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Five Things You Need To Know About Your Law School Loan

Five Things You Need To Know About Your Law School Loan

  • Education
  • Student Tips
Joanna HughesSep 12, 2018

Law school can lead to a bright future. However, it can also be expensive. And while loans can defray the cost, the degree to which they help depends on several factors. Keep these five tips in mind to make the most out of your law school loan.

1. Avoid borrowing the maximum amount allowed.

As a law student, you’ll probably be eligible to borrow the full amount of tuition, fees and “reasonable living expenses” involved with attending law school. However, many students to end up borrowing -- and spending -- more than they need due to the inherent subjectivity of the word “reasonable.”

Shares Jordan Rothman for Above the Law, “During law school, I never borrowed the maximum amount of student debt I was permitted to take out in order to pay for living expenses. Indeed, I borrowed several thousand dollars less than the amount suggested by my law school. I did some calculations, and reasoned that if I lived especially frugally, I could get by with less money for living expenses. Since I borrowed less money for living costs all three years I attended law school, and I also saved money on interest, borrowing less money for living expenses significantly lowered my student loan burden.”

Of course, you’ll want to make sure you borrow enough to cover what you need. But remember “need” is also relative.

Finding the balance point can help make sure you’ve got enough, but not too much.

2. Factor in the pricetag when choosing between law schools.

Ninety percent of law students take out loans to pay for law school, according to the American Bar Association. However, depending on whether you attend a public or private law school, your debt burden is likely to vary significantly: While the average law school loan debt for public law school grads is $88,000, the law school loan debt average for private law school grads is $127,000.

The prestige level of law schools can also impact the price, but again, it’s a balancing act which requires consideration: Is accumulating more debt to attend a top-tier law school an investment you’re willing to make?

Recommended reading: How to choose a law school?

3. Understand your postgraduation salary prospects.

Many people go into law because of the promise of cushy paychecks. However, this isn’t always the case. Before you take on a student loan, make sure you do your due diligence in terms of the salary you can realistically expect to collect.

According to a study by the Association for Legal Career Professionals (NALP), only 10 percent of law grads made $160,000 in 2011. Meanwhile, the average salary was $76,000 with some law grads making just $50,000.

Many schools provide information about placements and salaries. If it’s not readily available on a school’s website, contact them directly for this important data.

4. Spend smarter.

We already talked about borrowing less than the maximum amount. But regardless of the amount of money you borrow, there are always ways to trim costs, such as by living at home or being a resident advisor.

“If I had chosen to live in cheaper housing as a law student, I could have saved thousands if not tens of thousands of dollars over the course of my time in law school. Since student loans can have interest rates approaching eight percent, it is easy to see how much money one can save over the life of the debt if they live in less-expensive housing,” continues Rothman.

One money-saving mantra? “Live like a student now so you can live like a lawyer later.”

5. Know all of your loan options.

Law students have several options when it comes to student loans, including federal direct unsubsidized, federal direct PLUS loans, and private loans. Understanding each of these choices can help you make the most educated decision.

Advises, “When reviewing your options, including deciding between federal and private law school loans, make sure to evaluate the interest rates available for each type of loan. Government loans can be surprisingly expensive — particularly when you hit limits for federal direct loans, and must consider taking out PLUS loans....With law school, where many borrowers end up taking on six-figure student loan debt, the high interest rates can add significantly to your total repayment cost.”

Conversely, private lenders may offer more competitive interest rates, but may have less protection.

However, other factors also come into play, such as whether you’ll need a cosigner and/or whether you’ll qualify for debt forgiveness.

Student loans can be an invaluable lifeline for law students who might not otherwise be able to attend law school. However, not all law students or loans are created equal. The more informed you are, the better positioned you’ll be to borrow in the most advantageous way.

Will the fact that law firms are offering higher salaries influence your choice of loan or how much to borrow? Learn more here.

Joanna Hughes

Joanna worked in higher education administration for many years at a leading research institution before becoming a full-time freelance writer. She lives in the beautiful White Mountains region of New Hampshire with her family.