Big firms help graduating law students cover licensing costs in various ways. My to-be law firm cuts each to-be associate a check for $15,000. It’s a lot of money and I am very grateful to have the firm covering my bar exam expenses. But I think it’s easy to overestimate what that money will buy you and I’ve heard a lot of questions about stipends from other law students lately, so here are some answers from my point of view, based on the benefits that my firm offers.
Q: Are taxes withheld from the bar stipend?
A: Yes. The amount withheld will vary depending on state income tax and your completion of a W-2. In my case, $4,480.86 was withheld.
Q: If you will be working in an office in a state that levies state income tax, but are currently living in another state that does not levy income tax, will you still have to pay state income tax to the firm’s state?
A: In my experience, yes. I currently live in Texas, where we do not pay state income tax, but I will be working in California, where there is a state income tax. If you have a different answer to this question, I would love to hear about it.
Q: If you don’t end up starting work at the firm, do you have to pay back the stipend?
A: Yes. At my firm, if you fail to start work or if you quit within a certain amount of time from starting at the firm, you must pay back the stipend in full or in part.
Q: If you don’t meet the GPA requirement of your offer, do you have to pay back the stipend?
A: The firm hasn’t addressed this explicitly, but I assume so. Let’s face it, if I don’t make the GPA cut, I won’t start at the firm and the rule is that if you don’t start, you pay back the money.
Q: You just won the lottery! It doesn’t cost very much to take the bar exam, right? You should go shopping! Isn’t it time to buy some Manolos?
A: I paid $63 to take the MPRE, $97 to register with the California State Bar, $431 to file my Moral Character Exam, and about $3,000 for a California Bar Exam review course. I still need to pay $556 to take the exam and $125 laptop fee–to take the exam on a laptop instead of handwriting my answers. That’s a total of $4,272 and there’s probably more fees out there I’ve overlooked. (I probably could have shopped around for a less popular, but cheaper bar review method.)
So, what does that leave? $15,000 – $4,480.86 (taxes) – $4,272 (bar exam fees and prep) = $6,247.14. But that’s not shopping money. That money is intended to cover living expenses while I study for the bar exam in June and July. So that works out to $3,123.57 per month. Again, so happy to have the firm covering my expenses, but I don’t really think there’s money in the budget for Manolos or a trip to New Zealand. In a tactical error, my current lease ends the day after graduation and, unless I want to move between finals and the bar exam (which intimidates me since I’d be doing it all on my own and I have no idea where I’d move to), I’ll be paying outrageous month to month rent through July.
Q: Is the bar stipend intended to cover your moving expenses?
A: No, not at my firm. They have a separate program to cover moving expenses. The wrinkle here is that the firm will not confirm our start dates until some unspecified date in April 2010. It is likely that my offer will be deferred for a number of months, but it is not clear whether the firm will offer a deferral stipend. This makes it a little difficult to decide whether I’ll move, where I’ll move, what my budget will be, and whether I can get a legit interim job. I have a night and weekend job lined up, but not full-time interim job just yet.
Q: How do you cover all these costs if you don’t have a firm giving you a stipend?
A: I’ve seen e-mails from the law school indicating that you can take out additional student loans to cover these costs, but I don’t know a lot about this–personally.
This is what I know so far. If you have any tips or sage advice, I would love to hear it! If you have questions, post them in the comments and we’ll find an answer! Remember, law firm policies vary so be sure to ask you HR contact questions.
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