Episode 13: Law School in the Most Expensive City in America with Jessica Cox

Jessica Cox found herself in $300,000 of student loan debt after attending law school in New York. She went through many trials like losing her scholarships after her first year of classes. Despite the struggles during the first year, she was able to come back the next year and make the dean's list. It wasn’t easy, but Jessica graduated from law school and is now working to pay back her debt.

She's currently working in legal marketing and business development in Houston, Texas.

In today’s episode, you'll find out:

• Jessica's thoughts on law school after losing her scholarship after her first year
• Her thoughts on the bar exam
• What to do immediately after graduating law school
• What it's like to work as a legal manager?
• What moving to Texas did for Jessica's career
• Can you get get a license in one state and practice in another?
• Jessica’s first approach to tackling her student loan debt.
• What did she do to get a better idea of her debt and how did she start paying it back?
• How she used forbearance to help her get out of debt
• Will refinancing make any impact on my credit score?
• Has Jessica ever considered what impact her student loan debt can have on a future spouse?
• What piece of advice would Jessica give someone who hasn’t yet attended law school?
• What piece of advice would Jessica give someone who just graduated law school?
• My thoughts on the future of law schools.
• Is the schedule that a lawyer has worth the pay?

Links mentioned:

• Mint 
• YNAB – You Need a Budget

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Episode 13 Transcript

Jessica Cox: [00:00:02] They were contingent upon grades and so they gave it to a huge percentage of the students going, but then they stacked our section with all the kids who had scholarships. So it was literally impossible that 80%of us would keep our scholarship because everybody was in the same section and your graded on a curve. So I didn't maintain the high GPA that I needed after that first year and I lost all my money.

Travis Hornsby: [00:00:33] Welcome to another episode of The Student Loan Planner® podcast. I'm here today with Jessica Cox.

Travis: [00:00:39] Jessica went to law school at one of the most expensive cities on earth and I'm really excited on what kind of lessons Jessica has for us and all of her perspectives on going to law school. Welcome Jessica to the show.

Jessica: [00:00:51] Thanks Travis.

Travis: [00:00:52] So what I'd like to do is just kind of start off tell our listeners what happened in terms of your background and going to law school and what that journey looks like before law school and making that decision.

Jessica: [00:01:04] Sure. So I grew up in Texas and I went to undergrad at a private school here at TCU. I was a film major and I got to about my junior year and realized I was going to have to go try and get work and I didn't know how I was going to do that with a film degree. So a lot of the classes I had taken were really business focused within the industry. And a couple of legal specific classes taught by a professor who had been a lawyer previously and has since I think gone back to practicing. And I was like Well I I really like him I really like all his classes. And so I was like maybe there's something here that I could do with this degree that might have a little bit more job security and financial stability than going and trying to be a PA in LA sleeping on someone's couch.

Jessica: [00:01:55] So I started looking for schools law schools that had programs that sort of had an emphasis on media law or entertainment law and not surprisingly two of the best cities that it makes the most sense to look at are LA and New York. So I visited both a hated LA so I apologize to anybody who loves LA I didn't like it and you know a lot of different things could have contributed to that. But I went to New York after that and it rained on me for four days and it was the worst possible weather and I fell in love with the city and was like This is where I have to go. So I got in and decided all right I'll move halfway across the country and see if I can be an entertainment attorney.

Travis: [00:02:40] Wow. So you know actually my brother had a film degree.

Jessica: [00:02:44] Oh really.

Travis: [00:02:44] Yeah. He's like a YouTube celebrity for like Disney related videos.

Travis: [00:02:52] Yeah. So he made it work somehow. But you have to hustle. I think.

Jessica: [00:02:56] You really do and it's different now right.

Jessica: [00:02:59] Like I'm I mean I'm not old. I came of age with technology but I mean Facebook was just taking off when I was a freshman in college you had to have a dog eating you to sign up. So like the way that the internet works now is so different. I think it's so much easier to sort of get your content out there without someone giving you money for it first. Like you can just sort of create it and put it out there and that just wasn't the case when I was in college. So it's a really different media landscape now. I'm also fairly risk-averse just like in general so the idea that it was like All right hustle hustle hustle and you might make some money felt really scary to me. I was like oh I could be a lawyer they make money. It's not necessarily true. But it's what I thought it was. I'm surprised that they don't tell you that beforehand there's no like asterisk that says By the way, it's like a small percentage but now.

Getting Ready For Law School

Travis: [00:03:59] So you fell in love with New York. You know you're from Texas. You've got some private student loans from undergrad. What was your student loan debt before going to law school?

Jessica: [00:04:07] I want to say it was around $40,000. I still have some of it outstanding now it's because it all went on hold while I was in school. But I think it was around $40,000 when I graduated. Was that mostly private debt. Yes yes there was one smaller federal loan. And then most of it was like one big loan from Wells Fargo.

Travis: [00:04:30] And PSA to anyone listening do not take out private student loans for undergrad if you can help it. That's my general advice right. Because you never know when you're gonna have that amazing light shine down and you're just gonna have this perfect vision of what you want to do in life you're gonna want to go back to grad school after your undergrad degree and that slight interest rate savings that seemed attractive at the time. If you do end up going to get a graduate program really can make things pretty inefficient because of you know being able to go for loan forgiveness if you'd taken out federal debt. Yeah. Yeah. But then you know the federal government doesn't have booths set up on campus to try to get you to sign up for their debit and checking accounts right.

Jessica: [00:05:09] It's also I mean you know they're all like I was I mean 19 like you don't really understand the process and unless your parent really understands it to like there's just it was I was the first child to say I was the first one going to college. I was the first one like having to figure out in my family how we were gonna pay for everything and sort of like navigating the system. And circumstances just lead you to a place where it's like take out that money or leave your school so you know it found its place and it got me through when I graduated and now it's just the drop in the bucket.

Travis: [00:05:48] You know like a 19 I don't remember what I was I was like trying to. I told people I was going to build like mass-produced solar powered cars or something and they were going to they were going to run on fairy dust. That was me at 19.

Jessica: [00:05:59] Yeah. You just don't. Now. I barely understand money now. I did not understand it when I was 18,19 Or 22 when I graduated and moved to New York. So it's been a long process to try and figure out what it is I got myself into.

Jessica: [00:06:15] So long ago.

Travis: [00:06:16] Yeah. So how many law schools did you apply to?

Jessica: [00:06:19] Five ish. I think I applied one in New York, two out in L.A. I know I applied to Texas Tech in Texas as sort of a backup and an option if I wanted to go public and stay in Texas and I was pretty sure I could get in there. So sort of like a safety option but yeah and there were maybe a few other so it's probably about five.

Travis: [00:06:42] Interesting. So what kind of offers did you get from these schools? Did any of them give you any scholarships? Was it pure you know you're gonna have to take out all the debt to go here. What were the packages that they gave you?

Jessica: [00:06:54] I remember for me as far as making a decision it came down to. They were both private schools one in LA and one in New York. The one in LA was like ranked worse than the one in New York and they waitlisted me. I was like. No this school over here is let me in and offered me money so I'm going to go there but I want to say it was $6,000 a semester maybe. I mean it was small compared to what tuition was which I don't even remember what it was because I took out loans to cover all of it. So I don't even remember total but it was a lot.

Travis: [00:07:37] Sure Yeah. So my past life I was a municipal bond trader which means that we would vest in the debt of universities and states.

Jessica: [00:07:45] Yeah.

Travis: [00:07:45] Things like that. And one of the things that we would look at in university is we're just trying to decide whether or not to invest in one was something called the tuition discount rate. And what's interesting is a lot of these schools will position scholarships like that like the $6,000 scholarship when in reality and this is not maybe not the case for your school. But a lot of schools what they'll do is they'll position something as a scholarship when what it really is is tuition discounting and they do tuition discounting to try to make you feel like you're getting a spray deal so that they can have a talking point to get you to sign on the dotted line because it feels a lot better to give somebody some sort of artificially high price than discounted than to just say here's the price.

Jessica: [00:08:32] My mind was this seemed pretty common with a lot of the people I knew in school also as they were contingent upon grades. And so they gave it to a huge percentage of the students going but then they stacked our section with all the kids who had scholarships so it was literally impossible that 80% of us would keep our scholarship because everybody was in the same section and you're graded on a curve. So I didn't maintain the high GPA that I needed after that first year and I lost all my money.

Travis: [00:09:06] You know I feel like a lot a used car lots could learn a lot from studying the business models to universities. I mean like what do you guys feel like when I say out loud what happened.

Jessica: [00:09:16] I'm like man that's like it was such a scam. How did you get me to agree to that? You just feel sort of like I know better than that. When I look at what happened I'm like wow none of that was smart. You know at the time you're in it and then you're a year-end and it's like well I'm a third of the way through law school like what am I going to do now quit with one year under my belt and like go try and get an entry level job somewhere with half a law degree. You know I have to stick it out now.

Travis: [00:09:46] So yeah you're describing a lot of people's life experiences right now. You know I mean I think that a lot of people start wondering whether or not they should quit one year in. I think that if you're gonna make that decision you have to do it in the first semester not in you know right through the first year which you know it can be stressful. But I think that certainly if you think you made a bad decision getting out in the first semester is defendable and it's probably a decent financial decision you know. But once you're a year in or more it's probably best to just finish.

Jessica: [00:10:17] It's hard to know to like I think sometimes in any life situation like when you're in it it's so hard to evaluate if that's really the smartest decision. Especially as someone and I think this applies to most people who go to law school who are fairly type A and who have really never failed at anything before. That feels like a failure and so the idea that you wouldn't finish is and that's not even an option.

Travis: [00:10:42] Yeah exactly. Because you had to work your tail off to try to get in and be successful in the curriculum and you're like why would I quit?

Law School in New York

Travis: [00:10:50] So you moved up to New York City. You're excited to get started. What did that first experience of talking about the cost of law school look like? Did you just go to the financial aid office and just sign on the dotted line? Or did they tell you like hey here's our percentage of people who you know actually become attorneys that graduate here. How much disclosure was there on the front end?

Jessica: [00:11:13] I'm sure that information was available somewhere. I don't know that I knew to ask those questions and I feel like it's probably one of those like if you don't ask they don't tell you. I'm sure that that was all there. I know that one of the big things that law schools promote in general is their bar passage rate and that's really like a number that they like to tout out sort of first time pass rate and in their state and whatever but at the time none of that really felt like something that I needed to know. I guess it was sort of like I had decided I was going to law school I was gonna be an entertainment attorney. I wanted to be in New York, and so like whatever I had to do to make that happen I was just like absolutely. Sign me up and for law school because it was all on me and it was based on sort of my financial situation and I don't think anybody cosigned any of those loans with me. They are 99% private or public sorry federal not private. They're almost all their own up there. I want to say they're all federal. I Might have one small private but I don't think so.

Jessica: [00:12:21] I think the only private loan is from undergrad.

Travis: [00:12:23] So approximately how much debt do you have now?

Jessica: [00:12:28] Around $300,000.

Travis: [00:12:30] OK. Part of that is the private from undergrad right.

Jessica: [00:12:33] There's about $20,000 left on that.

Travis: [00:12:36] So what's crazy is the private debt you know from undergrad that is actually a little bit more challenging than your federal student debt.

Jessica: [00:12:45] To get paid like off you mean?

Travis: [00:12:47] Yes because the only way to get rid of private student debt is to pay it off. Right. Whereas the federal student debt you can do income-driven repayment programs and go for loan forgiveness and do that kind of thing. So if that $40,000 of debt from undergrad had been Stafford subsidized and unsubsidized debt you know if the financial aid office had done a better job at making sure that you had the right kind of debt in undergrad then that $40,000 could get lumped in with your you know federal student debt that you'd be utilizing a forgiveness program for and then you wouldn't even have to necessarily worry about paying that $40,000. So a $40,000 pot of debt is like $400 a month.

Travis: [00:13:29] That's like a really nice car payment.

Jessica: [00:13:30] Yeah I think mines at $220 a month is what I pay right now on that. That one is that yes there's always that amount no matter it doesn't matter what I'm making it doesn't matter if I have a job or not like that loan doesn't have the kind of flexibility like I've had with my other ones where I have been on income driven repayment or some version of that since I graduated and so there have been times particularly those two years after I graduated in New York where I was making so little money my payments were $0 because I could not afford to pay anything but I still had to pay the $200 on my private loan.

Travis: [00:14:09] Right and the sentiment that you're expressing is exactly what I'm talking about is just it's very difficult to have a private loan compared to a federal loan because private loans have no protections.

Travis: [00:14:20] So at least you're paying only the $220 a month. Now in terms of what kind of experience you had during law school? Maybe you can talk a little bit about that like around the money. Yeah maybe about the financial aspects but also like just you know what it was like what you learned? If was exciting. If you know had question mark sometimes with the quality of the curriculum or not you know just kind of like just do your experience during law school and any kind of descriptions you want to share like what kind of apartment you were living in what kind of lifestyle you were living in New York. That kind of thing.

Jessica: [00:14:49] Yeah. One that I probably couldn't afford now. So I started out in the East Village which was far enough away that I was taking the subway every day to get to school. I searched my school was down in Tribeca and I certainly couldn't afford to live there. But I had a couple of roommates I never lived alone in undergrad. So I was used to living with other people and we had a pretty decent sized apartment for New York. I think it was sort of eased me into it. We did however have to deal with mice which I have never experienced and sometimes still find myself like if I see something out of the corner of my eye I move in my apartment I'm like Oh my God did rodents get in. It's like scarred me a little bit but it was great. I loved being there and then finals came that first semester and it was a totally different testing experience than I had ever been in before.

Jessica: [00:15:43] I really struggled that first year with grades. It took me much longer to find my groove. I wasn't working I was just going to school. And it still just felt pretty overwhelming at times but I really loved being in New York and I got a job that summer. There were some grads from my school who were working for a government position. It was the children's advertising review unit and so it looked at advertising marketed towards children and whether or not it was in compliance with the rules that are set out. So I started with them and it was you know networking meeting people who had gone to my school and who were out there working and I was like This is great. Like I could do this. This could work. I stayed with them for a while.

Jessica: [00:16:32] My second year I started working retail. I went back to working retail which I had done in undergrad. And I clerked with a judge for a semester. My first semester of my second year I took something like 16 hours which is pretty high in law school. I was working retail and clerking for the judge. That semester and I made the dean's list. So it was like oh I am capable of doing well. It's just at that point I had done poorly enough my first year that I no longer had any kind of assistance from the school.

Jessica: [00:17:06] I had lost my scholarship. So you know that had been had been funded 100% through loans but I was working. So in addition to having like my loan money to help me live I had some additional income from working retail and sort of continued that through my second and third year, and stayed working retail after I graduated actually. I did not have a job as an attorney when I graduated which really makes for some pretty low lows while you're trying to find any purpose in wanting to take and pass the bar when you don't have a job and sort of everything you thought was going to turn out. Doesn't look like it's going to turn out that way. It was a very weird time for me.

Travis: [00:17:52] Yeah I mean because you have this big dream of t his is what life is going to look like right. You know that life isn't what you thought it was going to be.

Travis: [00:17:59] What was that initial period like you know six months after graduating from law school?

Jessica: [00:18:04] Yeah I mean it wasn't great. So I didn't pass the bar which was ended up being a really strange feeling for someone who has never really failed. I wasn't valedictorian, but I always did well in school. School and test-taking had always ,test taking in particular, had always come quite easy to me. You know I studied and prepped for the LSAT and then when I went and took it I scored much higher. I did the same on the SAT I scored 100 points higher than any of my practice tests so I was like this is great. I do really well in testing environments. I end up doing better on the actual tests and I just think there was a lot going on with sort of not having a job I had a lot going on personally that was just sort of making me feel not very motivated. And I just did not study the way I needed to study and it was a much more intense process than I think I really realized. And I got my results back in November that I had failed and still didn't have a job as a lawyer so didn't really matter. But I was nannying and working retail and it was just like OK now what. Like do I go back to Texas? Do I try again?

Jessica: [00:19:20] How am I going to stay in New York if I'm not making tons of money? What's my lifestyle going to look like?

Jessica: [00:19:27] It was it was all a very sort of time of self-reflection I guess.

Travis: [00:19:32] Sure. So did you retake the bar? What was that experience like?

Jessica: [00:19:36] I did. So I was in a relationship at the time and I was really lucky in that I financially was able to live with him which lightened that burden on me a lot as far as living expenses. I think without that I probably couldn't have afforded to stay in New York because I just wasn't making enough money.

Jessica: [00:19:55] I did retake it. I actually like full disclosure and this is sort of embarrassing to say or you know was for a very long time. I took it two more times and I failed two more times so I took it three times in New York and I failed all three times the bar was given twice a year so I took it July, February, and July. The last time I failed by only eight points. Which was really disheartening. Everyone who knew me every time I told them I failed they were shocked because that's just not even my grades in law school just didn't indicate that it was likely I would fail.

Jessica: [00:20:32] I tested really well so it was it was one of those things that really forced me to eventually say do I even want to do this? Like this is so hard for me. Nothing has ever been this hard for me. Is this really what I want? Do I really want to keep trying? Especially that third time getting so close and still not getting it. I really sort of had to decide. Do I want to keep trying to do this or do I want to figure out something else and start actually building a career and making a living?

Travis: [00:21:04] What do you decide?

Jessica: [00:21:05] So I just decided I stayed in New York for about another nine months after I failed the second time. I had gotten a full time position as a legal manager at a small boutique entertainment and business law firm and so I was doing everything for them except their legal work. There was only a few attorneys. I did all of their client intake. I did a lot of interaction with the clients. I managed the overhaul of their web. I planned all their client events all of their speaking opportunities CLE's things like that. And I was like well this works like I'm walking around lawyers and this is sort of an avenue I didn't really know existed and I got to the summer of 2014 or sort of late spring and was like time was coming for us to decide if we were going to resign our lease at our apartment. I was like I think maybe it's time for me to go back to Texas.

Jessica: [00:22:00] I can find a more stable job something that feels more stable or feels like I'm building toward something closer to my family I had been away for about five years and cost of living in Texas is way cheaper there are less taxes taken out here.

Moving Back to Texas

Jessica: [00:22:17] You can actually make more money because of that. So I moved back to Texas in August of 2014. I lived with some family in Houston my aunt who was an associate GC in-house at a oil and gas company. A lot of her contemporaries were partners at big law firms. So she really helped me network in the Houston legal market and I looked for positions that were at big firms but didn't require a law degree. So business development, professional development, and recruiting. I ended up at Norton Rose Fulbright as a business development coordinator working with the litigation team.

Jessica: [00:22:57] It took about three months to find a job and I was unemployed moved down here without a job and was very fortunate that I had family that let me live with them for free and fed me and then ended up in this sort of side of big law that I didn't know existed. When I went to law school where I'm working with attorneys but I'm not having to practice I don't need to have my law license. But you know that has sort of helped me be better at what I do.

Travis: [00:23:27] Sure so do you think you would ever take the Texas bars so that you'd be eligible for?

Jessica: [00:23:31] Eligible yes you can always go take it which is the nice thing I think about that is there's no like you to take it within this time frame or you can only take it you know for time like you can take it an infinite amount of times and they are right now a lot of states have been moving toward a multi-state bar exam or if I don't even know what they're calling it. Basically when I was in school you had to take every single state you wanted to be barred and there was no like you take one and you can practice anywhere in the US. You had to take New York, or New Jersey, or Texas, or California and there was some reciprocity but it was usually after five years of being in good standing and having actively practiced and then you could apply to transfer in to another state.

Jessica: [00:24:21] They're moving away from that model in general now a lot more states are accepting sort of the general bar exam and allowing you to be barred in several places which is great for new grads because the legal industry isn't as regionally focused anymore you can be in Texas servicing clients all over the US and all over the world. So it's helpful that they're moving toward that model but that wasn't the case when I went.

Jessica: [00:24:49] I have no interest in practicing. I look at the lawyers around me and I really don't want their schedules or the stress they have around their work. But I enjoy working with them very much and I find what they do really interesting. I just don't want to do it. So there's really no reason for me to take the bar it doesn't give me anything additional.

Travis: [00:25:12] That makes sense. So what kind of approach did you have initially when you were having to figure out your student loans? When did you get that first dreaded piece of mail that was a reminder you have $300,000 in student loans?

Jessica: [00:25:32] Yes I think it's six months after you graduate. You get a grace period of like six months. So I was still living in New York but working retail and nannying making not very much money.

Jessica: [00:25:45] So I can't I think I had several friends who we had all taken out loans together. So this came up in conversation to sort of what are you doing. How are you handling it? Where did you go to look it up? So we sort of had each other to lean on. I feel like one of us went to financial aid and got all the information and then dispersed it amongst each other. So somehow I figured out you have to do all the exit interviews I guess for your loans when you graduate you go online and you fill out all these questionnaires and it makes sure that you have your FAFSA pin and like all this different stuff. Then when you go through that it also tells you a little bit about your different options. I think it's been a long time since I did this but I believe it tells you your different options. And that website the federal loan website has the different options listed briefly and so I was like oh there's income driven. That's probably what I want because I don't make too much money and so I went through and I think to when you apply for your repayment options there's a choice to sort of pick like put me on the one that gives me the lowest payment and they figure it out for you.

Jessica: [00:26:59] I want to say that's probably how I started when I got back to Texas and got an actual job that paid me quite a bit more than I was making in New York and I was still living for free because of my wonderful aunt. I was able to really sit down with like an excel spreadsheet and put everything into it. I color coded everything and sort of like started budgeting and getting a real handle on how much I owe how much it's gonna cost me to live and things like that I lived in denial for quite a long time.

Travis: [00:27:32] That's a very common state to have residents in.

Jessica: [00:27:36] Yes.

Exploring Student Loan Repayment Options

Jessica Cox: [00:27:38] Sometimes it's you're like it's easier just to not look I don't want to know when you feel financially like you can't do anything about it. So when I was making such little money I was like I don't even want to know because it doesn't matter because I cannot change my situation. And once I started making a bit more money and I had a much higher earning capacity like I had this kind of upward trajectory in my career and I knew that there was something on the horizon sort of this ability to make a lot more money I was like alright I should really look at this so that I actually know what's going on so that I can be smart about the way that I allocate the extra funds coming in.

Travis: [00:28:17] Did you ever when you made that color-coded spreadsheet think that you wanted to put some of this money on the ones directly.

Travis: [00:28:23] Did you ever have doubt that income driven was the right plan for your long term?

Jessica: [00:28:27] Not initially. And then last year I filed my taxes and I had passed the I didn't even know this existed. But there are thresholds that once you make a certain amount of money you can only write off X amount of your student loan interests that you paid the last year. And so every year I had been able to write off the full amount which I think they only let you do like $2,500 which most people I know pay way more in student loan interest than that but last year my income bracket went up to where I was only able to write off $1,500 or something. I don't remember what it was but I was like wait that's not fair. What about the rest of it?

Jessica: [00:29:10] I paid all this other money and so I started thinking. Should I be doing something else? Am I going to start out earning the ability for this to be the best option for me or should I like consolidate or you know just sort of what other options are there.

Travis: [00:29:26] What was that process like?

Travis: [00:29:28] At some point you came across Student Loan Planner® obviously because you won one of our scholarships. What was that process like in terms of your research?

Jessica: [00:29:38] So initially I sort of just stayed the course and figured having the spreadsheet getting a handle on what I owed what I made was good enough at the time. Once I switch I was at the first drop I got here for about two and a half years and I moved over to another firm. I made a jump from non-exempt to exempt I made a pretty big salary jump and became a manager in April of 2017. It's almost been two years and when I did that I had also finally gotten an apartment and was living on my own and so a lot of stuff changed as far as what was coming in but also what was going out. And I don't think I was paying quite enough attention.

Jessica: [00:30:22] Sort of over the summer I guess it was I realized that like my credit cards had gotten really close to their limits and I started feeling really uncomfortable about that. I felt like I was trying to do sort of 0% interest balance transfer options but because everything was so close to their limits it affects your credit score. And I couldn't get a lot of those and I was like I don't even know what to do and I just sort of started Googling like who is somebody who understands student loans because it's different than other debt. It's a very nuanced and there's just a lot of stuff that it's hard to find information. If you call the loan servicers directly some of them are helpful in like helping adjust your payment schedule but they're not really that great explaining your options and they don't look at the whole picture. They're only looking at what you owe to them.

Jessica: [00:31:16] So I was like there has to be someone out there that does just this and I just are Googling. I don't even know what I Googled but I found several different articles. Then from there sort of went on and researched the people themselves and that's how I found you and I set up. A one on one with you.

Jessica: [00:31:34] We went through a lot of different things. A lot of different options same sort of cut my monthly expenses. Different things I actually put my loans on forbearance for a while so I could really focus all of my extra money on getting my credit card debt gone before those payments pick back up. And so that's really what I've been doing.

Travis: [00:31:54] You know that's that's a great thing to do a lot a lot of people don't realize that that is actually one of the responsible uses of forbearance is you know if you have credit card debt and you have no emergency fund paying on your student loans while you're trying to dig out from under a hole it's not necessarily a helpful thing to do. So just pausing the student loans you know you have three years of forbearance that you're allowed to do and you couldn't get approved for them one year at a time. So basically one thing that I'm a big fan of is basically telling somebody put your student loans on hold for up to a year and yes that'll capitalize the interest. Yes. That's not the best thing to do. But with that extra cash flow I want you to get rid of your credit card debt like it's in a you know emergency you like your house is on fire right. And then you get $5,000 to $10,000 cash in the bank and just those two things will insulate you from future financial disasters very very well.

Travis: [00:32:50] That's probably my biggest piece of advice. And if somebody is struggling you know one you have to actually know what you're spending you know the good news is back in the day like our parents they had to just use like an envelope method of budgeting and like things that have to be in cash.

Travis: [00:33:07] It was just yet to enter things manually but now there's two options that I love. One is Mint.com they're the free option and you can track your spending on that and budget on that. And then another option that I actually think is better if you invest the time to learn it is something called Doyouneedabudget.com that acronym is YNAB, it's like $80 a year that allows you to track everything and where it's going you know you can actually know that oh wow I spent $600 you know Chipotle last month. That's a bad life decision. You know better probably cut that but so I think that that's the key is first know what the heck's going on in terms of your budget which you can do with an app pretty easily and then figure out how to get out of the credit card debt and get the emergency fund.

Jessica: [00:33:54] Yeah, and I will say the one thing that you and I haven't directly discussed about doing that surprised me and made me like really happy almost right away is my credit score jumped up. And I mean within a month just because I had taken that debt like off of the actual cards themselves and gotten that the ratio of like what my credit limit is to what's actually on my card down that it affected my credit score almost immediately which it doesn't affect my cash in the bank it like it was this weight like lifted off like oh my god that was pretty easy to do. Now just get rid of the rest of it and you'll be good to go.

Travis: [00:34:35] Yeah. And you know a lot of times it's really funny people reach out to me. We have you know refinancing bonuses on the site. So a lot of people will reach out to us if they have you know a low debt to income ratio and ask about those refinancing bonuses one of the most popular questions is. If I apply is it going to hurt my credit score?

Travis: [00:34:53] Everybody is so terrified of their credit score going down. It's five to ten points. It's a temporary impact. And that's really not a big deal at all. Those same people will think that it's not a problem at all to carry a 0% credit card balance which could drop your credit score by you know 50 or 100 points. And what's nuts about that is say you have a 0% credit card balance that you're carrying when you apply for a mortgage. That could potentially cost you half a percent to 1% of your mortgage which could cost you like $50,000, $60,000, or $100,000 extra of interest over 30 years. And that was simply because you had a 0% credit card balance that was hurting your credit score.

Travis: [00:35:39] So that's one thing that's really interesting is people are so afraid of their credit score being impacted from these various things but it's actually like you don't really need a perfect credit score.

Travis: [00:35:49] All you need is a credit score that's decent. I think my credit score is in probably the mid 700's and a perfect credit score is like 850.

Travis: [00:35:57] So looking at me maybe I'm not the best person to lend to but I don't really care about getting a loan. You know except for I just want it to be like a decent loan if I needed one. I mean so you know a lot of people will focus so much on the credit score when it's like the credit score doesn't really matter as long as it's over say like a 700 long term.

Travis: [00:36:19] If you have more than a 700 credit score you're applying for mortgage you're going to do just fine. So just a PSA for people as that they don't freak out about your credit score as long as it's decent. You know that's really all that you need.

Travis: [00:36:31] What payment plan did we get you on or suggest for you after we looked at things?

Forbearance

Jessica: [00:36:36] So we decided to do forbearance on my federal loans for a year and focusing on credit card debt which was a combination of like one of the low interest rates personal loans and then the rest of it. I was able to get approved for a 0% balance transfer credit card so I can take the rest of that and it was 0% interest for like 18 months. So that's what I'm focused on right now. I'm still paying on my private loan obviously. Then once August comes around which is when my forbearance will reach the 12 month mark. Off to sort of re-evaluate again where I am.

Travis: [00:37:20] Sure so long term since your debt to income ratio is high and it will likely always be more than 1.5 to 1. So you know going for forgiveness long term is probably the right decision on your federal debt.

Jessica: [00:37:35] Yeah and we talked about taking it from I think I'm on income driven or income based. There's so many acronyms but taking it from that to like REPAYE. Yeah one of those. So just like changing which one it's on but that over time that would probably be the best one for me right now.

Travis: [00:37:55] One question in terms of dating or getting married has that ever been something you've thought about. In terms of the impact of you know a spouse and the student debt repayment?

Jessica: [00:38:05] I mean not seriously. I have never gotten close enough for that to be like a discussion that's had I do generally think sort of like how is this going to affect if I get married. If I have kids if I buy a house and I really don't have a huge desire to own a house a lot because of my student loans like I think that plays into it a lot is just that I have so much debt already to pay back that I don't really have interest in taking out another really big loan and having a mortgage that may not always be the case but that's how I feel right now because it is just me. I'm the only person bringing in income in my house and I really only have to take care of me. So that's really been my focus is sort of how to how to survive as a one person household and what makes the most sense for that. But I certainly hope it will be an issue one day that I have to think about but it hasn't been something that I've gotten close enough to that I've had to even really dig into that at all.

Travis: [00:39:08] So one thing that I've found for people who have student loan debt is that it's actually better from a financial perspective to marry somebody who also has a lot of student loan debt because then you can file jointly for income taxes your payment doesn't change at all. Your strategy doesn't change at all. It's very easy to figure out. Obviously, you can never plan on who you end up loving right.

Travis: [00:39:32] I'm not suggesting that you do that, but you know if you wanted a easy to manage financial situation you know hang out at a go to like a really high cost law school and hang out at the law library, or go to dental school, or medical school and like you know go to the bars that those people. I'm joking but you know it's always manageable you can always figure out the right strategy no matter what someone's spouse's income and debt profile is there's always a right strategy.

Travis: [00:40:04] You know some people get married that their spouse has no debt and they have to would have to either incur a lot of tax penalties or additional payments every month to get married. They'll get spiritually married so people will not actually turn in the certificate they'll get married, have a ceremony, commit to each other like that for life, but they won't actually turn in the paperwork and that's legal.

Travis: [00:40:28] It's kind of interesting to think about that happening with student debt these days but the easiest path is is having somebody who also has student debt and then you're going on you're going for forgiveness together.

Jessica: [00:40:38] Yeah I have a couple of friends who married other health care law school grads so I'm sure they'll be really happy to hear that they've made a smart financial decison to join up.

Travis: [00:40:49] Yeah which is like it's as kind of like you know if you look at like divorce statistics even like people who are in the same professions you know often understand what they're going through and so you know there's a higher success rate in some cases. So it's I think it's kind of similar with people with a lot of student loan debt. It's like this big thing if your partner doesn't have any but if your partner does like they understand what it's like they understand what you're going through is just a less of a thing. But you know again that shouldn't be a big determinant on your life at all it's just you know something to chat about.

Jessica's Suggestions to New Law School Students

Travis: [00:41:19] So if you could give some suggestions to a young person before law school let's have you give two pieces of advice one to that person who hasn't gone to law school and one to that person who's just graduated from law school. What would you tell him or her?

Jessica: [00:41:34] I mean someone who hasn't gone to law school yet. I would say either you have to be so committed to wanting to be a lawyer that you don't care like how much money you make. That can't be part of why you're going. Especially if you're not going to an Ivy League school. If you got into an Ivy League school or like your top 20 you're probably gonna be fine. But if you're not. Which I wasn't. You need to be like so committed that you don't care sort of what your lifestyle looks like.

Jessica: [00:42:06] If you are going to one of those top 20 Ivy League whatever situation and your job is not going to be an issue. Getting a job at a big law firm after you graduate. Making $190,000 a year is almost guaranteed for you. I would say really do some soul searching to figure out if that's the life that you want go and meet people who work there and figure out if that's what you want because I have friends in both situations I have friends that went to school with me and have really had to kind of claw their way to be able to make a good amount of money and they are. But they don't really love what they're doing. And then I have friends who went to Yale, Harvard, and Stanford type schools. That's kind of how jobs guaranteed right out of school. They have had no problem and they also are sitting here in their early 30's wondering whether or not this is what they really want to be doing with their life.

Jessica: [00:43:01] So I think if they really try and figure that out and it's hard when you're 22 to know if that's what you want to do for the rest of your life. But I do think sort of figuring that out before you go would be really helpful.

Jessica: [00:43:14] There was a big bubble of people who just started going to law school with the downturn of the economy in 2008, 2009, and 2010 which is right around when I went. So there's this huge supply of lawyers and the demand is not equal or at least that's how it feels as somebody's trying to find a job. So you don't have a lot of the power in that situation for someone who has gone and graduated. Congratulations because that's the whole three years of hard work no matter where you went to school.

Jessica: [00:43:50] I would say get really honest with yourself sooner rather than later about how much you owe and really do everything you can to keep the other debt in your life to $0. Your credit card extends your limit. Call them and tell them you don't want it extended or don't use credit cards if you can avoid it. I think sort of avoiding any sort of other kind of debt and starting to live outside your means. It's so much easier to live like you don't have money than it is to like get outside of your means and then try and pull it back. So just being really sort of Cognizant and honest with yourself upfront about how much money you have coming in and what sort of lifestyle that affords you.

Travis: [00:44:34] Great advice. That's fantastic advice.

Travis: [00:44:36] You know one thing that I would say is you know there's so much pressure in society right Jessica to like figure it out. Have your life just exactly figured out what you're going to do and all these things and what I would say instead is if you graduate and you're kind of uncertain kind of like you were I think that there's nothing wrong with moving to New York without a job and getting one of those retail jobs and just surviving and you know instead of going to law school you can go to the New York City Public Library and just read random books you know and then go hang out in bookstores and be poor young broke person in New York and then one thing that I did that was one of the best decisions I ever made was travel I traveled for about a year and a half different places about 40 countries and it was awesome and really cleared my mind and took a lot of the pressure off of me from society and culture to you know have this predetermined long term stable path.

Travis: [00:45:28] It's like people kind of panic in your life. A lot of times if they can't say like oh yeah my son, daughter, or nephew whatever is on this 20 year path to becoming a career prosecutor or a you know a career or a fund manager or they're doing you know investment banking one day they'll be a partner. And it's like you don't have to worry about that. You don't have to let people's pressure influence your decision making. So I think that's fantastic advice. I feel like that's one reason why a lot of law schools are going to close and just continue to close in the next 10 years.

Travis: [00:45:58] I think that there are two kinds of law schools that make sense to exist. There's one kind that produces people who are going to be doing you know the law work for the state that the law schools located in. You know so like regional law schools and like Texas Tech you know that's going to be producing people doing right estates and trusts for people with less than a million dollars of assets you know. And then you know there's those people that those top 20 schools that are going to be producing lawyers who are going to be working at the giant prestigious law firms of the world and you know D.C. kind of district courts and that kind of thing.

Jessica: [00:46:31] Yeah. And you know I will say just generally and this is something I didn't before going to law school but I'm subscribed to all the different like Bloomberg Law and lottery 60 alerts and news stories and stuff. There's been a lot lately talking and this is not something that's new but it's it's really being talked about but sort of the mental health issues and the addiction issues that exist in the legal profession.

Jessica: [00:46:55] I think the two professions that is highest in are like doctors and lawyers and so it's not necessarily if it's you. But it's also all the people you're going to be around. And so I think that that's something just to sort of think about like there's a reason that that's prevalent in this industry. It can be a really hard job and those big laws like they pay you great they pay you great for a reason and they expect for your entire life to be that job and so I think that that paycheck is great. But what I have found is most people because I have had friends that have taken jobs, sort of sacrifice their life for the money and not one of them has said it's worth it like even for a year. They're like I can't do it. So you know I think there is a lot of value in sort of finding something that doesn't make you want to go crazy.

Travis: [00:47:44] That is fantastic advice. So thank you so much Jessica for being on the show. It was really great to have you.

Jessica: [00:47:52] Absolutely. Yeah. Thank you for having me. It was a lot of fun.

Travis: [00:47:55] And that's the end of today's show. If you know that you need a student loan plan get one set up today at studentloanplanner/book if you know that you need to refinance your loans. Check out studentloanplanner.com/refi and get a cashback bonus so you can start saving money in your interest today. And finally if you like the show leave us review on the favorite place that you listen to podcasts or share it with someone who owes more than you.