Those the Legal Profession Leaves Behind

One of the downsides of current tuition discounting practices is that the students who pay full tuition are often those who can least afford to. On average, getting a JD increases earning power. But we know that those benefits are unevenly distributed—there are some graduates who have a hard time either entering or remaining in the legal profession. It can be especially hard for women to re-enter the profession after stepping away.

A remarkable bankruptcy opinion from the Western District of Washington illustrates what can happen when things fall apart. Legally, it is interesting for its discussion of how income-based repayment of student loans interacts with dischargability in bankruptcy. But the court’s factual findings and discussion of the debtor’s circumstances are especially eye-opening.

The debtor’s educational path started in community college, where she got an associate’s degree. She later finished a B.A. in political science at the University of Washington and then obtained a J.D. from Pacific McGeorge. She took out a bit more than $300,000 to finance her various degrees. Along the way, she married and had children. She also had mental-health struggles and was diagnosed with bipolar disorder. In spite of her struggles, she managed to achieve academically and “consistently held some form of employment” when out of school.

Her family obligations and financial situation became much more difficult right around the time she was graduating from law school. She was pregnant with triplets who were born very prematurely. The triplets required lengthy hospitalizations and all three had some level of disability. One of the triplets had particularly severe disabilities, and even eight years later cannot walk, read, write, or count to 100. The triplets’ older brother was apparently diagnosed with autism during these years. The debtor's husband divorced her—he continued to pay child support, but the court opinion makes it clear that she had primary custodial responsibility for five children, four of them disabled.

It spite of those difficulties, she passed the bar and got a job as an associate at a law office. However, the court stated that the position did not offer her “an advancement track that would that would likely improve her financial situation.” As a result, she attempted to set herself up in solo practice. In order to establish her reputation and build her practice, she engaged in “volunteer and reduced-fee legal work.” Again, however, she was unable to earn enough money to support herself. She worked side-jobs as an Uber driver and a pizza delivery driver. She got a real-estate license and sold a couple of properties.

Ultimately, none of those ventures ended up being sufficient to sustain her, and she took a job as a waitress in a nearby casino. The waitressing job offered health insurance and allowed her to work nights and weekends in order to take care of her children.

She filed a Chapter 13 bankruptcy case and made the required payments for three years. At that time, the court had to decide whether to discharge her student loans, which had grown to $484,964 with interest and penalties. Navient/SallieMae stipulated to a discharge of the $68,967 owed to it, leaving the court to decide what to do the remaining $415,997.

In performing the “undue hardship,” analysis, the court made a likely accurate—but still very disquieting—conclusion. The court found that the debtor’s “work history as an attorney did not result in sufficient income to to repay her student loans and take care of her dependents,” and that, in fact, “she is likely earning more with benefits [through waitressing at the casino] than [she] could through practicing law.”

The final question before the court was how to consider the existence of income-based repayment programs in the undue-hardship analysis. The student loan companies argued that since her income was so low and her family expenses so high, her IBR payment would be $0 a month. They therefore opposed discharging the debt, preferring instead to take a wait-and-see approach as to whether she would be able to make payments some time in the next 25 years.

The court, however, held that such an approach would not advance “either the policy of repayment of student loans or the debtor’s fresh start.” The court therefore discharged nearly $200,000 of her debt. It left $220,000 intact, concluding that the debtor could potentially pay it off over the next decade if she put all available resources toward the debt. This would not leave her any money to save for retirement, but the court noted that “in ten years the Plaintiff will be 55 years old and with some time left in her working life.” If she is still able to waitress at age 55, she can start saving for retirement at that time.