Law school graduate learns how to pay off a heavy debt
Andrew Carmichael Post is used to fast-tracking his way through life.
At 13, when most boys are fretting about the perils of girls and middle school, Post was attending California State University-Los Angeles, working on degrees in computer science and applied mathematics. At 18, Post was entering the University of Southern California’s Gould School of Law. At 22, Post became a member of the State Bar of California.
Along the way, the U.S. economy took to the slow track. Like many in his generation facing the worst job market in decades, Post opted to stay in school.
The Altadena, Calif., resident is now 24 and has landed well-paying work as a programmer for a website operator. But he also faces $215,000 in student loans, with a minimum monthly payment of $2,756.
“It’s like some sort of nightmare where someone gave me a bank mortgage but forgot to add the deed to the house,” Post quipped.
To save money, Post has moved back into his boyhood bedroom, putting him among the 36 percent of Americans ages 18 to 31 who still live with their parents. That’s the highest percentage in four decades, according to the Pew Research Institute.
Although Post’s debt is higher than average, it underscores a growing problem that has begun to affect how quickly young adults are able to contribute to the U.S. economy, said Lauren Asher, president of the Institute for College Access and Success, an Oakland, Calif., nonprofit.
“It used to be that people with student debt were more likely to have a home mortgage,” Asher said. “Now, they are less likely to have one.”
Other experts have called millennials the “failure to launch” generation. There was nothing wrong with Post’s launch; it just was just ill-timed.
In 2009, one year before Post would seek a full-time job, “141 employers had attended (on-campus interviews) at USC law school,” he said. “The following summer, I competed with 300 people in my year for the attention of only seven private employers and a handful of government agencies.”
Unable to secure full-time employment, Post put out his legal shingle. He took on small-business clients with limited budgets. He also fell back on his programming skills for other clients. The pay was difficult to predict.
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“I was never really impoverished,” Post said, “just terribly inconvenienced by not being able to collect on a legal bill or a programming bill I’d sent out two months earlier. What little stable income I had wasn’t enough to get by on. There were times when I had to decide on whether to buy enough gas to get back to court or buy lunch.”
Post struggled to avoid feeling discouraged.
“The last time I went into court, I was wearing something that I got at Goodwill,” Post said. “The two lawyers on the other side were each wearing suits worth more than my car.”
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Things are looking up for Post, who estimates his annual income has risen to between $80,000 and $96,000, cobbled together from four sources, including a part-time teaching gig and the new full-time programming job with a 401(k) matching plan.
But he still needs to make the right financial choices to reach his short-term goals: new shoes, his own apartment, a later-model used car rather than his 187,000-mile mid-1990s Toyota sedan, a gym membership, his first smartphone.
Longer term, he’s eager to avoid his worst fear: “reaching my 30s, wanting to get married, buy a house, start a family, with bad credit and a lot of this debt still hanging over me.”
To fee-only advisor Lara Lamb, director of financial planning for Abacus Wealth Partners, Post is at a crucial phase.
After depriving himself of some of the common perks of a successful 20-something, Lamb said, Post could reach too quickly for those freedoms “and severely limit his ability to strive for success in several financial areas. Having multiple goals is very important.”
Lamb added, “He needs to pare down his debt, but he also needs to build up an emergency fund, repair his credit, get on a budget and begin contributing to his retirement by embracing his company’s matching 401(k) plan.”
For many of her clients, Lamb advises setting up several bank accounts to aid in budgeting.
One main account collects all of Post’s income. Regularly scheduled transfers go to smaller accounts dedicated to paying his debt and other regular bills, building up emergency cash reserves equal to three months of expenses, holding funds for discretionary spending and salting away something for infrequent bills.
Making these transfers automatic means Post doesn’t have to think about them as often, Lamb said, “but he still needs to acquire the discipline to accept that when those spending limits have been reached, he can’t spend more on those things until the next deposit arrives.”
Another key recommendation concerns Post’s living situation. Because he gets along well with his mother, who is a physics professor, and his father, who is a former aerospace engineer, Post should remain at home for as long as that feels comfortable, Lamb said.
The reason is that immense minimum student loan payment of $2,756 a month.
Avoiding the typically high cost of leasing an apartment in Los Angeles, plus potential move-in costs such as a security deposit and first and last month’s rent, will enable Post to build an emergency fund in just one year, Lamb said.
Then, in Year Two, Post can take the $1,045 a month that went into his emergency cash fund in the first year and add it to his debt payments.
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Post, who has student loans from seven sources with interest rates ranging from 4.5 percent to 8.5 percent, should apply the extra payments to the most expensive loans, she said.
If Post sticks to the plan and remains at home with his parents, Lamb said, “his debt could be paid off in less than six years.”
“For many young people, staying at home wouldn’t be something they would want to do,” she said. “But given his willingness to do that, and his desire to pay off that debt quickly, this will give him a big head start.”
Lamb did have one warning. She is concerned that the large amount of student debt Post faces could drive him to push too hard, “devoting so much of his current income to debt repayment that he doesn’t reward himself at all for the success he has begun to achieve.”
Lamb described it as being similar to a person so intent on losing a large amount of weight quickly that he diets to excess and ultimately risks failing. Lamb wants to make sure that Post includes regular and reasonable perks, such as continuing to devote resources to his love of drawing.
Post has described himself as a very frugal traveler in the few vacations he has taken.
“He should spend money on areas that he values, such as his art hobby, socializing with friends and travel, so that he can stick to the budget without being driven to binge-spend,” Lamb said.
Post said he found his new road map almost overwhelming after months of wondering “whether I could ever have good credit.”
“It’s hard to imagine feeling better right now,” Post said. “It feels like I have a future, a good future.”
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