In order to cover the tuition costs incurred due to law school, you can choose between federal student loans and private student loans. There are two types of federal student loans for which law students can qualify for. These are Direct Unsubsidized loans or grad PLUS loans. Firstly choose Direct Unsubsidized loans as it has lower interest rates and fees. But you may need grad PLUS loans too, as the amount in Direct Unsubsidized loans is limited.
Private lenders also offer law school schools or loans for the bar exam expenses. These loans cover all the law student’s specific needs like deferring payments during clerkship or fellowship. Your private student loans can also be used for your law school bar loans.
Table of contents
- Federal student loan options
- Private student loan options
- How can you pay for law school?
- Which law school loan is right for you?
- Repaying student debt after law school
Federal Student Loan Options
The U.S Department of Education issues loans for various programs like UnderGraduates, Graduate students. They are offering loans to students pursuing varying levels of education.
William D. Ford Federal Direct Loan (Unsubsidized)
You can borrow up to $,20,500 per year
The current interest rate is 5.84%
The origination fee is 1%
No requirement of credit history check or co-signer
Up to the full cost of attendance at your college.
Current Interest Rate: 6.84%
Origination fees: 4.3%
Do not require any credit history
A cosigner may be required
For many students opting for law school, with these two loans, they can possibly finance their entire education( depending on their additional living expenses/ housing costs that may arise.
But for every student that may not be the right choice. Federal loans may be one of the most popular choices, it has some benefits as well as drawbacks it makes less appealing to some borrowers.
Benefits of Federal loans-
For Federal Loans no credit is required
Deferment or Forbearance protection
Income-based repayment plans available
Drawbacks of Federal loans-
National yearly interest rate
Repayment plans are not that much flexible
Loan Origination fees
Private Student Loan Options
There are many private lenders apart from federal loan options who can help student fund for education.
These banks include some well-established banks like Sallie Mae, Bank of America, Discover and new entrants like College Ave and local/regional credit unions and banks around the country.
As private lenders tend to offer competitive market rates, many students pursuing graduate or professional degrees will look for it. In addition, many lenders consider the potential lifetime earnings of the borrower, which is beneficial for future lawyers- when evaluating the credit.
More flexible repayment terms are offered by private lenders, with an option to select specific loan duration in months, rather than to choose from 10,15 or 20 years loans. Some lenders also offer unemployment protection and other benefits but not all do. Private lenders do not cover as much as federal loans do.
Benefits of private lenders
More competitive, market interest rates
Lenders may offer additional flexibility on repayment terms
Rates are based on creditworthiness and not the same for all the borrowers
Drawbacks of private lenders
Credit history check is required
Co-signer is required
Not all lenders offer borrower protections
How can you pay for law school?
Paying for law school shouldn’t be impossible, but it can be hard. There are some other ways in which you can cover your tuition cost and living expenses.
The following are the six steps that may help you figure out how to pay for law school:
1) Applying for grants and scholarships
Your very first for finding the money for your law school is scholarships and grants. As these are free money, as you don’t have to pay as you do for a loan. Here is the difference between scholarship and grants:
a)Scholarship - These are merit-based and are determined by academic performance.
b)Grants - These are financial need-based and usually awarded based on your family’s financial situation.
Scholarship and grants are available at federal, state, and local levels. You can also find law specific grants and law specific scholarships.
2) Find a less expensive law school
To attend a private law school may sound prestigious but to be in debt-free from student loans try to choose a less expensive law school which has a good reputation in this way you can save your money without sacrificing your education, as a big law school will be expensive.It is always good to first check the law school cost and finds a school that is moderately priced.
For example, U.S News & Reports have complied with a list of few schools that make it easy to pay your debts based on the salary to debt ratio. These schools are Howard University, Boston College, University of Texas- Austin, Brigham Young University (Clark), University of California- Irvine, Georgia State University.
You can consider one of these schools or you can do some more research and find out a school of law that suits your budget and your individual needs.
3) Take advantages of Federal Student loans
Make sure you fill out the Free Application for Federal Student Aid(FAFSA), once you have decided which law school you are attending. This is one more step to help you find an affordable law school. This will help you find an affordable college.
You can also qualify for work-study programs, Besides qualifying for Federal student loans from the government, like- Direct PLUS and Federal Direct loans. The following are the options when it comes to federal financial aid for law school.
Federal Students Unsubsidized Loans
From the United States Department of Education, the law students can borrow up to $20,500 each year in Federal Students Unsubsidized Loans. Being Unsubsidized loans, the interest starts accumulating as soon as the loan is disbursed to you. These loans are eligible for deferment and other repayment plans like income-driven plans.
Federal Direct PLUS Loans
Your Direct PLUS loans may get affected if you don’t have an adverse credit history. You will need a cosigner if you have any issues in your credit files such as bills that are more than 90 days late, foreclosure within the last 5 years, or bankruptcy. With PLUS loans you can cover borrow as much as you need to cover your school expenses, minus other forms of Financial aid or grants you receive. Law school graduates opting for PLUS loans also have a grace period, But interest starts accumulating as soon as it is disbursed.
4) Work-study Programs
You will get to know whether you qualified for work-study by your financial aid award letter, but you are usually responsible for finding a qualifying job (on-campus). With this type of job, you are guaranteed to make at least the federal minimum wage.
5) Consider private student loans
Private loans are the best option if you are not eligible for federal loans, or are looking for more competitive interest rates and options, or needs a postgraduate loan while you study for bar loans. You may get a more competitive interest rate, with some of the best private student loan lenders.
Consider all the factors before choosing the lender as the terms and conditions for law school loans will vary from one private lender to another regarding grace period, repayment loans.
6) Get a job
The last step can be making some extra money to pay for law schools and living costs. Whether it is a full-time position or anything else, every bit can help you cover the cost of your law school.
Worried about your college tuition? Learn more about student loans
Which law school loan is right for you?
If you have exhausted all of your free aid options like scholarship, grants and want to opt for student loans then go for federal student loans.
According to the National Center for Education Statistics, LAw students while finishing their school they owe a debt of $145,500. Federal Student loan offers more repayment options to handle that debt load, like income-driven repayment plans, Public Service Loan Forgiveness and Loan Repayment Assistance Programs (LRAPs).
If you don’t think you will need or qualify for those options, then private loans may make sense for you and save your money.
For example- in Grad PLUS loans repaying $145,500 with a 7.08% interest rate would cost $203,446 over 10 years. Opting for private loans with an interest rate of 5% would drop that amount of $185,191. Most of the private lenders don’t charge ab origination fees, whereas the PLUS loans come with an origination fee of 4.236%.
On that much debt monthly payment can be roughly $1,500 for private loans and $1,700 for federal loans. According to the National Association of Law Placement, either the amount may be unaffordable if you choose to be a legal services attorney, public defender or prosecutor, whose starting salaries range from $48,000 to $58,000. But with the federal loans, income-driven payments at that salary would be $244, and Public Service Loan Forgiveness can erase the balance after 10 years.
Repaying Student Debt after Law School
Tackling your law school loans can be even more challenging than appearing for American Bar Association Exam and finding a good job.
Before you choose any school, research all the options, including what school you will attend, what type of loans you will need, and how you can make some extra income. Be ready to afford that monthly payment, by being proactive and having a repayment strategy.
It’s a good idea to consider refinancing your law school loans or looking for public service loan forgiveness(PSLF) if you are a law school graduate and you are still having trouble repaying your loans.