Kyle Zwiren, J.D.
Student loan debt is the second highest consumer debt category in the U.S., second only to mortgage debt.1 44.7 million Americans owe a combined $1.56 trillion.2
On average, law school is more expensive than all other graduate programs, with the exception of medicine and dentistry. As of 2012, the average law school graduate owed $140,616,3 and that figure has certainly accelerated since then.
Student loan debt is undoubtedly an enormous problem on a national scale. But until the government intervenes with a solution — and nobody is optimistic about that — what does that mean for young attorneys or your clients with children in this position?
Regardless of the problem’s severity, attending law school is still an excellent decision for many. When I advise my clients regarding their student loan repayment plan, I always start with the abstract before I narrow down to specific advice.
The conversation starts as I ask my clients to tell me why the stock market exists. Initial responses deal with investors — the stock market exists for 401(k) plans, or it exists so investors can make money. That’s when I rephrase the question and ask why the corporation would want to issue stock to the public.
Then the lightbulb goes off — the stock market exists to allow corporations to secure financing so it can grow and make more money.
The same concept applies to law school loans: one can only practice law if they have a legal degree, which often requires financing. For many, without taking on debt, they would otherwise be precluded from practicing law, earning their salaries, and having meaningful work.
The next phase of the conversation deals with the difference between good debt and bad debt. Good debt has (1) a long repayment term, (2) a low interest rate, and (3) interest payments may be tax-deductible.4 Student loan debt qualifies as good debt, even for those who don’t qualify for the tax deduction.
In the discussion’s final phase, I ask my clients if they would rather have (1) less debt or (2) more money. This generates another head-scratching moment. Many of my clients, and myself included, were taught to avoid debt or pay it off quickly. But when we reconsider debt, and instead call it “leverage,” we think of it is a means to an end — the end being increased wealth.
Once the concept has been reframed, we can then explore strategies to pay off their debt and build wealth at the same time. In next week’s column I will identify how Financial Architects strategize to pay off student loan debt.
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1Zack Friedman, Student Loan Debt Statistics in 2019: A $1.5 Trillion Crisis, https://www. forbes.com/sites/zackfriedman/ 2019/02/25/student-loan-debt-statistics-2019/#259d2570133f, Feb. 25, 2019.
2Id.
3https://studentloanhero.com/student-loan-debt-statistics/, updated Feb. 4, 2019.
4If you earn less than $65,000 you can deduct up to $2,500 from your taxable income for interest paid on student loans. If you earn between $65,000 and $80,000 you can deduct a reduced amount. Brianna McGurran and Ryan Lane, How to Get the Student Loan Interest Deduction, https://www. nerdwallet.com/blog/loans/student-loans/8-student-faqs-taxes/, Feb. 28, 2019.
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Want to talk to Kyle about student loans or other topics featured in The Economic Blueprint? Please email him at kzwiren@financialarch.com or call him at 248-482-3622.
Kyle Zwiren, J.D. works with Financial Architects, Inc., an independently-owned company located in Farmington Hills. Kyle and his team serve attorneys and other professionals to help them design financial plans in line with their goals and based on optimal efficiency. Kyle practiced law prior to becoming a Financial Architect and left the practice to follow his passion.
