Financing Law School

The Financing Law School section is broken up into four parts including:

Law School Financial Aid Checklist
Paying For Law School
A Realistic Look at Salaries and Debt
Helpful Hints

Law School Financial Aid Checklist

Late Summer/Autumn, One Year Prior To Enrollment:
1) Review financial aid procedures for all schools to which you will apply.
2) Consider law schools that offer a night program, if you need to work during the day.
3) Pay attention to tuition and job placement statistics, because that’s the bottom line.
4) Reduce credit card debt.
5) Check your credit report and correct any errors.
6) Save what you can.
7) Ask for gifts in cash, for the “law school tuition fund.” Every little bit helps.
8) Begin researching scholarships and grants.
9) Consider taking time off after college to save some money and make yourself a more competitive applicant.

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December Before You Enroll:
1) File your law school applications as soon as practicable, preferably in early to mid December. You will not be considered for admissions or aid until your file is complete. Schools begin offering aid immediately; late applicants generally get the leftovers.
2) Apply broadly to maximize opportunities for aid.
3) If you area minority/diversity student with a decent to good LSAT score, you should consider applying even more broadly, to take advantage of scholarships and grants that schools might offer. (What is a “minority”? It depends on the school. What does the school consider to be a minority? Traditionally underrepresented racial and ethnic groups, students from low socio-economic backgrounds, students who add some sort of diversity to the class are all possible definitions.)
4) As you file your applications, also file all the financial aid forms required by the schools.

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January Before You Enroll:
1) Obtain and file the FAFSA as soon as possible. FAFSA may be filed starting January 1st.
2) Prepare your income tax return as soon as possible.
3) Have your parents/guardians prepare their income tax return as soon as possible. (Note: for the purposes of federal aid, such as student loans, a graduate student is automatically considered independent. But for private aid, such as a school’s own scholarships and grants, it may be necessary to provide parental tax returns.)

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Spring Before You Enroll:
1) When you receive aid packages from the schools that have accepted you, compare and contrast them. Are some all loan based or do some include free money?
2) You may, at this point, begin to bargain diplomatically with the law schools you are most interested in.
3) Send a letter to the Director of Financial Aid requesting more money (be tactful).
4) Point out that you have a better offer from another school, but you really want to attend his/her school.
5) Ask them if there is anything they can do for you, or if there are other things that you should be doing.
6) When you have chosen your school, write to a few professors, particularly those who head up institutes or clinics.
7) Ask for a part time job, explaining your financial need. Many schools strongly discourage students from working during their first semester or year of law school, but do not really enforce this preference.
8) If your aid package includes loans, you should apply for them immediately. Although the loan process is more streamlined than it was just a few years ago, you still want to allow plenty of time for your loan materials to be reviewed.
9) If your aid package requires you to seek loans from private lenders, explore the various private and non profit financial institutions that make graduate loans.
10) Compare factors such as interest rates, origination fees, repayment options, reductions in interest rates for on time payments, etc.
11) Before you choose a school, prepare a working budget to see if you can really afford it. The figures provided by the school for tuition, fees, and living expenses is a STARTING POINT only. Your actual expenses will most likely be greater. For example, you may need to budget for things like travel to and from home, entertainment, an indulgence like cable TV or a home Internet connection, car repairs, and professional expenses such as purchasing an interview suit and small professional wardrobe.
12) If you are admitted to a school you want to attend, but simply can’t afford it, you should contact the Director of Admissions and explain that fact. You may be able to request a deferment of your admission for a year.

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Summer Before You Enroll:
1) You need to live like a starving student to save as much money as possible. If your parents/guardians offer free housing so that you can save money for school, you should strongly consider it. Work, save, and reduce your debt.
2) Prepare a final budget for your first year of law school.

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Paying for Law School

The following information was compiled by Ava Preacher, Assistant Dean and Principal Pre Law Advisor, University of Notre Dame. I have edited it and included information about loan forgiveness and debt burden.

The cost of a three year law school education could run well over $80,000 (even at a public law school!). Tuition alone can range from a few thousand dollars to more than $25,000 a year. When calculating the total cost of attending law school, you also have to include the cost of housing, food, books, travel, and personal expenses. During the first year of law school, full time students are discouraged from obtaining any but the most limited part time employment. Therefore, approximately 75 percent of law school students rely on education loans as their primary source of financial aid.

Money for law school is available in the form of scholarships, grants, work study and loans, but most students finance their education through loans, either from the government or private sources.

Some law schools offer their own scholarship programs, but the amount available varies greatly from school to school. Some offer their best candidates full scholarships based on merit. Others give financial aid primarily on the basis of need.

Loans from governmental and private sources at low and moderate interest rates are available to qualified students. Some of these loans consider the applicant’s financial need in determining eligibility; other have limitations based on the law school budget. Many states offer guaranteed student loans. To determine your eligibility for these you should consult lending institutions in your area. Private loans are also increasingly available. Typically, the lowest interest rates are associated with federal loans that require demonstrated need; private bank loans are typically available at higher rates.

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To Apply for Federal Aid:
1) Start the financial aid process in December to be well in advance of the school’s particular filing deadline. You cannot wait until after you receive admissions offers to begin the planning process.
2) Obtain the Free Application for Federal Student Aid (FAFSA) from your college or university financial aid office or from the law school to which you are applying. FAFSA is a need analysis tool developed by the US Department of Education
Note: When completing the FAFSA form, you will designate the names of all law schools that are to receive the report. It asks for information about your income, assets, and other financial resources. Be sure to answer “yes” to the questions, “Will you be a graduate or professional student for the upcoming year? ALL GRADUATE/PROFESSIONAL STUDENTS ARE CONSIDERED INDEPENDENT FOR THE FEDERAL LOAN PROGRAMS. However, some law schools will request parents’ financial information in determining their in house institutional aid.
3) Prepare your federal income tax returns as early as possible after the first of the year. Some schools will want to see a copy of your actual return, so be sure to keep a photocopy for your files. The FAFSA requires information that is derived directly from your tax return. While information packets (including the FAFSA) may be available from some law school financial aid offices in the fall, applications cannot be filed until after January 1. (They will be returned to you if received before the first of the year.) However, you can file any time after the first of the year the earlier the better.
4) The law schools to which you apply will determine your eligibility for federal financial aid. The amount offered by each law school will vary, and each student’s individually because the cost of attending each law school varies.
5) Once you determine the school that you will attend, you may begin the federal loan application process.
6) Most of the private education loan programs will make credit decisions on the telephone. Contact them for details.

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To Apply for Aid From Your Chosen Law School:

1) Call or write the financial aid office of the law schools you plan to attend. Some schools may require you to submit information in addition to the FAFSA, such as an institutional application or an additional form from a central processor. Many schools have very early filing deadlines.
2)  You should arrange for financial aid transcript to be sent from any undergraduate or graduate school you attended to any law school to which you apply. This may or may not be required by the law school for institutional aid.
3) Complete the loan applications. Note: You will benefit by planning a financial strategy before you even enter law school. Save as much money as you can, and try to rid yourself of any outstanding consumer debt. It is important to have a good credit history. Clear up errors or discrepancies in your credit before you apply for loans. Establish and maintain good credit early.

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Loan Repayment Assistance or Forgiveness
Some law schools participate in loan assistance and forgiveness programs. Generally, these programs are set up to help students who want to take low paying public interest legal jobs upon graduation. You should check with each law school to find out the details of and requirements for its program.
The Loan Repayment Assistance Program (LRAP) award grants to qualifying law school graduates of schools who have high debt and have taken low paying public interest jobs. The money is considered reimbursement for student loan payments. The grants are awarded yearly and are renewable for up to fifteen years. Contact the law schools of interest for more information about LRAP programs. Not all states or universities offer the program.

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A Realistic Look at Salaries and Debt

Compiled by Gina D. Rowsam, Assistant Dean and Director, Law Career Services and Legal Intern Program, Oklahoma City University School of Law and member, National Association for Law Placement; I edited it.

Starting Salaries and Positions for the Law School Graduating Class of 2001 (42,018 graduates reporting to NALP)
1) The average starting salary was $53,250. The median was $45,000.
2) 55% of salaries were in the $35,000 to $70,000 range.
3) 24% of salaries were above $70,000.
4) Approximately 55% of the class chose to practice in private firms.
5) Approximately 26% chose positions in public service, including judicial clerkships, government agencies, and public interest organizations.
6) 13% entered business and industry.
7) 10% chose non legal jobs.

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The Debt Dilemma
1) The average 2000 law graduate debt burden was $70,500 for law school only!
2) The average combined undergraduate and law school debt was $90,000.
3) Lawyers default on their student loans at a higher rate than other professionals.
4) Graduate students have an average of 6 credit cards and an average balance of $4,925 per card. In total, graduate students have an average of $29,550 in credit card debt on top of their student loan debt.
5) Student loans are NOT dischargeable in bankruptcy. That means that they do not go away if you file bankruptcy.

The above figures suggest what many pre law advisors know to be true: most students can't afford law school on their own, so they borrow. Their student loans cover tuition and books and school based expenses, but do not leave enough money to pay for living. Costs of living are paid for by credit cards. This is an oft repeated scenario among graduate and law school students.
Unfortunately, the starting salaries upon graduation generally are not high enough to pay for the debt that has accumulated. Law school grads may find themselves unable to afford a house because their debt to income ratio is too high to qualify for a mortgage. They may also be disappointed in their standard of living, given the high amount of their monthly student loan payments.
Is there a solution to this dilemma? Many people blame students for being irresponsible. Some are, I'm sure. But personally I believe that law schools should assume some responsibility for this mounting student debt. They collect their tuition money from your student loans, and they make little effort to reduce the size of their classes or to make law school more affordable and less loan based. That means that, for most of us, the only way we can attend law school and join the legal profession is to borrow for the education. What's a middle class student to do? I for one do not want a legal education to be a privilege of the rich. Something must happen systemically, or else a generation of students will collapse under a mountain of debt.
Some pre law advisors are lobbying for changes. But until change comes, the question of whether to assume debt to pay for law school remains a highly personal one. The best thing to do is inform yourself about the costs of school and the risks associated with borrowing to pay for it. Do your homework, and make the best, most informed decision you can.

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Helpful Hints

Applying to Law School: Adding up the Costs
Set Costs
LSAT EXAM $96
LSDAS Fee (includes one report $95
LSDAS Report sent to five more Schools $45
Letter of Recommendation Service $0
LSAT Telephone Score Release $10
Transcripts $2
LSAT Prep Materials From LSAC $17- 45
LSAT related Total
Application Fees 6 schools at $40.00(range from $248
$20.00 - $60.00 each
Grand Total

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Know Your Loans
Many students take out loans to pay for law school. There are a number of loan programs for graduate students, and some specifically for law students. In order to be eligible for loan aid, you must submit the FAFSA (Free Application for Federal Student Aid). The first day for submitting the FAFSA is January 1 of any given year; you should plan to have your FAFSA in as early as possible. Also, you should plan to do your tax returns early that year as well.
In general, most schools participate in a wide variety of loan programs. When you submit your FAFSA, they will automatically check your eligibility under all loan and scholarship programs to determine what type of aid you will receive. Do not be misled when schools claim that high percentages of their students receive financial aid. Almost all law schools make this claim, but they consider student loans "aid," so the money is not free. You should try to find out what percentage of incoming students receive non loan financial aid that will give you a better idea of how generous the school really is.

There are too many loan programs to detail. These are the most common types:

1) Federal Government Loans: The primary federal student loans for college and graduate school were commonly called Stafford Loans. They've had a name change, and are now referred to as Direct Loans (or Stafford Direct Loans) and FFEL Loans (or Stafford FFEL Loans). As far as the student is concerned, these two loans are virtually identical; the main difference is in who provides the funds. In the Direct Loan program, the federal government provides the loan. In the FFEL program (Federal Family Education Loans), a bank or other private lender makes the loan.

Both of these loans can be either subsidized (meaning that the government pays the accruing interest on your loan while you remain in school) or unsubsidized (meaning that you have to pay the accruing interest as you go along or have it added to your loan balance). The unsubsidized loan is awarded without regard to financial need. Graduate students may borrow up to $18,500 per year. However, an unsubsidized loan can become pretty costly. If you cannot afford to make the quarterly interest payments, they will be added to your loan balance. Over the years of law school, those interest amounts could add a few to several thousand dollars to your balance, depending on how much you borrow, and for how long.

2) The Perkins Loan program and NDSL (National Direct Student Loan) program are also available to graduate students. Eligibility is based on need, and the amount you borrow cannot exceed $30,000 for undergraduate and graduate school combined.

3) Law School Loans: Often a law school has its own pool of money to lend out. While scholarships are better (because they're usually free money), a loan from your law school can be at a lower interest rate than the government loans or private loans, making them a good deal. Law schools develop their own rules for lending their money, although most will consider both merit and financial need.

4) Private Loans: Private loans come from private lenders like banks, credit unions, and non profit educational groups like ACCESS. These loans are used primarily to pay additional costs above and beyond those covered by government loans. The interest rates are market driven. If you attend an expensive law school where, for example, tuition alone exceeds the government loan limit of $18,500, you will need to make up the difference. Most students turn to private lenders. These loans can be relatively easy to obtain UNLESS you have screwed up your credit rating. See the discussion of credit rating, below. The Good News: It's a way to pay the costs of an expensive graduate school education. The Bad News: Borrowing lots of money can make for a lower standard of living later on.

5) Scholarships, Tuition Waivers, and Grants
Like it or not, the number one factor in obtaining a scholarship from a law school is your LSAT score. Law schools compete for top candidates, and use free money in the form of scholarships and tuition waivers to attract them. This approach is true even of lesser ranked schools: a school with a median LSAT of 156, for example, might not be able to compete for the very best students, so it instead offers money to students who will contribute to raising that median score meaning that students who score, say, a 157 or 158 may be targeted for scholarship aid.
After the LSAT, scholarships are generally given on the basis of financial need. There. Are also targeted scholarships to help underrepresented groups, children of alumni, etc. These scholarships are particular to the school and are awarded by each school's financial aid office. You may qualify for a scholarship at one school and be completely shut out at another. Awarding free money is a very school specific undertaking, and it is often impossible to predict what a school will do for you. Consequently, your best course of action is to submit your completed law school and financial aid applications as early as possible. There's more money available at the beginning of the admissions cycle than at the end.
There are a number of federal scholarship and grant programs for needy individuals, plus a number of private programs. You need to do your homework to see which ones you might be eligible for. Sometimes these programs can be very idiosyncratic- "awarded to the children of union laborers," for example so research extensively to see if there are any that match your background.

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Keeping A Good Credit Rating
1) Limit the number of credit cards you have. One or two is plenty.
2) Make your monthly payments on time. Even if you just pay the minimum balance, you must do so in a timely manner.
3) Pay off your loan balances before law school.
4) Obtain a copy of your credit report once per year. Correct any mistakes.
5) Beware of "hidden" credit accounts. First, close all accounts you aren't using, like old department store accounts. Second, check to see if some of your services are treated like credit accounts (e.g., cell phones and Internet accounts).
6) Give up luxury goods. ACCESS, for one, believes that a student does not need a cell phone. If you wish to claim poverty to receive financial aid, you need to demonstrate it. Cell phones and sometimes automobiles are suspect.

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Top Ten Tips For Your Financial Aid Strategy
1) Keep a good credit rating.
2) Keep your credit card balances low or pay them of
3) Watch your other indebtedness (car loans, college student loans, etc.)
4) Fill out the FAFSA immediately and send it in. Similarly, send in your law school applications as soon as possible.
5) Kick butt on the LSAT to have the best chance of receiving scholarships and grants.
6) Think about what job you want, and what its likely salary will be. Ask the law schools for the placement histories and average salaries of its recent graduates.
7) Consider taking time off before going to law school to earn money or pay off college debt.
8) Establish, if possible, residency in a state to take advantage of the lower in state tuition at public law schools.
9) Read up on educational funding sources and apply for all scholarships and grants that you can.
10) Apply to many law schools to maximize your chances of receiving financial aid. Compare your financial packages and see if your schools can do better or can match other offers you've received.

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Managing Student Loan Debt After Graduation
1) Generally, student loans and the interest accruing on those loans can be deferred while you are in school at least half-time.
2) Most loans have a grace period of 6 9 months.
3) You must NEVER lose track of your loans keep a central file and put every bit of loan info in it. Start now!
4) If you end up with a lot of debt and a lot of lenders, you should consider loan consolidation. Loan consolidation means that a single lender (Sallie Mae, for instance) pays off all of your individual loans. In exchange, you get one new loan for the same overall amount at a fixed interest rate. The interest rate might be better or worse at the time you consolidate. The consolidation loan can be paid over 10, 20, or even 30 years depending on the offerings of your lender. Lenders often also offer sliding scale payback, where you start off with lower payments that gradually increase over time.

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Benefits of Loan Consolidation
1) One lender to deal with;
2) One monthly payment;
3) Significantly lower payments if you spread your loan repayments out longer than 10 years;
4) Potentially lower interest rate;
5) Makes other financial transactions easier, such as buying a house. Some mortgage companies strongly urge you to consolidate your debt.

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Drawbacks of Consolidation
1) If you spread your loans out over several years, you will incur significantly higher interest charges. You may even double the amount of money you will ultimately pay back on your loans;
2) Potentially higher interest rate.

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Will I Be Able to Buy a House? The Debt to Income Ratio
In the "old days," the common rule of thumb was that you needed to put 20% down when you bought your house, and that a person with too much debt could not obtain a mortgage. Today, buyers rarely put 20% down on a home, and mortgages are much more readily available, even to persons with significant student loan debt.
The common debt to income ratio used by large banks is 30%. That means when you compare your debts to your income, the total amount of the debt payments you must make each month should not exceed 30% of your total income. Banks will take into account other assets you may have, of course, in determining loan eligibility, but the debt to income ratio is a big factor
All is not lost, however. Many credit unions and non traditional lenders such as mortgage brokers permit higher levels of debt. Mortgage brokers, in particular, are used to dealing with persons with high student loans, and may allow debt to income ratios of 50% or even 55%. However, in order to qualify for such a loan, you must have an excellent credit history, meaning that you have borrowed money and paid it back on time with few if any "black marks." Once again, a good credit rating is crucial. If you are a conscientious borrower, a mortgage broker will work with you to help you obtain a mortgage. If you qualify for a "non conforming" mortgage, as they are called, you usually have to pay a slightly higher interest rate on your loan.
So the prospects for home ownership are not lost. Far from it. Nevertheless, decisions you make today about your credit and spending habits will be very relevant down the road when you go to buy a house. Therefore, it is never too early to practice good debt and credit management skills. Before enrolling in law school, it's a good idea to sit down and make a financial plan, one that details not only how you will pay for your education, but also how you will pay for the things that you will want and need upon graduation. You need to accurately assess the kind of lifestyle you will have after law school if you borrow heavily now to pay for it.

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Final Thoughts
The bottom line is this: if you want to go to law school, you can borrow enough money to do so. The ceilings on student loan borrowing are very high well in excess of $100,000 and there are enough loan programs out there for you to obtain the money you need. Schools like to lend money, because it brings more people and tuition money in the door and it doesn't cost THEM anything it costs YOU!

Therefore, you must seriously consider whether you might be "making a deal with the devil" in taking out significant student loans. Take a look at your local newspaper or any national magazine. They are replete with stories about the mounting student loan debt of the middle class. They should be! Lawmakers, and particularly Congress, decided years ago that the best way to help citizens pay for higher education was to loan them the money to do so, and allow each student to choose where the money would be spent. (The other alternative, used commonly in elementary and secondary school funding, is to give large sums of money directly to the institutions, not the students. Hence the whole school choice and voucher debate, but that's another matter.)
If you borrow substantial sums of money, you should expect a reduced lifestyle upon graduation. You may be forced to take a high pressure, high paying job that you do not enjoy. You may postpone having children. You may not be able to relocate easily. There are many potential negative consequences when you accumulate massive debt. (And, just so you know, student loan debts are generally not excused if you file bankruptcy!)

That being said, law school should not be reserved simply for the children of the rich. Student loans exist for middle and lower income students in part so that this doesn't happen. Student loans are there for you to take advantage of, to better yourself and eventually to obtain a higher standard of living.
The key for you, then, is to make a careful, informed decision about how important a legal career is and how much you are willing to sacrifice to pursue it. That means you should do your homework. This includes not just your financial aid homework, but more importantly the homework involved in discerning whether a legal career is for you. Know what you are getting into before you start, and you'll be better off when you finish.

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