Navigating Law School Student Loans: A Comprehensive Guide

Law school represents a substantial investment in your future. Understanding the landscape of student loans is crucial for managing the financial aspects of your legal education. This guide provides a detailed overview of available funding options, application processes, and repayment strategies to help you make informed decisions about financing your law school journey.

Funding Your Legal Education: An Overview

Law school is a major commitment and a significant financial investment. Fortunately, there are affordable and flexible funding options to help you pay.

Scholarships and Grants: Free Money for Law School

Scholarships and grants are the most desirable form of financial aid because they do not require repayment. This type of funding may be awarded based on financial need, academic merit, or a combination of both.

Sources of Scholarships and Grants:

Law Schools: Most scholarships are awarded directly by individual law schools. Contact the admission and financial aid offices for information about available resources. Some schools award merit money shortly after admission, while others may require separate scholarship application forms. Some schools award need-based institutional grant aid. Confirm with each law school what application materials are required and the deadline for submitting those materials.
Organizations: Various organizations offer scholarships to law school students.
Employers: Some companies provide tuition reimbursement benefits to their employees and their dependents.
Department of Veterans Affairs: The Department of Veterans Affairs administers a number of educational benefit programs for veterans.

The availability of scholarships and grants is limited but worth taking the time to research. Be aware that many scholarships and grants are merit-based and may require a certain level of academic performance for continuation.

Federal Work-Study Program

The Federal Work-Study (FWS) program provides funding for full-time students to work part-time during the school year and full-time during the summer. Students may find employment on campus in various departments or at off-campus nonprofit agencies. The amount each student is awarded is decided by your school based on your financial information (as collected by FAFSA surveys). Each year, the maximum amount of money awarded per student is $8,000. Students are encouraged to limit their paid employment to no more than 20 hours per week during the academic year after their first year in law school. (Full-time students are discouraged from part-time paid employment during the first year so that they can focus on performing as well as possible on their coursework.) Additional information is available from the financial aid office serving a participating law school.

Veteran's Benefits

The Department of Veterans Affairs administers a number of educational benefit programs for veterans. These include, but are not limited to, the Montgomery GI Bill and the Post-9/11 GI Bill (9/11 GI Bill). The 9/11 GI Bill assists eligible individuals with tuition and fees, a monthly housing allowance, an annual books and supplies stipend, and a one-time rural benefit payment for eligible individuals. In addition to the 9/11 GI Bill providing an education benefit for eligible veterans, the education benefit may also be transferred to dependents under certain conditions.

The 9/11 GI Bill also has a provision that established the Yellow Ribbon Program , which assists with funding tuition and fee expenses not covered by the 9/11 GI Bill. The benefits are exclusively for eligible veterans; the Yellow Ribbon benefits cannot be transferred to dependents.

Types of Law School Loans

If scholarships, grants, and work-study programs do not fully cover the cost of law school, loans can help bridge the gap. There are three primary types of loans available: Federal Direct Loans, Grad PLUS Loans, and private loans.

Federal Direct Unsubsidized Loans

Law students are not eligible for subsidized loans but can apply for Federal Direct Unsubsidized Loans. They may borrow up to $20,500 each year. Since these loans for law school are not subsidized, interest on the borrowed money begins to accrue as soon as the loan is awarded to you.

Key Features of Federal Direct Unsubsidized Loans:

Eligibility: Available to law students regardless of credit history.
Loan Limits: Up to $20,500 per year.
Interest: Interest starts accruing as “simple” interest (it is not compounding while you are in school) once the loan is disbursed. As of the 2016/2017 school year, interest rates on these loans were set to be fixed at 5.31%, though this percentage may have gone up or down since the loan rates were set.
Grace Period: A six-month grace period after graduation before repayment begins.
Repayment Flexibility: Flexible repayment plans exist, including options based on your household income; payment relief (deferment or forbearance) is available when needed if you are experiencing financial hardship during repayment; and refinancing is possible through the Federal Direct Consolidation Loan program.
Loan Forgiveness: This loan also qualifies for potential forgiveness in the Public Service Loan Forgiveness (PSLF) program .

Grad PLUS Loans

Grad PLUS Loans also come from the Department of Education.

Read also: Examining ECMC Student Loans

Key Features of Grad PLUS Loans:

Credit Check: Grad PLUS loan recipients must have good credit. Those with an adverse credit history will not qualify unless they have a creditworthy cosigner.
Interest Rates: The interest rates for PLUS loans are higher. For the 2021-2022 school year, the interest rate is at 6.28 percent.
Fees: Borrowers need to pay a loan origination fee of over 4 percent of the total amount they borrow.
Grace Period: Like Direct loans, law students have a six-month grace period after graduation before repayment of their PLUS loan.
Interest Accrual: PLUS borrows accrue interest. They may pay interest-only payments in school or add the interest to their total loan amount.

Private Loans

When law students need money for school beyond any Direct Unsubsidized Loans they receive, some turn to private loans through banks, credit unions, and other private lenders. Private loans have advantages and disadvantages compared to PLUS loans. The right choice for a student really depends on their situation. This option is most relevant to students who do not qualify for federal loans. A private loan may also be attractive to you if you are seeking more competitive interest rates or if you need loans post-graduation while you are still in search of full-time employment.

Key Features of Private Loans:

Eligibility: Eligibility is based on your credit history and the lending institution’s willingness to lend.
Terms and Conditions: Terms of private loans will likely vary widely as they are awarded by private vendors. Be sure to pay attention to the explanations in loan application brochures and consumer information.
Credit Requirements: Like PLUS loans, private loans require good credit or a cosigner. Those with less than perfect credit might have to pay higher interest rates than a plus loan.

Some lenders also offer postgraduate loans for bar-review study.

Private Loan Examples:

Wells Fargo: Wells Fargo offers students a private law school loan option with competitive interest rates. Students are not expected to repay any portion of this loan while still enrolled in school and are given a six-month grace period before owing any money. This loan is awarded not only for tuition, but also for any expenses related to a college education, like: housing, textbooks, electronics, lab fees, and more. Interest rate discounts are awarded to eligible students.
This private loan for law school is available at a fixed interest rate of 6.79% to 7.89% APR to graduate students who are enrolled at least half-time. Students are not required to pay back their loan while in school and can receive a lower interest rate if they qualify for the Auto Debit Reward program.

Applying for Law School Loans: A Step-by-Step Guide

Here are the steps you need to take, including timelines to apply for law school loans.

Investigate financial aid procedures: Investigate financial aid procedures at the schools for which you are applying while you investigate admissions procedures and deadlines.
Complete your federal tax returns: Complete your federal tax returns as early as possible each year because you will need your most current tax information to apply for federal or private loans.
Fill out your Free Application for Federal Student Aid (FAFSA): Fill out your Free Application for Federal Student Aid (FAFSA). This is the same form you had to fill out for financial aid as an undergrad. The new form comes out October 1 for the following year. For example, if you want to enter law school in Fall 2022, you can fill out your FAFSA beginning October 2021. You should complete it as soon as possible; you can always update it with new tax information. At the very least, you should have your FAFSA complete by the time you complete your admissions package.
Wait for acceptance letters: Wait for acceptance letters from the schools where you applied. If accepted, they will determine the type and amount of financial aid you can receive and send you instructions on how to complete your financial aid package. Considering the cost of tuition, board, and other fees, law schools ultimately determine how much assistance a student will need through federal and/or private loans.
Apply for funding: After you choose your school, you need to apply for the funding you want. For Direct Federal Loans, you do not need to do anything special beyond filling out your FAFSA and accepting the loan. If you want to take out a PLUS loan, you need to fill out a separate application. If approved, you must also complete a Direct PLUS Loan Master Promissory Note that spells out the terms of your loan.
Apply for private loans: Apply for loans with private lenders if you do not get the funding you need or wish to borrow from a private lender instead of taking out a PLUS loan.

To apply for Federal Direct Unsubsidized Stafford Loans:

Two documents are required for the law school to determine your eligibility for federal student loans.

In order for Federal Student Loans to disburse (i.e., pay out), other documents are required after accepting loans in your GW Law aid package and paying your admissions deposits. Go to www.studentaid.gov, and log in with your FSA-ID. Click on the tab for "Graduate/Professional Students." In this menu, you will complete Loan Entrance Counseling, and Loan Agreements (MPNs) for each loan - Unsubsidized - that you wish to take out. The MPNs are valid for ten years, regardless of the school you attend. Entrance counseling is a school-specific requirement. Note that even at this stage, you are not bound to borrow loans, even if you accepted them as part of your aid package. You have a 14-day right to cancellation after the funds disburse.

Repaying Your Law School Loans

Law school graduates are required to begin paying back their law school loans after a certain grace period. Although this grace period differs with each loan program, a one-year grace period is the typical amount of time a student has before they must begin paying back their loans. With Direct Unsubsidized Federal Loans, students are allowed a six-month grace period, after which students are responsible for paying the interest for the time they were both enrolled in a law school program as well as using their grace period. If a student should find themselves struggling or unable to pay back their law student loans, they are urged to contact a loan provider immediately to decide how best to handle the matter.

Loan Repayment Assistance Programs (LRAP) & Loan Forgiveness

LRAPs differ a bit with each law school. Typically, students receive forgivable loans for law school in exchange for working in the public interest sector or government for a certain length of time. Once a student completes their obligation, the LRAP forgives or cancels the loans. The American Bar Association offers this great resource for LRAPs.

Direct Federal loans and PLUS loans also qualify for the Public Service Loan Forgiveness Program. Law students who work in a particular sector and make payments for ten years can have their loans forgiven. During repayment, students are also eligible for income-based repayment (IBR) plans, offering flexibility not available with private loans. Post-graduation, these student loans for law school can offer you a monthly payment option that totals less than 10% of your family's monthly income (as opposed to many loans that base repayment off of the amount your owe in total student debt). IDR plans give you more opportunities for payment relief than private/institutional sources of student-assistance loans.

However, private lenders also sometimes participate in forgiveness programs depending on the school and the situation.

Important Considerations

Only borrow the minimum needed to attend your chosen school.
Each loan program will have a set of requirements laid out for applicants; however, there are a few general criteria students should expect to fulfill. For Federal Direct Loans, students are required to fill out the Free Application for Federal Student Aid (FAFSA) to determine their eligibility for loan assistance.
Some loan options will take your household's income into account in determining your loan's interest rates; be sure to look at interest and repayment expectations before signing onto any loans.

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