Lifting the Burden: Law Student Debt as a Barrier to Public Service

one with the lowest total payments in interest and principal. She calculates that,under the ten-year plan, she will have to pay approximately $1,065 each month forten years, a total of $12,780 per year. 2021Ms. Median’s Loan Payments on a Standard Ten-year Plan: $1,065 permonth and $12,780 per yearMs. Median has been a good student and has succeeded in obtaining two offers ofemployment. One is as an assistant prosecutor in the largest city in her state. It willpay her a gross salary of $40,000. That was the median salary in 2002 for law schoolgraduates taking jobs as prosecutors. 21 The other offer is as an associate in a firm of60 lawyers in the same city. That job would pay her $80,000, the median salary forlawyers in firms of this size. 22Ms. Median would like to take the government job. Like other law studentsthinking about government, she is attracted by the challenge of the work and theopportunity to contribute to society. 23 $40,000 as a starting salary sounds veryattractive – at least until she calculates how much disposable income she will have.As a single person with no dependents, her total federal and state income taxes andpayroll taxes on an income of $40,000 will be approximately $10,293, 24 leaving herabout $16,927 to live on after taxes and the $12,780 payments on her debt. $16,927is only slightly more than she has had available as living expenses as a student, soafter law school she will be able to live only slightly better than she is now. She willbe paying about 43% of her after-tax income toward her loans.On the other hand, if she takes the job in the law firm that pays $80,000, her taxeswill be higher (approximately $26,488), 25 but her loan payments will be the same andshe will have about $40,732 left over after paying taxes and her loan installments.Lifting the Burden:The Problem and Its SolutionsIf Ms. Median Takes the Job as a Prosecutor:Salary as a Prosecutor: $40,000State and Federal Income Taxes and Payroll Taxes $10,293Annual Loan Payments on Ten-Year Plan $12,780Total of Taxes and Loan Payments $23,073Discretionary Income for All Living Expenses $16,927Ms. Median’s Loan Payments as a Percent of Her After-Tax Income: 43.02%20This estimate assumes an interest rate of 8.25% for Stafford loans (the cap) and 8.5% for the private loan.21National Association for Law Placement, Jobs & J.D.’s: Employment and Salaries of New Law Graduates,Class of 2002.22Id.23These are the two most common reasons for wanting to work in government found in the study ofgraduating law students in 2002. Equal Justice Works, National Association for Law Placement andPartnership for Public Service, From Paper Chase to Money Chase: Law School Debt Diverts the Road to PublicService, 22 (2002). The report is available at www.equaljusticeworks.org.24These calculations are based on 2003 income tax rates for federal and payroll tax, including an exemptionof $3,050, standard deduction of $4,750 and state income tax rate of 5.5% (income tax rates vary from stateto state, with some states as low as 0% and others as high as 9%).25Id.