Student Loan Tips
I am one of the volunteers with the Bankruptcy Court’s Credit Abuse Resistance Education Program (“CARE Program”). The CARE Program is a financial literacy education program for students and young adults taught by bankruptcy professionals. Its goal is to improve the financial literacy of students and other young consumers.
The CARE Program provides practical advice on (1) the true cost of consumer credit; (2) the difficulty of repaying consumer debt; (3) the need to have savings and to effectively budget; and (4) the advantages of living with manageable consumer debt.
CARE presentations are taught by experienced and passionate bankruptcy practitioner volunteers, who use relevant, real life examples to engage their audience. Presentations are flexible and can be specifically tailored to address a group's specific needs/ time frame. CARE presentations free of charge. If you are interested in scheduling a presentation for your group or class, you can find more information HERE
The CARE Program also addresses the important topic of student loan debt, which is one of the biggest problems facing young people today, and explains the different types of student loans and how to choose among them wisely. I recently gave a presentation about law school loan debt to a group of aspiring law students. I am sharing the information below as I believe this information could probably apply to anyone considering college/ grad school (anyone wanting to further their education). This is just a brief overview and there is a lot more information out there, but I hope these tips are a helpful:
Why we love practicing law
- We get to help and serve others. We help people experiencing financial difficulty and give them protection, peace of mind, and a fresh start.
- Intellectually challenging. We are always thinking, learning, problem-solving and coming up with creative solutions.
- Many other reasons
Although being an attorney is a wonderful and fulfilling career, going to law school is not a decision to be made lightly, especially because of the expense involved. If it has always been your hope, wish and dream to be a lawyer and you want to help and serve others, that is one thing. But if it is more of a “whim” or “something to do” after college or you think you will make a “ton of money”, those are not the right reasons; and you may want to give more thought before going…
Law school expense
- The national average law school tuition is about $46K per year (law school is 3 years)
- In addition to tuition, you will also have to pay for books and supplies, housing, and meals, among other living expenses
- Living expenses on average total out at about $23K per year
- A loan amount of $150K with a term of 15 years at 3.5% interest equals a monthly payment of $1,100 per month
You will most likely have to take out student loans in order to pay for law school tuition and/ or living costs
- There are 2 types of student loans: Federal loans and Private loans
- Preferred: Federal loans
- A student receiving a federal loan does not usually need a credit history
- Lower/ Fixed Interest Rates which means the payments won’t fluctuate (go up and down)
- Deferral (delay/ suspension of payments) while in school; and deferments/ forbearance options available after graduation
- Sometimes discharged/ forgiven after certain period of regular payments (usually 25 years)- make sure you are in the right program
- Possible public service discharge. If you work for the state for 10 years (such as a solicitor or public defender), your loans will be forgiven. Again, make sure you are signed up under the right program
- Cap on total amount you are allowed borrow (you might have to subsidize with private loans)
- Flexible Repayment options
- Standard Plan: fixed payment amount, fixed amount of time; usually 10 years
- Extended Plan option: extends repayment period, lower payments over a longer period of time
- Need-based or Income-contingent Programs available: monthly payments are based on your income
- Private loans (only get these if no other option)
- Variable interest rates so payments can increase significantly over time
- Interest rate can be very high- depends on market rate and credit history
- Payment due immediately after graduation regardless of whether you have a job
- Limited forbearance/ deferral (postpone/ delay/ extend) options
- No public service discharge
You will need to make enough money to pay back your student loans and live the life you want. Remember also, after you graduate, your expenses will also go up as this will be the time in your life when you will be buying a house and getting married/ starting a family
Income/ Job market
- Research the job market where you plan to practice
- Research the median private sector salary and the median public sector salary
- Research student loan forgiveness for jobs in the public sector (such as public defender or solicitor). If you work in public sector for a certain amount of time (term is usually 10 years), the loans might be eligible for forgiveness. Make sure your loans qualify especially if the objective of choosing this career path is loan forgiveness
- Consider Military JAG, which will either pay for law school or will re-pay your law school loans in exchange for military service
- If you have to have a co-signor: be careful about getting your parents or grandparents to co-sign for you on student loans. If you ever default, the collections efforts will be just as strong against them as against you
- Choose your school wisely. Consider the cost. Consider an in-state public school. You usually want to choose a school where you plan to practice for networking opportunities.
- Consider working while in school
- ** Live like a student now so you don’t have to later**. Only borrow what you need. Try to borrow as little as possible. Spend as little of your student loans as possible. Live on campus or get a roommate. Live frugally on a budget.
- See sample budget before and after graduation
Student Loan Budget