The year was 1992. I had just graduated from Boston University Law School, magna cum laude no less. My mom was proud.
The school handed me a diploma. The government handed me $55,000 in school loans.
In today’s dollars, my law school debt was the equivalent of about $100,000. Ouch.
It’s somewhat ironic that after 25 years of practicing law, I retired at the ripe old age of 49 to write about personal finance and investing. Though, that’s a story for another time. Today, the topic is law school student loans.
It’s no secret that the average law school can cost an arm and a leg. And many students have to finance that arm and leg. So, just how much debt does the average law student incur?
Grads coming from the top law schools could have even more debt. The latest U.S. News & World Report rankings show that 2016 graduates from Thomas Jefferson School of Law have an average of $182,411 in student loan debt. Columbia University graduates averaged $159,789 in the hole.
Even on a median lawyer’s salary of $126,930 per year, that amount of debt could take quite a while to pay off. If you want to work for the government, you could be looking at less than that for an average salary - -about $88,000 in 2016 -- and an even lower starting salary.
But there is good news.
There are plenty of great assistance programs designed to specifically help lawyers repay their student loans. Some of these programs will even get part of your loan balances forgiven.
There are also a variety of federal repayment programs and specialized loan repayment assistance programs (LRAPs) and loan forgiveness prog
In this guide, we’ll walk you through the options for dealing with your law school-sized student loans. Before we cover specific loan forgiveness and repayment plan programs, we’ll cover some tips for those still deciding on a school.
If You Haven’t Chosen a School
If you haven’t yet applied for or chosen, your law school, that’s a good thing.
More and more schools are offering loan repayment assistance programs. Some of these programs provide a powerful incentive for students to pursue their dreams -- like working for underserved populations -- that might provide plenty of motivation but not a lot of money.
These programs, such as Harvard’s Low Income Protection Plan (LIPP), help graduates avoid burdensome student loan payments if they opt for a lower-paying type of law practice. Harvard’s program, for instance, requires that graduates put a certain percentage of their income towards student loans. Then, the school pays the remaining portion of the debt.
Yales Career Options Assistance Program (COAP) is similar. Students who make below a certain income threshold do not pay on their student loans at all. Other students above that threshold may pay a portion of their loan payments, with COAP picking up the rest of the tab.
These programs should be considered when choosing the law school that’s right for you, especially if you plan to go into a lower-paying type of practice. Luckily, the American Bar Association keeps a list of law schools that offer LRAPs.
LRAP requirements and repayment amounts vary by school. Be sure to account for these programs when looking at the school’s total cost.
So, what if you’ve already chosen a law school, or have already graduated? If you’ve never asked about your school’s LRAP, now is the time to do it. Some of these programs don’t apply retroactively, but you can use some schools’ programs long after you’ve graduated.
For instance, say that you went from law school to a high-paying, private practice job. You could handle your student loan payments just fine on your six-figure salary.
But then you got interested in a cause and decided to work for a not-for-profit serving underserved populations. The pay cut is totally worth the fulfillment you get from your new job, but how are you going to manage that $1,000-a-month loan payment? This is the time to call your alma mater to check for a student loan assistance option.
If it’s not an option, don’t worry. We’ve got several others for you.
If You’re Looking for a Job
Many legal employers offer loan repayment assistance programs. They may fund these programs on a one-off basis through grants and other means.
If you haven’t yet found a job, consider asking about employer LRAPs when you’re job searching. This valuable benefit could make it possible for you to work in a lower-paying job that services the underserved, while still being able to manage your hefty student loans.
Some large companies, such as Fidelity, offer broader student loan repayment programs to all their employees, not just lawyers. As you’ll learn below, working for the government as a lawyer could also net you some serious student loan repayment benefits.
Many civil legal aid and nonprofit legal aid employers offer similar programs. Government and non-profit loan forgiveness programs are often linked to the programs listed below.
State Loan Forgiveness Programs
Many states offer additional assistance to lawyers who work in underserved communities or who are employed in certain programs. Some of these programs grant you a set amount of money annually, and others pay your student loan servicer directly.
Most of these programs are run through the state’s bar association or bar association foundation. Like the school-based programs, they have income requirements. And they often require attorneys to work for non-profits or government organizations. Some of the programs require employment with specific non-profits in the state.
National Loan Forgiveness Programs
The above state-based programs are mostly administered by the state’s legal aid foundation. But there are some national programs that also favor lawyers working for certain underserved populations.
These programs include the following:
Department of Justice Attorney Student Loan Repayment Program
Any Department of Justice employee serving (or hired to serve) as an attorney can be eligible for this program.
Its goal is to help with placement in hard-to-fill positions within the Department of Justice. Attorneys are selected annually on a competitive basis, and can renew their eligibility for subsequent years of employment. Accepting the assistance locks attorneys into a three-year service obligation.
For the extensive list of requirements, click here.
This program funds up to $6,000 per year with a lifetime total of as much as $60,000.
Benefits are taxable, and the benefit amount received depends on both the attorney’s income and the student loan repayment plan. The DOJ will match the attorney’s annual student loan payment amounts up to the $6,000 maximum. Attorneys whose salaries are under the threshold amount for matching funds will automatically receive the full amount.
Any payments made under this program are made directly to the attorney’s student loan servicer.
John R. Justice Student Loan Repayment Program
This program focuses on public defenders and state prosecutors. Attorneys who qualify for this program must commit to remaining in qualifying employment for at least three years. The funds are administered through state agencies.
This program can pay up to $10,000 per year, for a lifetime total of $60,000.
To qualify, attorneys must meet the following requirements:
- Prosecutors must be full-time employees of state or local government, including tribal government, who prosecute cases at the state or local government level.
- Public defenders must be either full-time employees of a state or local government, including tribal government, or full-time employees of a nonprofit organization that contracts with the government to provide legal representation to the indigent or in juvenile delinquency cases.
- Attorneys who supervise, educate, or train others who meet the above qualifications are also eligible.
- Attorneys must not be in default on repayment of any federal student loans.
This program doesn’t have set income requirements, but does prioritize those who are least able to meet their obligation. Only federal loans -- FFEL and Direct -- are eligible. Parent PLUS loans, private, commercial, or alternative student loans are not eligible.
Click here for a list of state agencies that administer this program.
Herbert S. Garten Loan Repayment Assistance Program
This program offers as much as $5,600 per year in assistance, for up to three years. The assistance is made in the form of loans, which are forgiven at the end of the term provided the attorney remains in good standing throughout the term.
Attorneys must be employed by one of the program’s grantees. They must also meet certain other income and debt burden requirements. The system works by lottery and makes loans to approximately 70 attorneys each year, depending on funding levels.
AmeriCorps is a Peace Corps-like program that offers a small stipend plus a student loan repayment benefit to students working in underserved communities. Some of these programs are specifically for new lawyers.
For more information about legal services AmeriCorps programs, visit this page.
Federal Loan Forgiveness
The above programs are your best bet, most likely, for student loan assistance. They often have a much shorter time requirement than the federal loan forgiveness program we’ll discuss now.
However, if you don’t qualify for one of these other programs -- or if you still have loans left to pay after using these programs -- keep the Public Service Loan Forgiveness program in mind. The Public Service Loan Forgiveness program will forgive part, or all, of your federal student loan balance after you meet certain qualifications.
To qualify, you need to:
- Be employed by a government organization (federal, state, local, and tribal all count), a 501(c)(3) not-for-profit organization, or another organization that provides certain types of public service
- Be employed by a government organization (federal, state, local, and tribal all count), a 501(c)(3) not-for-profit organization, or another organization that provides certain types of public service
- Be employed full-time
- Make 120 qualifying monthly payments, which are made: After October 1, 2007
- Under a qualifying repayment plan
- For the full amount shown on your bill
- No later than 15 days after your due date
- While employed full-time by a qualifying employer
Got all that? Basically, it means that if you put in ten years working with a non-profit or government organization while you’re not in school, in your loans grace period, or in a period of forbearance or deferment, you can have the rest of your loan balance forgiven. This program applies to Direct Loans, including Direct Consolidation Loans.
You don’t have to make these 120 payments consecutively. So, let’s say you work for a non-profit for a few years, go for-profit, and then work for the government. Any full payments you make while in the first and third jobs count towards your total credits for this program.
Be careful. The standard student loan repayment program has you paying off your student loan balance within ten years. It doesn’t take a math whiz to see how that works out. If you make standard payments, you’ll pay off your loan right at the same time you qualify for forgiveness.
The program is set up that way so that it mostly benefits workers in lower-paying jobs who qualify for income-driven repayment plans. These plans base your minimum student loan payments on your earnings.
If you’re working as a strapped-for-cash public defender, you could qualify for a lower student loan payment. The lower payment will result in a longer repayment time frame. So, when you’ve made 120 qualifying payments, the government will forgive the remaining balance.
Federal Student Loan Consolidation
What about federal student loan consolidation? Some types of student loans, including FFEL and Perkins Loans don’t qualify for this program. However, if you can consolidate these loans with a Direct Consolidation Loan, their balances will then count.
Only payments made on the Direct Consolidation Loan, though, will qualify. So, if you’re aiming to take advantage of this plan and have non-qualifying loans, you should consider consolidating them sooner rather than later.
The bottom line: PSLF is a powerful program, but only if you work in a qualifying job for enough years to get the loan forgiveness.
Choose the Right Repayment Program
Once you’ve figured out which repayment assistance programs might best suit your needs, you’ll need to decide how those programs can work together.
Let’s say, for instance, that your state’s program will pay off $15,000 of your student loans over three years, leaving you with a $50,000 balance. Talk to the program administrators and experts at the Department of Education to determine if the remaining $50,000 balance is eligible for the federal forgiveness program.
If you’re aiming for forgiveness, the goal should be to pay as little as possible towards your student loan balances during the 10-year period. You’ll need to make regular monthly payments for the amount shown on your bill. But the right repayment program might significantly lower that amount.
For federal student loans, there are several income-driven plans that will set your monthly payment based on your income. Each plan accounts for your income and family size, but each will give you a slightly different monthly payment. When you’re aiming for student loan forgiveness after ten years, choose the plan with the smallest repayment amount over that ten-year period.
Here are the basics of the four income-driven repayment plans:
|REPAYE Plan||10% of your discretionary income|
|PAYE Plan||10% of your discretionary income up to the Standard Repayment Plan amount|
|Income-Based Repayment Plan||10% of your discretionary income up to the Standard Repayment Plan amount for new borrowers before July 1, 2014|
15% of discretionary income up to the Standard Repayment Plan amount for new borrowers after July 1, 2014
|Income-Contingent Repayment Plan||The lesser of: 20% of your discretionary income OR what you would pay on a fixed 12-year repayment plan|
So, how do you figure out which of these plans has the smallest repayment amount? Use this calculator. You can log in with your student loan credentials to get exact amounts, or just click Proceed to fill in your student loan information manually.
The calculator offers an option to look at your situation under the Public Service Loan Forgiveness program, as well. That way, you can see the remaining balance that would be forgiven under this program. You can also see the total amount you’d pay over ten consecutive years of qualifying payments.
Keep in mind that income-driven plans require you to re-qualify over time. You’ll have to continue to provide proof of income and family size. This could cause your payments to increase or decrease over time.
Choosing a plan that keeps payments at or below the Standard Repayment Plan amount can ensure that your payments never balloon to a huge monthly amount.
Please note that for the most part, these plans lend themselves well to Direct Consolidation. If you’re planning to qualify for the federal loan forgiveness program, this lends itself well to consolidating all of your federal student loans and then choosing the repayment plan with the lowest repayment amount.
Most (though, not all) federal student loans can be consolidated as a Direct Consolidation loan. And Direct Consolidation loans are eligible for the income-driven repayment programs.
What About Private Loans?
Some private lenders do have variable loan repayment programs, but this varies from one lender to the next. Private loans cannot be consolidated with federal student loans.
Some lawyer-specific student loan assistance programs allow for repayment of private student loans, though most do not. If you qualify for a program that does, consider using it to pay down your private loans first.
What If You Take the High-Paying Job?
So far, we’ve mostly been talking about repayment assistance programs for young lawyers who work in public service (read: lower-paying) legal jobs. But what if you land that six-figure job -- or close to it -- with a private firm right out of college? In this case, your options for dealing with your student loans are completely different.
There are three steps you should take.
- First, keep refinancing in mind.
- If you don’t immediately qualify for refinancing, choose an affordable payment program.
- Pay off your loans as quickly as you can.
Let’s tackle these step by step:
Student Loan Refinancing
It used to be that refinancing for student loans was unheard of. Refinancing unsecured loans carries big risks for lenders, after all.
Nowadays, though, several organizations exist primarily (or even solely) to refinance student loans. These organizations include SoFi and Credible. They’re similar to crowdfunding organizations, but with a heavy focus on student debt.
Credible offers an opportunity to get rate quotes from several different lenders by completing a single online application. Since private lenders are likely to be the best sources of refinances or consolidations for the large loans law school will involve, getting pre-qualified by several lenders at the same time through a site like Credible may be your best strategy.
Refinancing large student loan balances can save you tens of thousands of dollars over time, with a smaller interest rate or a tighter repayment time frame. Some of these organizations could cut your interest rate in half. Plus, many offer refinancing for both federal and private student loans.
Here’s the thing, though: you have to be in a good financial position to qualify for competitive refinancing terms.
This means you need a solid credit score and a steady income. When you first graduate law school, you may not have a good credit score, and some refinancing organizations will require a year or more of employment history to qualify.
With a high-earning legal job, you’ll likely be able to qualify for student loan refinancing fairly quickly if you take the following steps:
- Make all your monthly payments on time. On-time payments will help your credit score gradually increase.
- Consider using a credit card wisely. If you’ve never used a credit card, consider getting one that you pay off in full each month. This can also help increase your credit score.
- Pay down revolving debts. If you already have credit cards carrying a balance, put some resources into paying down those debts, which can also help increase your credit score.
- Maintain your high-paying job. Having a solid history of big paychecks will help you qualify for refinancing through companies like Credible and SoFi.
If you don’t qualify for refinancing right away, talk to the lender to see what you need to do in order to qualify.
Choose an Affordable Repayment Program
While you’re working towards qualifying for student loan refinancing, you may want to choose a more affordable federal loan repayment program.
With a high income, you may not qualify for income-driven repayment plans, even with a massive loan balance. But you could choose a graduated plan that will give you lower payments on the front end. These payments will gradually increase over time and will result in paying off your loan in the standard ten years.
Choosing a graduated plan now can help you free up spare cash for setting up your life as a young lawyer, like getting an apartment or saving for a down payment. If you have other outstanding debts, like credit cards, a graduated repayment plan can help you pay down those while you work to qualify for refinancing.
But don’t lean too heavily on this affordable repayment program for long. Paying 7% or more interest on your loans over 10 years just because that plan is available is likely not a wise use of your income.
These repayment programs can be helpful tools when you’ve first graduated. If you can, however, aim to pay off your loan in less than 10 years.
Pay Them Off Quickly
If you’re not going to qualify for a loan forgiveness program, your goal should be to pay off your student loans as quickly as possible, especially if you’re locked into a relatively high interest rate.
Once you qualify for refinancing at a much lower interest rate, you might be better off investing your extra cash each month rather than paying down student loans. But you might still wish to choose a shorter loan term so that you can offload your debt more quickly. This frees up cash to save or invest, once your debt is paid off.
Of course, we always advocate for a holistic financial plan. You may or may not want to continue saving for retirement, to buy a home, or meet other goals while paying off your debt.
The goal is to pay off your debt in a reasonable amount of time. But that doesn’t necessarily mean sacrificing all of your other financial goals to get this one done. Read more of our advice on the pay-off-debt vs. save-and-invest debate both here and here.
Putting it All Together
Combining all of this information together to form a plan that works best for your particular situation can be tricky. In general, though, here’s the process you should walk through:
- Determine your career options and goals:
- If you want to work for the government or a non-profit for just a short period of time, look into loan assistance programs that require a one- to five-year commitment.
- If you want to work long-term for the government or a non-profit, look closely at the federal loan forgiveness program. Also ask how state, school, and employer programs might work with that program.
- If you want to land a higher-paying private job immediately, aim instead to improve your credit score and income so that you can qualify for lower-interest-rate refinancing.
- Find out how programs interact:
- The rules on using a short-term loan assistance program with the federal forgiveness program are unclear. But you may be able to use a short-term program to pay some of your loan balances while counting payments that you make for yourself towards the 120 qualifying payments for federal loan forgiveness.
- If you’ll qualify for a non-profit or government loan assistance program for a few years, take that benefit. After all, it’s free money! Then if you move into a higher-paying, private sector job, consider refinancing the remaining loan balance to qualify for better terms.
- Decide whether to invest or pay your debts off more quickly:
- When you’re in a job that qualifies for loan assistance, you may not have the extra cash to throw at student debt. Just worry about making your payments on time and qualifying for that bonus as long as you can.
- Once you move into a higher-paying job, take stock of your financial goals and situation to determine if you should pay off your student loans as quickly as possible or pay them off on time while investing your extra cash.
Tools and Resources
That's a lot of information, I know! To keep things simple as you figure out your student loan repayment plan, here are the tools and resources we mentioned in this article -- plus a few extras:
- American Bar Association’s List of Law Schools Offering LRAPs
- State Agencies that Administer the John R. Justice Program
- Student Loan Repayment Plan Calculator
- 5 Effective Ways to Build Your Credit Without Going In the Hole
- How to Compare LRAPs (Harvard Law School)
- Equal Justice Works Student Debt Relief Section -- Includes eBook, Webinars, and more