How an Attorney Working for the County Government Does Money

Elizabeth (not her real name) is a 33-year-old criminal defense attorney in Phoenix, Arizona.

So, Elizabeth, how much are you making?

I make $78,000 per year, with an additional $7,200 paid to me as reimbursement for student loan payments.

Reimbursement for student loan payments? How does that work?

I work for the county government. There is a program allotted for all attorneys called the Loan Repayment Assistance Program. You submit proof of your student loan payments each financial quarter, and the county reimburses you up to $7,200 per year.

Got it. But you’re paying more than $7,200 per year towards your student loans, right?

Yes. I pay approximately $1,250 per month for all of my student loans.

How many loans do you have to pay off?

Well, I have one consolidated loan for all the federal student loans. When I went to law school, there was a cap of $18,500 for federal loans each year to graduate students. I had to take out private loans to be able to afford law school. And then I took a bar study loan out as well. I owe $200,000.

So if I’ve done the math right, you’re putting roughly 25 percent of your post-tax income towards student loan repayment.

No. As a county employee, nearly 12 percent of my paycheck is automatically placed into the Arizona State Retirement System (the pension for all state and county employees). So my actual wages come out to $62,000 or so.

How long will it take to pay your student loans off?

If the Public Service Loan Forgiveness Program still exists when I am 41, all of my federal debt ($125,000) will be forgiven, because the program forgives all debt once you have made 10 years of qualifying payments and you work in public service. My private loans ($75,000) won’t be paid off until I am in my mid-50s.

So 12 percent of your income goes towards retirement and a large percentage goes towards student loans, even though you get some of that reimbursed… where else is your money going? Do you feel like you’re earning enough to cover what you need?

I have a small amount of credit card debt ($1,000) that is on a CareCredit card, which I use exclusively for veterinary expenses for my dogs. I have four dogs, and one has cancer and another had an emergency earlier this year. I rent an old two-bedroom house for $850. I also have about $1,000 in Visa credit card debt.

I am definitely on the edge of not being able to afford my day-to-day expenses. But then, to be honest, I struggle to stick to a reasonable food budget.

How much do you spend on food?

I’m embarrassed to say, compared to all the other people who have been in this column. I eat lunch out pretty much every day at work. And my job is so high stress, especially when I’m in trial, that I stress eat and have a hard time going home to make dinner, rather than grabbing something on the way home. So I probably spend $600 a month.

It’s all good. We all have different priorities. 😀

Mine is just trying to survive!

I am guessing that the food issue, while being an area where you might be able to cut back, isn’t really the financial problem here. Would you agree?

Yes. It’s obviously the student loan payments. I drive a 12-year-old car and I’m not sure how I will afford a new one when this one breaks down.

Is it possible to make lower student loan payments, or are you stuck with this amount?

I am stuck. There is no flexibility with private loans — you either pay the amount or you default. For federal loans, I am currently on the income-based repayment plan, which calculates payments based on your salary.

Bear with me on this, because it get ridiculously complicated: because I am married (though currently separated from my husband), the federal government takes my husband’s income into account when calculating payments. He makes more than I do. So to avoid payments in excess of $900 just for the federal loans, I have to file my taxes as married filing separately. Then they only take 1/2 my income and 1/2 my husband’s into account (Arizona is a community property state). But because I’m filing “married filing separately,” I am no longer entitled to the $2,500 loan interest deduction when I file. So it’s a big tradeoff in order to qualify for income-based repayment. I have to be on income-based repayment in order to get my loans forgiven in eight more years.

As a side note, I am super irritated that lawyers who went to law school after I did now get way better repayment plans. There is an attorney in my office with $400,000 total student loan debt between him and his wife, also, an attorney, and they pay less than $400 a month total. I pay $690 a month in federal, and then $580 in private loans.

Wow. Yep. Okay. I’m crossing your fingers for you and the next eight years.

Me too! The federal government could eliminate the program at any time. The first people eligible under the program are due to be forgiven in October 2017. We will see what happens.

So… how do you deal with your money? How do you manage the day-to-day, literally and emotionally?

Well, I tend to spend money impulsively when I actually get some. I got a decent tax return this year b/c my husband made less this year, so I withheld too much. When I got my tax return, I promptly bought a ticket to Peru for a 2-week trip in September. Haven’t paid for or planned anything on that yet, but I’ll find a way!

I’ve tried using You Need a Budget, and that helps a lot. But I go over that budget every single month.

What ends up pushing you over your budget?

Food. Picking restaurants over making dinner. So then I don’t save as much, and it instead goes to food.

Are you saving up an emergency fund or something like that, then?

In theory I am! For each paycheck, 10 percent of my take-home ($1,700) goes into my savings account. Then I use that for car repairs, other situations that pop up. I only have a few hundred in it right now.

But! I do have a 457(b) retirement plan, which is for government employees only. I contribute about $2,600 a year to that deferred compensation plan, and if I do have a real emergency, I can withdraw from that plan without any consequences other than getting taxed on it. It’s way better than a 401(k), because you can take money whenever you want and it’s not a loan you have to pay back. I have about $15,000 in that account. I’ve never had to withdraw from it.

That’s the money that is automatically deposited into your plan, right?

No, it’s an additional plan. So I have a pension plan where almost 12 percent is automatically placed into. Under that system, it’s a defined-benefit system where I can retire at age 53 if I want, or wait longer and get a better pension. The deferred compensation plan is an additional, optional retirement account. The only way I would be able to take any more out of the pension plan is if I leave government employment entirely.

I contribute $100 each paycheck automatically into the deferred comp plan.

Oh cool!

Yeah it’s pretty nice. I get paid substantially less as a government employee, but I do get some good benefits out of it.

So from my perspective, you’re doing a lot of things really well!

Why thank you! That’s surprising to hear. 😀

You’re saving, you’re saving for retirement, you’re saving extra for retirement, you’re paying off your loans… it’s hard to make ends meet but you really seem to be doing well with what you have.

What do you think you do well financially, and what do you wish you could do better?

I do well at saving for retirement, and I do well at paying all my bills every month. I am separated from my husband, so I am living entirely off of my income only. I am good about trimming some expenses. I don’t have cable; just internet and Hulu and Netflix. I don’t drink alcohol, so I don’t spend any money on that! 😀

But I do not stick to a budget. I could reduce my expenses by a lot if I just bought lunch from home and made dinner every night. I didn’t mention that I also have to have a $1,000 flexible savings account just for my annual medical expenses. But I am good at choosing to rent a house that is small and basic for my needs, rather than getting a larger, fancier place. And my husband and I paid down $30,000 in credit card and medical debt over five years, and we paid all that off in January 2016. So I am happy to be nearly-debt-free (other than my student loans).

Congratulations on your debt repayment!

Thanks! We had to close all of our credit card accounts to qualify. So I got my first new credit card last fall, and I have an interest-free balance on the vet credit card. All things considered, my life is okay!

All things considered, indeed. 😀

With that in mind, my last question: what advice do you have for Billfold readers?

DO NOT GO TO LAW SCHOOL (or other graduate school) UNLESS YOU WILL BE ABLE TO GO FOR FREE! I love my job, I love what I do, I’m passionate about representing my clients, but I graduated college with only $20,000 in loans. If I had to do it all over again, I would not have gone to law school. I would have had much more freedom, and would have been happy with making a lot less.

I’ve been in repayment for nine years, and my balance has only gone up.

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