Earning a law degree can lead to a career with a high salary — but it also means hefty student loan payments. Luckily, assistance programs, repayment plans, or refinancing law school loans can save you money.
Here are the options you have when it comes to managing your law school debt:
- Refinance your law school loans
- Take advantage of repayment assistance programs
- Consider loan forgiveness
- Seek alternative repayment options
1. Refinance your law school loans
Depending on the specific loans you took out to pay for law school, you could have high-interest debt. To get a lower interest rate, you should consider refinancing your loans with a private lender.
The only way to get a lower interest rate is to refinance your loans with a private lender. Refinancing your student loans can reduce the total amount repaid, your monthly payment, or both. Refinancing can be a smart decision if your income and credit score qualify you for a more competitive interest rate.
If you can afford the payments on a shorter repayment period, you can get a much lower rate and save a substantial amount of money.
If you’re refinancing federal loans with a private lender, however, keep in mind you’ll lose benefits that come with federal loans, such as access to income-driven repayment with the potential to qualify for loan forgiveness.
Additionally, if you are struggling to pass the bar or end up taking a job that pays less than you expected as a law school graduate, refinancing may not make sense. Instead, opting for a federal income-driven repayment option can help reduce your payments; after making the qualifying payments for 10, 20, or 25 years, you may have the remaining balance forgiven.
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Citizens Bank Education Refinance Loan Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of November 1, 2019, the one-month LIBOR rate is 1.80%. Variable interest rates range from 2.15%-8.82% (2.15%-8.82% APR) and will fluctuate over the term of the borrower's loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 3.45%-9.02% (3.45%-9.02% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan. |
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2. Take advantage of repayment assistance programs
Depending on where you went to school, the amount of your debt, and your career path, you may be able to take advantage of one of these repayment options:
- Loan Repayment Assistance Programs (LRAPs): LRAPs are available to law school graduates from over 100 different universities. Eligibility for many of them is based on your income and whether you work in some form of public service, such as serving as an attorney for a non-profit organization or legal aid (see our list of schools offering LRAPs and requirements).
- Federal repayment assistance: Under the John R. Justice Student Loan Repayment Program, state and federal public defenders and state prosecutors are eligible for loan repayment assistance if they stay in public service for at least three years. According to Equal Justice Works, an organization that supports law graduates interested in the public sector, public defenders and state prosecutors may qualify for up to $10,000 a year in assistance. To apply, you need to work with your designated state agency.
- State repayment assistance: Some states offer assistance programs, as well. Annual awards can range from $650 up to $10,000, depending on the state and your unique situation. Each state has different criteria, but most require public service, such as providing legal aid to low-income residents or working either in education or with a nonprofit organization. Check your state’s availability to see what you may be eligible to receive.
3. Consider loan forgiveness
In some circumstances, your loan balance can be forgiven, either through public service or after making regular payments on an income-driven repayment plan:
- Public Service Loan Forgiveness (PSLF): After making 120 monthly payments, your balance is forgiven as long as you worked for a tax-exempt nonprofit or government organization. For lawyers, this typically includes working as a state prosecutor, public defender or working in a legal aid office for underserved or low-income individuals.
- Income-driven repayment plan forgiveness: If you are on an income-driven repayment plan, such as REPAYE, after making your payments for the entire repayment period — usually 20 or 25 years — any remaining balance is forgiven. While that can be a huge benefit, it does come with one major caveat: unlike forgiven loans under PSLF, the amount that is eliminated is taxable as income. That can add a big chunk to your bill when your taxes are due.
4. Seek alternative repayment options
If you don’t qualify for one of the assistance programs or need additional help making your payments on your federal student loans, there are alternative payment plans that may help. The Department of Education’s Office of Federal Student Aid offers the following alternatives to the standard 10-year repayment term, depending on your circumstances:
- Extended repayment: With an extended repayment plan, your payments may be fixed or graduated and spread over 25 years, reducing your monthly payment.
- Revised Pay As You Earn (REPAYE): With REPAYE, your monthly bill is capped at 10% of your discretionary income. For borrowers with law school debt, it takes 25 years to qualify for loan forgiveness.
- Pay As You Earn (PAYE): With PAYE plans, your payment is 10% of your income but will not exceed what your bill would be under a standard repayment plan. With PAYE, you must make payments for 20 years before you can qualify for loan forgiveness.
- Income-Based Repayment (IBR): With IBR, your payment is capped at 10% of your income, and you will make payments for 20 years.
- Income-Contingent Repayment (ICR): With ICR, you pay the lesser of 20% of your discretionary income or what would you pay with a fixed plan over the course of 12 years.
Under income-driven repayment plans, your payments are based on calculations that take into account several factors, such as your income, marital status, and whether you have dependent children. Every year, you need to submit a new application, so if you have fluctuations in income or your family size changes, your payments can increase or decrease as well.
Extended or income-driven repayment plans can significantly reduce your monthly payments. But because you are paying interest for a longer period, you can end up spending thousands more over the life of your loan, particularly if you end up paying off your loans before you qualify for loan forgiveness.
Amount paid under government repayment plans
The easiest way to grasp the different outcomes is to compare the total repayment costs of each repayment plan. The table below illustrates how much a borrower with $140,616 in direct federal student loans would pay back in nine different government repayment programs.
| Repayment plan | Monthly payment (first, last) | Repayment period | Projected loan forgiveness | Total amount repaid |
|---|---|---|---|---|
| Standard | $1,554 | 10 years | $0 | $186,492 |
| Graduated | $888-$2,663 | 10 years | $0 | $198,729 |
| Extended fixed | $897 | 25 years | $0 | $269,234 |
| Extended graduated | $691-$1,360 | 25 years | $0 | $293,053 |
| REPAYE* | $552-$1,800 | 22 years, 7 months | $0 | $285,669 |
| PAYE* | $552-$1,539 | 20 years | $52,184 | $233,194 |
| IBR* | $827-$1,554 | 15 years, 4 months | $0 | $225,692 |
| IBR for new borrowers* | $552-$1,539 | 20 years | $52,184 | $233,194 |
| ICR* | $1,202-$1,733 | 10 years, 8 months | $0 | $193,899 |
| *Plans marked with an asterisk are income-driven repayment plans, with monthly payments tied to a percentage of disposable income. Source: Department of Education Repayment Estimator |
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The table above assumes that an attorney has just landed a job out of law school with:
- $25,000 in federal direct subsidized loans taken out to attend a four-year college at a weighted average interest rate of 4.2%
- $61,500 in federal direct unsubsidized loans ($20,500 annual limit) taken out to attend three years of law school at a weighted average rate of 5.8%
- $54,116 in PLUS loans taken out to pay for the balance of law school at a weighted average rate of 6.8%
- Adjusted gross income of $84,000 a year that increases by 5% a year
Paying for law school
Dealing with law school debt can be overwhelming and frustrating. With student loans that can easily reach into the six-figures, your payments can outpace your rent. While cutting your monthly payment down or lowering your interest rate may be tempting, it’s essential to consider your long-term goals and career interests.
If you can find an alternative to extended repayment options, you can save yourself a lot of money over the life of your loans. But whether extended payment, income-driven repayment, or refinancing is right for you depends on your own unique circumstances.
Jamie Young contributed to the reporting of this article.
