Financial Aid for Law School
Repayment Options
You may be able to reduce your monthly payments by consolidating your federal loans into one new loan after graduation. Most federal consolidation is through the Federal Direct Consolidation Loan Program. Consolidating loans will decrease your monthly payment, which could make a difference to you in the first few years after law school. You will pay more over the long term as you are only making small payments toward the principal of your loan. You can extend your repayment period to a maximum of 30 years. There is no penalty for prepayment on any federal loan.
Many lenders offer a variety of repayment options even without consolidation. Under these arrangements, you may be able to pay only interest during the first few years and have (re)payments increase gradually. You may be able to reduce your interest rates through special incentives offered by your lender as a reward for on-time payments or for making payments by automatic transfer from your checking or savings accounts.
You may also be able to take advantage of a new federal income-based repayment program (IBR). IBR allows you to make very low payments toward your loans—15 percent of your income above 150 percent of the poverty level. At $40,000 income, you would pay $297 monthly toward your loans. After 25 years, if you still have principal outstanding, that amount is forgiven.
If you are planning on a career in government or 501(c) 3 nonprofit work, you can combine the IBR payments with a federal loan forgiveness program. After 120 months (10 years) of payments on your federal loans through IBR and 10 years of eligible work, your remaining federal loans are forgiven. The website www.ed.gov has more details on IBR and federal loan forgiveness.
Strategies for Graduates Seeking Public Interest Careers
Students who seek to work in public service or the public interest sector of the profession face special challenges in financing their legal educations because salaries for such jobs are low. Students graduating from law school with the average amount of indebtedness may find that the average entry-level public service or public interest salary ($41,000 for 2007 graduates) will not provide the resources needed to repay their law school loans and cover their basic living expenses.
Students can employ a number of strategies to make it easier (or possible) to pursue a career in government or public interest law. First, students can borrow less during law school (attend a lower tuition institution; follow some of the debt management strategies mentioned on this site). Students may also take advantage of programs developed at some law schools to relieve the debt burden for those interested in public interest careers, including fellowships, scholarships, and loan repayment assistance programs (LRAPs). LRAPs provide financial assistance to law school graduates working in the public interest sector, government, or other lower-paying legal fields. In most cases, this aid is given to graduates in the form of a forgivable loan to help them repay their annual educational debt. Upon completion of the required service obligation, schools will forgive or cancel these loans for program participants.
The number of law schools sponsoring LRAPs is limited: as of December 2006, approximately 106 law schools sponsored programs. The funding for these programs is limited, so most schools are unable to provide assistance to all applicants.
LRAPs are also administered by state bar foundations, public interest legal employers, and federal and state governments to assist law graduates in pursuing and remaining in public interest jobs. The federal government offers some options to assist graduates seeking legal careers in public service, including the new income-based repayment (IBR) option for federal loan repayment and the Federal Loan Forgiveness Program, both beginning in 2009. The IBR will allow any federal education loan borrower the opportunity to make low monthly payments on their federal loans. The payments are equal to 15 percent of the difference between the borrower's earnings and 150 percent of the federal poverty level. The Federal Loan Forgiveness Program allows borrowers who work in government or nonprofits the opportunity to make payments under the IBR, then have their outstanding balances forgiven after 120 eligible payments. Please check with your schools or directly with the Department of Education for details on these new programs.
For more information about loan repayment assistance programs or the income-based repayment programs, visit www.abalegalservices.org/lrap or www.equaljusticeworks.org.
All figures and calculations are based on current interest rates, loan terms, and fees, and are subject to change.
