Reimagining Law School Debt
Our loans for the Spring semester came in recently. Although I am only in my first year, I already have accrued quite an impressive sum of debt that will grow for at least the next two and a half years. Sometimes the money seems make-believe: tens of thousands of dollars per semester in tuition, thousands spent on casebooks, the cost of living in New York City (a city so expensive it practically has its own exchange rate compared to the rest of the country).
My loan money comes to me as digits in my bank account that decrease precipitously until the next semester’s refueling. I never see the money. It is almost irrelevant how much my housing, my tuition, my fees, my anything cost, because my school and my government assign me some arbitrary sum of numbers that I turn around and hand right back to the school or government or shopkeeper. It is like the money does not even exist, but it will follow me for 10 years after I graduate.
Loans are pretty scary; debt is stressful; money is generally problematic. Debt is carefully considered when deciding whether to go to law school at all.
As a friend recently pointed out, with tuition around $26,000 per 14-week semester, I paid $120 per class hour this year (this is $2.40 per minute; each class “hour” is a 50-minute segment). If we think of our money as paying for individual classes, it can get a little hectic. Miss a train and show up 10 minutes late for class? $25 gone. Professor goes off on a 20-minute tangent? $50 burned. Sleep in on Monday morning and miss two two-hour classes? $480 out the window. This is a little misleading, though; law school is more than class. Instead, it is better to think of myself paying for education. I remember from my economics classes that education is a good that benefits not only the students, but also the society they contribute to. Because of this effect, rational students should be willing to pay more for education than just its value to themselves personally.
I like to think of it differently, not that I am paying for my schooling but that my school is paying me. I like to pretend I am a bank that my school believes in. When a person deposits money in a savings account, she actually gives cash to the bank in exchange for a set of promises from the bank–both the ability to retrieve the cash when she wants it and an amount of interest the bank will pay her for the cash. In return, the bank gets cash to play with. Usually the bank then makes investments or loans that will earn a higher rate of interest than it must pay to the savings account holder. People give money to the bank that the bank earns more money on. It is good deal for the person and a great deal for the bank. Banks know how to invest, and the more money they can attract to their savings accounts, the happier they will be.
So, instead of seeing a loan as a giant weight I must carry, I think of myself as the bank. My school invests money in me, and I use their cash investment to make an even better investment with a greater return. Just like a savings account, I am given money to play with in exchange for a promise to pay interest and pay back the principal when requested. Education, then, is how I chose to play with my money.
It’s a small distinction, but it makes me feel more valuable and less financially fragile.