Be a smart borrower...Educate yourself
Most law students who receive financial aid take out loans to help with costs and living expenses. While the debt accumulated in law school is often substantial, it is manageable if you plan your expenses carefully, and reduce your debt while in school.
Understand repayment before you enter it
The loan repayment process can be confusing and overwhelming. Having a firm grasp on the process, timeline, and options for repayment will help you make early and effective decisions.
The basics
Your federal student loans will generally enter repayment six months after you graduate; however, under certain circumstances, you can receive a deferment or forbearance that allows you to temporarily postpone or reduce your federal student loan payments if you experience financial difficulties.
Only federal loans (e.g., Stafford and Graduate Plus) qualify for the federal loan repayment programs.
Repayment Options
- You have a variety of repayment options including income-based plans that calculate your monthly payment based on how much you earn. All repayment is managed by your loan servicer(s). Please contact your loan servicer(s) to answer any specific questions about your repayment plan.
- You have to affirmatively sign-up for income-based plans to avoid automatic enrollment in the standard plan which usually has a higher monthly payment. To qualify for the income-driven repayment options, you must demonstrate partial financial hardship.
It’s in your best interest
When thinking about interest for student loans, the mantra is Less is Best. Interest starts accruing on federal student loans upon disbursement and capitalizes upon entering repayment. Repaying your loans quickly will reduce the total amount you will have to pay over time. Not all loans are created equally. The following table highlights three types of loans available to law students and their interest rates.
Loan | Interest Rate (loans first disbursed on or after 7/1/13 and before 7/1/14) | Interest Rate (loans first disbursed on or after 7/1/14 and before 7/1/15) |
Federal Unsubsidized Stafford Loans | Fixed at 5.41% | Fixed at 6.21%
|
Federal Graduate PLUS Loans | Fixed at 6.41%
| Fixed at 7.21% |
Private Loans | These loans are made through banks and other financial institutions and are subject to their terms | These loans are made through banks and other financial institutions and are subject to their terms |
Take control of your interest
- If you return loan money during the academic year, it’s like you never borrowed the returned portion and there is no accrued interest
- If you make payments on accrued interest while you are still in school, less will capitalize when you start repayment
Know your cost to borrow
Understanding your projected law school debt can help you make informed decisions about loan repayment. Bearing in mind, varying lifestyle choices affect debt and repayment; these simplified examples are designed to help you understand public employment repayment options and benefits, and private employment repayment options. All three examples use median employment salaries for 2012 Colorado Law graduates and assume:
- Total amount to repay is the average for those who borrowed in the class of 2012 of $95,769
- No other federal school loan debt
- Consolidated all federal school loans
- Single with family size of 1
- Fixed interest rate of 7%
- Salary remains constant during repayment
Case #1 Private Sector Employment with Median Salary of $70,000 (Example: Private Practice Law Firm)
Total Loan Debt = $95,769
Monthly Payment = $1,111.96
- 120 monthly payments under Standard Repayment plan
- Debt is paid off in ten years and total interest paid is $37,666.08
Total Cost to Borrow = $133,435.08
Case #2 Public Sector Employment with Median salary of $48, 000 (Example: Public Defender)
Total Loan Debt = $95,769
Monthly Payment = $256
- 120 monthly payments under Pay As You Earn = $30,720
- Loan Repayment Assistance Program award of $6,500 for 3 consecutive years= $19,500
- Any remaining debt is forgiven after 120 consecutive payments under Public Service Loan Forgiveness program. This amount is not taxable.
Total Cost to Borrow = $11,200
Case #3 Other Professional Employment with Median salary of $38,250 (Example: Public School Teacher)
Total Loan Debt = $95,769
Monthly Payment = $175
- 120 monthly payments under Pay As You Earn = $21,000
- Any remaining debt is forgiven after 120 consecutive payments under Public Service Loan Forgiveness program. This amount is not taxable.
- No LRAP Award due to lack of qualifying public interest work
- Requirement: Applicants must be licensed, full-time (35 or more hours per week) lawyers working in a “public interest capacity”
Total Cost to Borrow = $21,000
All plans qualify for PAYE due to partial financial hardship.
Partial financial hardship if the monthly amount you would be required to pay on your eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under PAYE.
Standard Repayment Calculation:
- Monthly Loan Payment = $1,111.96
- Number of Payments = 120
- Cumulative Payments = $133,435.08
- Total Interest Paid = $37,666.08
Use the repayment calculators at studentaid.ed.gov to check your repayment options!
Disclaimer: The information provided on this website is to provide awareness and general information regarding federal financial aid, private aid, and various repayment options and resources available to borrowers. All specific questions must be addressed by your loan servicer(s).