Over the years we’ve noticed sub-groups within the broad category:
- the newly minted JDs
- those considering buying in to a partnership
- seasoned attorneys with high incomes.
The financial planning needs of each group are quite different – but there is one common thread that runs through each of these groups – cash flow issues.
Deferred Gratification
And these issues tend to arise from deferred gratification. We all know what that is – postponement of pleasure or of receiving a benefit to some point in the future when it can be enjoyed even more fully.
The newly minted juris doctor is probably about age 26 and has spent eight years as a poor college student. Now, he or she is out of school, earning a decent buck, and wants to live! Cue the Mercedes or BMW lease, and the Brickell apartment. No more deferred anything! The goal is reached and it is time to live!
We see this theme to some degree throughout our work with the legal eagles. I earned this! I’m a working professional, highly educated, so at this point in life I should have everything I want!
There are always financial constraints.
The bad news here is that there are always financial constraints. Have my readers ever read about Hollywood stars – or lottery winners – who went bankrupt? How does this happen? Because they literally blew through all their money, with the presumption that the income source would never dry up.
Financial planning is always a discipline of allocating finite resources amongst competing priorities. Dinner out tonight at the new one-star restaurant, or an IRA contribution? S-Class lease vs. student loan payoff? When the source of income is limited – as it always is – money must be allocated in a thoughtful way to achieve one’s financial goals.
Partnership Distributions
Along the same lines, another financial issue that faces attorneys who’ve achieved partnership is the uneven nature of profit distributions. Typically, attorneys have a base salary, and then annual partnership distributions, which can be quite large, depending on the success of the partnership that fiscal year. An easy trap for an attorney is to begin to spend that partnership distribution before it is in hand. (Our rule here at CameronDowning is that until the EFT or the wire hits your checking account, the money isn’t yours.) So debt begins to build up, it is paid off when the distribution is received, and the cycle repeats. The financial planning issue here is to get out in front of the cycle, and eschew debt.
Student Loans
Ah, student loans – a topic that has changed significantly since this post was first written. Loan repayments are now well underway, and the landscape has shifted considerably in 2026.
The most urgent development for attorneys on income-driven repayment (IDR) plans: IDR forgiveness is taxable again as of January 1, 2026. A temporary exemption under the American Rescue Plan Act shielded IDR forgiveness from federal income tax from 2021 through December 31, 2025. That provision expired, and the One Big Beautiful Bill Act did not extend it. Any balance forgiven after 20 or 25 years of qualifying IDR payments – often called the “IDR tax bomb” – is now treated as ordinary income in the year of forgiveness. For an attorney with a large loan balance, this could mean a tax bill of tens of thousands of dollars in a single year.
The core warning in this post remains fully valid: if you’re planning to “wait out” forgiveness, you don’t care because in 20 or 25 years it will be forgiven, right? But the amount forgiven is a taxable event. Take that amount times your marginal tax bracket, and you now owe a big chunk to the IRS. All you’ve done is swapped one overlord – the student loan people – for another – the IRS.
Important exceptions: Public Service Loan Forgiveness (PSLF) – available to attorneys employed by government agencies or qualifying nonprofits – remains permanently tax-free at the federal level. Teacher Loan Forgiveness and Total and Permanent Disability discharges are also still tax-free.
Additionally, the OBBBA restructured repayment options significantly. For loans disbursed on or after July 1, 2026, new borrowers will have access to only the Standard Repayment Plan and a new Repayment Assistance Plan (RAP). Existing IDR plans (PAYE, ICR) will sunset by July 1, 2028. If you are on one of these plans, you will need to transition to either Income-Based Repayment (IBR) or RAP before that deadline. Borrowers need to be very careful about unpaid interest capitalizing and the loan balance increasing over time.
Given all this, the case for aggressively paying down student loans – rather than waiting decades for forgiveness – has never been stronger for most high-earning attorneys. This is exactly the kind of analysis we do at CameronDowning.
Lots of tools in the toolbox
If any of these issues hits home with you, please have a look at our financial planning package designed for attorneys elsewhere on the website. We’ll begin by analyzing your cash flows, look at your tax situation, and see what insurance you have in place. Maybe you should forgo the benefits of married filing jointly in favor of filing separately, to keep your income-based student loan repayments manageable. Maybe you should take better advantage of the benefits available to you at your firm. And maybe you need to make some hard decisions and lifestyle choices. Deferred gratification continues on throughout life.
