Today we are talking about the common practice of taking out loans to fund studying for the bar ( as well as my experience in funding bar study). I was a law student many years ago, and I can speak from experience about how that has played out for the folks who did, and the folks who did not use loan money to travel.
Let’s back it up and talk about law school and the bar exam
I knew about the bar exam when I started law school. But it was something that seemed so far away. I didn’t really even think about how it would play out. Or how I would even pay for things while I was studying for the bar.
Against the wishes of the law school I attended, I worked steadily throughout law school, sometimes as much as 20 hours a week or more.
I have no doubt that working so much hurt my grades and my performance in class. I had fewer hours available each day to read cases, and to outline or prepare case briefs.
When it came time to study for the bar, I didn’t question my decision to keep working.
After all, I needed to pay bills, and the idea of taking out additional loans to study for the bar seemed ludicrous.
Taking and Passing the Bar the First Time
It didn’t even occur to me that I wouldn’t pass the bar on the first try. I just went about studying for the bar as I did with everything I had done in school. I put in the hours that I could, and did my best, trusting in my powerful and excellent memory, as well as the touch of luck I always seemed to have when it came to things I tried.
I worked through studying for the bar, and I could even say that I didn’t even take it that seriously.
To my surprise, I didn’t pass the bar on my first try.
In hindsight, I can see why I didn’t. I didn’t really dedicate myself to studying. I didn’t have any fear of failing to motivate me. I also didn’t understand what exactly I needed to do in order to pass the bar. (Stop watching the lecture videos and start taking MBE practice tests!)
I also didn’t spend enough time studying, as I was frequently at work.
Getting ready to take the bar
Here’s what the timeline looked like. For me, law school ended the first week of May. This gave us the rest of May, all of June, and half of July to study for the bar.
Then bar results came out in September or so, and then everyone could go to work.
Realistically, that’s about three-five months worth of expenses, to keep your head above water until you could go to work legitimately as a lawyer.
What I saw though was that people were maxing out the amounts of money they could take out to study for the bar. There was a special loan offered by Access Group (or some other provider) at the time that was a 9-10% interest rate loan, and they were giving out 10k-20k dollar loans.
I saw a law student use the bar loan (which did have a forbearance period on payments) to pay off a credit card.
I saw a law student purchase a vehicle.
They were then using that money (taken out at a high interest rate compared to regular federal loans, which were around 2-3% at the time) for other purposes.
But the most common abuse of this loan I saw was to fund a huge trip after the bar.
After all, once the test was over, no one could go lawfully work as a lawyer until after the results were in.
And…..didn’t we all need a reward for completing law school?!?! For taking on such a massive challenge and succeeding?
So here’s what people did. They maxxed out the bar loan options, and bought plane tickets. Some of these students traveled around the world for two months. Thailand. Vietnam. Australia. Peru. Brazil. France. England.
You name it. They went everyone, all on borrowed money.
Was this against the rules?
Probably. But who was going to check to see how that money was spent?
I did take out a small bar study loan, to pay for rent, food, and gas. I also continued to work my regular schedule of 15-20 hours a week. I thought about taking out more money to pay for a trip like my friends were doing. But I had gotten a clerkship that would be starting in August of that year right after the bar.
In hindsight, I probably should have worked out a budget for those bar study months, and found a way to pay to live during that time without working.
Or I should have moved home and drastically reduced my expenses.
Was taking out additional debt to travel a good idea?
For some people, maxing out the bar loan may not have been a good idea, but it wasn’t a bad idea for them.
If you were a law student who had already accepted and received a lucrative job offer from a law firm, you know that you’d be able to make payments on the money you borrowed. Further, you knew that it would be a long time before you’d be in a place in the future to be able to take a round the world trip. After all, as a junior lawyer in a big firm, you probably would be sleeping in your office for the next two years at least.
However, this plan only worked out if you actually had a job waiting for you that paid well….and you actually passed the bar.
There were a lot of people (in addition to myself) that didn’t pass the bar on the first try. This isn’t anything to be ashamed of, honestly, because the bar is hard. In some states, the passage rate is less than 50%.
In states with a difficult bar exam, it is a pretty huge gamble to take on massive amounts of high interest debt, when you have no idea whether or not you’ll be able to make payments on it.
And in some cases, there were law students who defaulted on their student loan debt in that first year post-law school when the bills became due, because the never started working as a lawyer.
Then taking out that extra money was obviously a Bad idea.
The Good idea/Bad idea question was only answered in hindsight for these students. Some of them sailed right through the bar, and paid off those loans quickly.
Others did not. And have not paid for that trip, even close to twenty years later.
I felt it was vital to clear by student loans ASAP
I don’t blame those law students who took out tons of debt to enjoy themselves after the bar.
I get it.
I went on my own trip a year later, after I took and passed the bar, after I worked for a year as a judicial clerk, after I had landed my first real lawyer job to begin later in the fall.
But I didn’t finance that trip with student loans. Instead, I saved money from my job, living as cheaply as possible.
I think overall, I probably accrued about 25% less debt than my colleagues in law school, and paid my debt off about 75% sooner.
As soon as I started working, I started making payments, even during the forbearance period. I paid all of my bonuses against my loans. I avoided taking big trips, and making big purchases. I delayed buying a house, kept driving my conservative car, and continued to live the life of a law student.
I managed to clear the debt entirely within five years of leaving law school.
The reason I was able to do so in five years was two-fold. I put every available extra dollar to the loans, and I didn’t take out any debt that I absolutely didn’t need.
Some people live by debt. They believe that debt is the path to wealth.
Maybe that is true. But I have always felt like debt and large payments, especially debt that is unsecured by any asset, is a liability. After all, there’s no way to control everything. I learned that when I failed the bar.
I wanted to get my life back into my control, and that debt took control out of my hands.
In hindsight, avoiding taking out the extra debt was a Good idea
Looking back now, with the benefit of hindsight, I was 100% right to avoid taking out extra loans to travel after the bar exam.
As I mentioned above, I failed the bar the first time. This fact didn’t impact me financially, because I had already agreed to spend a year in a judicial clerkship, which did not require that I passed the bar.
But the debt I had did impact me when I became a lawyer.
What many people didn’t realize during law school, that I didn’t realize, was that the practice of law kind of sucks.
While some people love it, a large percentage of people really hate it.
I was one of those people.
I hated practicing law. But I couldn’t stop after law school, because I owed so much money.
Thus I had no choice but to go to a job that I hated every day.
I found that the Golden Handcuffs were a very real thing.
With an intense focus and discipline, I was able to pay off my debts quickly, get my finances in order, and when the time came to jump from my practice to other opportunities, there was nothing to stop me.
Now I spend a lot of time with my children, I work from home, I pick and choose my projects (like learning to start passive income earning blogs/websites), I can focus on my health and happiness. My colleagues are still at the office, suffering from high blood pressure.
After paying off my law school loans, I avoided as much unsecured debt as possible. Driving the same paid off car, paying off credit cards each month, avoiding drowning myself in stuff.
I have additional reasons to be glad that I avoided extra debt now in this very turbulent world that we live in. The stock market is bouncing up and down. Businesses are closing down. People aren’t spending money like they used to on lawyers.
Some people are freaking out.
I feel almost no financial stress. I don’t have any payments to make, aside from reasonable utilities and food/gas that I have to buy to live.
I know for a FACT that my colleagues are still paying off those debts that they incurred close to 20 years ago, despite having high paying jobs in high profile law firms.
I know for a FACT that many of my colleagues would be in a real dire situation if they lost their jobs, or their firms closed down for a month or more.
Yes, going to Greece after the bar exam was probably amazing. But not so amazing that it would be worth carrying the debt of the trip for 20 years.
Using student loans to travel is a bad idea
I know it is a common practice, but it is a bad, bad idea. My dad said this me to while I was in college, and I find it to be so true. He said that I would not mind making the payments at first, but that near the end of the loan, the last two to three years of payments, I would be kicking myself for taking out the extra money I really didn’t need to take out, because I would know that I’d be done with my loans.
I felt that way even with taking out the minimum amounts. I saw the end of the tunnel with my payments and I was so frustrated that I wasn’t already there.
People financed their trips with loans at really high interest rates, and ended up paying in interest pretty much what the entire trip cost.
Students partied it up for a few weeks, and then spent years paying for it.
Some of them never became lawyers, and have made no progress in paying those loans back.
Student loans are not dischargeable in bankruptcy, meaning those loans, that trip, has been a yoke around their necks for the past 20 years.
What would have been better?
If you are determined to take a trip after the bar exam, I’d make plans early. Start setting aside money for the trip during law school. If working isn’t an option, talk to your parents or family about putting together a fund for the trip as a gift. Take cans back and put that money into an account. Sell items on Facebook marketplace.
Don’t take out loans to travel.
Are you a law student getting ready to take the bar? Or do you have a child who is getting ready to travel around the world on a trip financed with student loans? Let us know about your experiences in the comments section below.
Emily Anderson is a mother of three children, all under the age of 10. Located in the Pacific Northwest of the US, Emily is a mom and part-time blogger, jumping in front of the computer when the kids are sleeping. She started this blog in April of 2019 and is proud that the blog is now paying for itself. If you want to know about her journey as a blogger, check out out her personal digital journal or her post about failing her way to blogging success.