skimp and save now, the better the position you will be in when you graduate.”
Law school is hard enough—why should you give up your little joys? “It is all about balance,” says Travillian. “I will be the first to tell you that I am never giving up my Starbucks. But in its place I might buy generic cereal or skip cable TV service. If you want that splurge, what are you pulling out to have a balanced budget?”
Dos and Don’ts of Saving Money and Building Wealth
Make sure you follow accepted rules of thumb for building your financial future. Here are three critical financial dos and don’ts:
1. PROTECT YOUR FINANCIAL FUTURE WITH HEALTH INSURANCE. “I worked during a lot of my law school experience, so I was able to have health insurance through my job,” says Zenovia Evans, a lawyer and president of Lifeline Legal Media LLC in Denver. “But during a short period of time I was not insured, I learned really quickly that health insurance was crucial. I caught pneumonia and had a $4,000 bill, and I had to work very hard to pay it off.” If you do not qualify under a parent or spouse’s health insurance plan, ask whether your school offers low-cost health insurance or coverage through affiliated groups at a discount. Health insurance is a benefit of ABA Law Student Division membership. For more information, visit www.abanet.org/lsd/membership/benefits/home.html.
2. BE WARY OF BORROWING FROM FRIENDS AND RELATIVES. “There is a saying: If you are ready to lose a friendship, ask that friend for money,” explains Elaine King, a certified financial planner and director of financial planning at Gibraltar Private Bank in Coral Gables, Florida, who has hosted financial planning seminars for law students and associates. “Money creates a lot of emotional discomfort. Before you borrow, ask yourself whether you want to be stressed out every time you see Aunt Sally because you owe her $10,000.”
3. THINK LONG-TERM BEFORE INCURRING ANY DEBT. “Most people need to be told that you really have to be cautious about the future,” says Andrea Travillian, president of Smart Step Inc. in Houston, which teaches people how to make financial decisions. “When you are in school, it is really hard to do that because you think, ‘I am going to graduate, and things are going to be wonderful.’ But think what will happen if you do not get a job. And what will happen if you get three years into practicing law and want to stop working because you have a child or do not like the practice of law but cannot because of your law school debt? Realize that what you do in school will affect your future decisions.”
That goes for vacations, too. “If you can pay for it ahead of time, you can afford a vacation,” says King. “But if you are going on vacation and have not paid for it, you should not be taking the vacation. That $500 Cancun vacation may turn out to be $2,000 in debt if you put it on a credit card. That is what I consider bad debt—when you are still paying the debt years later and the joy is gone. Instead, take an alternative spring break. Paint houses for low-income families. It is less expensive and more gratifying.”
Also keep your eyes open for money-making opportunities. “During breaks,” recommends King, “work and use all the money you make to pay down debt.”
Onyema again recommends developing relationships with professors and faculty. “To make a little money during law school, I had friends who talked themselves into research positions,” he explains. “They would say to the professor, ‘I am really interested in your work. Can I help you out for free for a couple of months and see if it works?’ Professors are good at finding money to hire students as researchers. That helps you out moneywise, builds your résumé, and allows you to make a good connection with your professor.”
Wiseberg earned extra money and freebies during law school by taking surveys and being a mystery shopper. “I wish I had been doing more of it because looking back, I could have saved even more money.”
To earn money doing surveys, sign up with a survey company and do surveys you consider worth your time. “If I got 25 cents and the survey took a half hour, it wasn’t worth it,” says Wiseberg. “But if it was $2 for 10 minutes, I might do it. If you do two surveys a day and each is worth $1, that is $60 a month. You are even going to get surveys worth $25, and companies may even send you products to try, so you might get free frozen dinners, shampoo, or toilet paper.”
Mystery shopping requires you to pay for a service for which you will get reimbursed and then take a survey about the service. “You have to be careful what company you sign up with,” advises Wiseberg. “I have done mystery shopping for steakhouses, movie theaters, carpet-cleaning and car oil change services, and pet stores. If it takes me an hour to fill out the survey and I get a $100 meal or oil change, that is a pretty good return on my time.”
Save, save, save as much as possible. “When I went to school, my father gave me an allowance,” says King. “I forced myself to live within my means. If he gave me $50 a week, I would see how much of that I could save. At the end of law school, you could have several thousand dollars.”
That small emergency fund comes in handy when you launch your new career. “Once you are done with law school, there are many expenses that come up with a new job—moving, settling in a new place, purchasing an appropriate wardrobe, not to mention the other things that occur at about the same time in life, like marriage and kids,” says Kapp. “Having a cash stash to pay for them will help you avoid even more debt.”
Perhaps the best way to build wealth is to live within your means, a rule you can begin to enforce in law school. “I have seen people comparing themselves to their classmates and thinking loans are free money,” says Onyema. “But that can get you deeper in debt. Be wary of feeling you have to compete. If you spend less than your peers, you are not missing out on an amazing networking opportunity or an opportunity to live life. Keep in mind where you are in, and what you want to do with, your life.”
Kapp could not agree more. “The tendency among students is to emulate those they are clerking for or what they think an attorney should look like,” he says. “Be very careful to remember that you are still a student. Eliminate expenses where you can. Every penny you save now will help you build wealth faster when you are practicing.”