Future JD Students

Repayment: An Overview

Before Law School: Careful Planning

Plan a financial strategy before you enter law school. If possible, pay off any outstanding consumer debt. Save as much money as you can to reduce the amount you will borrow. Have a plan for meeting the expenses of your legal education and anticipate what portion of the plan will be based on borrowing. It is also important that you have a good credit history.

Because most of your financial aid will come from loans, you are likely to graduate from law school with debt to repay. Currently, the average law school debt is about $100,000. For those who borrowed only federally guaranteed student loans, the average debt is just over $55,000. Keep accurate records of all loans you receive during your enrollment in law school; this will help you manage your repayments when you complete your education.

Federal loan recipients will be required to attend an entrance interview during the first few weeks of law school and an exit interview before leaving school. During these sessions, your financial aid officer will review with you the terms of your loan, sample repayment schedules, and repayment options.

While in Law School: Living on a Budget

While loans may be available to students with good credit histories, the question of how much to borrow is often asked. The maxim "Live like a student now or you will live like a student later" is a good one to remember. Consult an individual school's Student Expense Budget for estimates of living expenses, and budget accordingly. Track your current spending habits and compare them to the budget at schools of your choice. Share housing; learn to cook. Food expenses are often budget busters. Bring a lunch rather than buying one. While law school may be an excellent long-term investment, paying loans in the short term can be a real burden. Remember, not all lawyers will earn the highest salaries.

Most federal loans allow you to defer payment while you attend law school at least half time. Interest on subsidized loans does not accrue, while unsubsidized, Graduate PLUS, and private loans accrue interest while you are in law school.

The Student Expense Budget does not allow the use of federal education loan funds to pay for prior consumer debt.

Planning Ahead: Repayment of Your Loan

Your income after law school is an important factor in determining what constitutes manageable payments on your education loans. Although it may be difficult to predict what kind of job you will get (or want) after law school, or exactly what kind of salary you will receive, it is important that you make some assessment of your goals for the purpose of sound debt management. The money you borrow will be paid out of your future earnings and may have a significant effect on that lifestyle. In addition to assessing expected income, you must also create a realistic picture of how much you can afford to pay back on a monthly basis while maintaining the lifestyle that you desire. You may have to adjust your thinking about how quickly you can pay your loans back, or how much money you can afford to borrow, or just how extravagantly you expect to live in the years following your graduation from law school.

Your education loan debt represents a serious financial commitment which must be repaid. A default on any loan engenders serious consequences, including possible legal action against you by the lender or the government, or both.

Law school graduate debt of $100,000 amounts to almost $1,187 a month on a standard 10-year repayment plan. Most lenders offer graduated and income-sensitive repayment plans that lower monthly payment amounts but increase the number of years of repayment. The Federal Direct Consolidation Loan allows students to repay their Federal Stafford, Ford Federal Direct Loans, and Graduate PLUS loans on an extended repayment schedule, lasting up to 30 years. Stafford and Direct Loan lenders also offer income-based repayment options (IBR). This repayment allows borrowers to pay a small amount monthly toward their loans, depending on income and the loan amounts. There also may be forgiveness after 25 years, and federal loan forgiveness for government and nonprofit employees after 10 years. The federal government (www.ed.gov), and many lenders have websites with loan repayment and budget calculators.

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