Law

Student Loan Options for Law Students

It is well known that a law school education is a very expensive proposition. If you are not careful which loans you choose and are not diligent in your pursuit of grants and scholarships, you could easily wind up with $100,000 of debt by the time you graduate. Although many lawyers eventually make a very good living, it usually takes years of hard work, and it is highly dependent on what kind of practice you decide to go into. Student loans for law students can come from three possible sources:

  • The Federal government,
  • State government, and
  • Private lenders.

Types of Government Student Loans

The Federal government offers two types of student loans for graduate students: The Stafford Loan and the PLUS Loan (for Parents and for graduate students). Graduating students can also take advantage of a Federal Consolidation Loan to combine all of their college loans into one manageable loan package.

 Federal Stafford Loan

Stafford Loans are the single most common type of student loan available. The Stafford Loan is so versatile because:

  • It is available to undergraduates and graduate students.
  • There is no financial need or credit score requirement to qualify for a Stafford Loan.
  • The Stafford comes in subsidized and unsubsidized versions. The subsidized Stafford Loan is reserved for students with the most need because the interest that accrues while the student is enrolled in college is paid by the federal government.  With the unsubsidized Stafford Loan, you are responsible for payment of monthly interest while in school though the principle is deferred until graduation.
  • Low interest rates.
  • Six-month grace period following graduation before repayment begins.

Federal PLUS Loan for Parents and Graduate Students

Parents PLUS and Grad PLUS are credit-based alternative loan programs designed for parents of dependent college students and for graduate students. Parents and grad students can secure a loan up to the value of the cost of their student’s attendance less any other financial aid awarded. Repayment of the PLUS Loan begins as soon as the loan is fully disbursed.

Federal Consolidation Loan Program

If you have multiple loans and limited income after graduation, a consolidation loan could help you get control of your debt. A consolidation loan enables graduates with one or more Federal student loans to combine all of them into one loan. This allows the student to reduce his loan payments to one more manageable monthly payment. Details are available at www.loanconsolidation.ed.gov.

Applying for Federal Loans Is a One-Step Process

To apply for any government loan you must complete the Free Application for Student Aid (FAFSA). The FAFSA is required for all forms of Federal aid programs, and it is also required for state programs and for financial aid from colleges and universities. Whether you are applying for a Federal loan, grant or scholarship the FAFSA is your first step and must be submitted early to meet any deadlines for your loan or grant applications. The application form and full information is at www.fafsa.ed.org.

State Student Loans

All states have an extensive program of student loans, grants and scholarships. To find out what your state offers, go to the website of the state higher education authority. The site will have the links to the information you need. A list of the state authorities, their websites and contact information can be found on the Department of Education website at http://wdcrobcolp01.ed.gov/Programs/EROD/org_list.cfm?category_ID=SHE.

Private Loans for Law Students

Used judiciously, private student loans are an excellent way of rounding out your funding picture. But that is precisely how they should be used – to round out the picture. Students should only consider private loans once they have exhausted their federal loan options. Private student loans may be the only loan option for financing bar exam studies, as well.

Choosing a Private Lender

Every private bank and student loan lender offers private student loans. There is a huge array of options, with products designed for specific types of students, different interest rates, borrower fees, loan limits and repayment terms. The fees charged by some lenders drastically raise the cost of the loans, so a loan with a fairly low interest rate but high fees can ultimately cost more than a loan with a higher interest rate but no fees. Examples of the institutions that offer private loans are:

  • Private banks, such as Bank of America and Wells Fargo, and
  • Student Loan lenders Sallie Mae and Nellie Mae.

A few facts to bear in mind when you consider private loans:

  • These loans are credit-based. Students with poor credit or no credit will need a co-signor who has good credit;
  • There are often no repayment periods grace periods, which means repayment begins immediately;
  • Interest rates may be variable;
  • If there is a grace period, lender will often advertise a lower interest rate for this period, with a much higher rate when the loan goes into repayment.

FinAid’s maintains an extensive comparison chart of private loans on the market that could provide a good starting point for research. This resource is at www.finaid.org.loans/privatestudentloans.

Law School Loan Repayment Programs

Public interest law is critical for the fair functioning of our legal system. Public interest lawyers ensure that the disadvantaged receive fair and equal treatment and that interests that are in the common good are represented. Unfortunately this work is not very well compensated, and many young lawyers do not feel they can afford to enter this area because of their student loan debt.

To address this problem, many law schools and state now sponsor loan forgiveness programs. Equal Justice Works (www.equaljusticeworks.org/resources) maintains a list of law school-sponsored loan forgiveness programs. You can find a list of state sponsored loan repayment assistance programs on the American Bar Association site at www.americanbar.org.

Equal Justice Corps and AmeriCorps funds a nationwide corps of new lawyers. In exchange for a couple of years of volunteer grassroots legal work you qualify for student loan forbearance, receive a monthly living stipend, and receive partial payment on your federal student loans. See http://www.equaljusticeworks.org/post-grad for more information.