Oliver S. Berryhill Blogs: The Ultimate Guide to Eliminating Your Law School Debt

The year was 1992. I had just graduated from Boston University Law School, magna cum laude no less. My mom was proud.

The school handed me a diploma. The government handed me $55,000 in school loans.

In today’s dollars, my law school debt was the equivalent of about $100,000. Ouch.

law school debt

It’s somewhat ironic that after 25 years of practicing law, I retired at the ripe old age of 49 to write about personal finance and investing. Though, that’s a story for another time. Today, the topic is law school student loans.

It’s no secret that the average law school cost can be an arm and a leg. And many students have to finance that arm and leg. So, just how much debt does the average law student incur?

One analysis showed that students with professional practice degrees have a much higher average amount of debt than other students. In fact, 37 percent of them owe more than $50,000 in student loans.

Grads coming from the top law schools could have even more debt. The latest U.S. News & World Report rankings show that 2016 graduates from Thomas Jefferson School of Law have an average of $182,411 in student loan debt. Columbia University graduates averaged $159,789 in the hole.

Even on a median lawyer’s salary of $118,160 per year, that amount of debt could take quite a while to pay off. If you want to work for the government, you could be looking at less than that for an average salary – -about $88,000 in 2016 — and an even lower starting salary.

But there is good news.

There are plenty of great assistance programs designed to specifically help lawyers repay their student loans. Some of these programs will even get part of your loan balances forgiven.

There are also a variety of federal repayment programs and specialized loan repayment assistance programs (LRAPs) and loan forgiveness programs.

Table of Contents

In this guide, we’ll walk you through the options for dealing with your law school-sized student loans. Before we cover specific loan forgiveness and repayment plan programs, we’ll cover some tips for those still deciding on a school.

If You Haven’t Chosen a School

If you haven’t yet applied for, or chosen, your law school, that’s a good thing.

More and more schools are offering loan repayment assistance programs. Some of these programs provide a powerful incentive for students to pursue their dreams — like working for underserved populations — that might provide plenty of motivation but not a lot of money.

These programs, such as Harvard’s Low Income Protection Plan (LIPP), help graduates avoid burdensome student loan payments if they opt for a lower-paying type of law practice. Harvard’s program, for instance, requires that graduates put a certain percentage of their income towards student loans. Then, the school pays the remaining portion of the debt.

Yale’s Career Options Assistance Program (COAP) is similar. Students who make below a certain income threshold do not pay on their student loans at all. Other students above that threshold may pay a portion of their loan payments, with COAP picking up the rest of the tab.

These programs should be considered when choosing the law school that’s right for you, especially if you plan to go into a lower-paying type of practice. Luckily, the American Bar Association keeps a list of law schools that offer LRAPs.

LRAP requirements and repayment amounts vary by school. Be sure to account for these programs when looking at the school’s total cost.

So, what if you’ve already chosen a law school, or have already graduated? If you’ve never asked about your school’s LRAP, now is the time to do it. Some of these programs don’t apply retroactively, but you can use some schools’ programs long after you’ve graduated.

For instance, say that you went from law school to a high-paying, private practice job. You could handle your student loan payments just fine on your six-figure salary.

But then you got interested in a cause and decided to work for a not-for-profit serving underserved populations. The pay cut is totally worth the fulfillment you get from your new job, but how are you going to manage that $1,000-a-month loan payment? This is the time to call your alma mater to check for a student loan assistance option.

If it’s not an option, don’t worry. We’ve got several others for you.

If You’re Looking for a Job

Many legal employers offer loan repayment assistance programs. They may fund these programs on a one-off basis through grants and other means.

If you haven’t yet found a job, consider asking about employer LRAPs when you’re job searching. This valuable benefit could make it possible for you to work in a lower-paying job that services the underserved, while still being able to manage your hefty student loans.

Some large companies, such as Fidelity, offer broader student loan repayment programs to all their employees, not just lawyers. As you’ll learn below, working for the government as a lawyer could also net you some serious student loan repayment benefits.

Many civil legal aid and nonprofit legal aid employers offer similar programs. Government and non-profit loan forgiveness programs are often linked to the programs listed below.

Learn More: Student Loan Consolidation vs Refinancing: Do You Know the Difference?

State Loan Forgiveness Programs

Many states offer additional assistance to lawyers who work in underserved communities or who are employed in certain programs. Some of these programs grant you a set amount of money annually, and others pay your student loan servicer directly.

Most of these programs are run through the state’s bar association or bar association foundation. Like the school-based programs, they have income requirements. And they often require attorneys to work for non-profits or government organizations. Some of the programs require employment with specific non-profits in the state.

State	Eligibility	Amount	Other Details
Arizona	Legal aid attorneys employed by approved non-profits	Annual award amount not stated	Currently closed to new applicants
District of Columbia	Attorneys must be employed with non-profit providing direct services to low-income DC residents Publicly-funded: Must be a DC resident with salary under $84,413.16 for 2017 ($190,503.16 joint) Privately-funded: No residency restriction, but same salary restrictions	Publicly-funded: $12,000 per year up to $60,000 lifetime cap Privately-funded: $12,000 per year with no lifetime cap	Single application is available, and applicants will be placed in the appropriate program
Florida	Attorneys must work with an eligible employer and work at least 50% FTE	Foundation provides loans of $5,000 per year. Loans are forgiven annually as long as participants remained employed full-time or part-time with qualifying employers.	This benefit only covers staff attorneys working for organizations that receive general support from the Florida Bar Foundation.
Illinois	Attorneys must work with or have accepted an offer to work with a qualifying employer, and must make a commitment to work full-time with qualifying organization for five years.	Fellowship recipients receive $20,000, payable over five years.	This program only awards five fellows annually.
Indiana	Must work with a non-profit serving low-income Indiana residents. Must be licensed, employed at least part-time, and earn up to $50,000 per year.	Maximum of $5,000 per year.	Part-time workers will receive assistance at a prorated rate.
Iowa	Must be licensed attorneys employed full-time in non-profit or government job or as a public defender or prosecutor. Annual salary must not exceed $50,000, and must be an active member of the Iowa State Bar Association.	Up to $2,000 per year.	This program’s website is out-of-date. Call the Iowa State Bar Association to confirm details.
Louisiana	Attorneys must be licensed and employed in a non-profit assisting low-income individuals. Must work at least 35 hours per week, and must not exceed $60,000 per year in income.	Up to $5,000 per year.	Income requirements are higher for applicants with dependents. Income is adjusted by $5,000 for each dependent.
Maine	Attorneys employed full-time or part-time with participating employers can participate for 10 years.	Contingent on funding and pro-rated for part-time employees.	Accounts for assistance from other sources.
Maryland	Any Maryland resident (not just a lawyer) who works for state or local government or a qualifying non-profit. Gross annual salary cannot exceed $60,000 (if married, individual salary cannot exceed $75,000 and joint salaries cannot exceed $160,000)	Up to $30,000 distributed over a 3-year period, depending on total debt amount.	Law students at the University of Maryland, Baltimore or University of Baltimore can apply before graduation with documentation of official, eligible job offer.
Minnesota	Graduate from Minnesota law school or any ABA-accredited school if employed at qualified Minnesota employer. Must be employed full-time and meet the graduated income cap.	Variable depending on payments.	Applications are competitive, and awards are made in May and November annually.
Montana	Must be employed full-time with an approved non-profit or other legal organization. Income may be considered.	Up to $2,500 per year for up to five years.	Awards are given twice per year.
New Hampshire	Attorneys must be employed by NHLA, LARC, DRC, or Prop Bono, full-time or part-time. Assistance is granted on a pro-rated basis for part-time workers.	Based on a percentage of the total outstanding loans. Made as a forgivable loan contingent upon continued service.	Only the lawyer’s income and debt are counted in the formula, rather than total family income and debt.
New Mexico	Licensed attorneys must practice in public service, have loans obtained specifically for legal education, and earn under $55,000 per year.	Up to $7,200 per year.	Program requires a three-year commitment to working in public service.
New York	Must be a New York resident employed as a District Attorney, Indigent Legal Services Attorney, or Assistant District Attorney for four to nine years. Must work at least 35 hours per week.	Maximum amount of $20,400 paid in the amount of $3,400 annually.
North Carolina	Attorneys who work in public service.	Variable funding.	Mecklenburg County applications no longer being accepted.
Ohio	Attorneys must work in legal aid programs serving underserved communities.	Up to $6,000 in repayment assistance.
Oregon	Must be a practice attorney within Oregon with a civil legal aid organization or other non-profit representing low-income clients, or as a public defender or deputy district attorney. Salary cap is $65,000, and debt at the time of application must be greater than $35,000.	Forgivable loan of up to $7,500 per year for a maximum of three years.	Applicants must already be engaged in qualifying employment at the time of application.
Pennsylvania	Must be licensed to practice in Pennsylvania with a gross salary of $66,000 or less or debt service equal to 10% of the attorney’s current annual gross salary.	Forgivable annual loans paid quarterly pending ongoing employment.	Administered each year starting on September 1.
Texas	Must work full-time for a program that is a recipient of Texas Access to Justice Foundation funds, a recipient of Legal Services Corporation funds, or a non-profit providing legal services to underserved populations.	Forgivable loans. Apply for an amount equal to SLRAP loans to repay existing educational loans.	Secondary selection criteria gives priority to attorneys practicing in rural areas, in specialized areas of law, and diversity-based criteria.
Vermont	Must be licensed to practice in Vermont and be employed by Disability Rights Vermont, Have Justice-Will Travel, Inc., Legal Services Law Line of Vermont, Office of the Public Defenders, Safeline, South Royalton Legal Clinics of Vermont Law School, Spectrum Youth and Family Services, Vermont Legal Aid. Must be employed full-time or part-time with salary not in excess of $60,000.	Forgivable loan of up to $5,000 per year.	Checks are disbursed twice per year.

National Loan Forgiveness Programs

The above state-based programs are mostly administered by the state’s legal aid foundation. But there are some national programs that also favor lawyers working for certain underserved populations.

These programs include the following:

Department of Justice Attorney Student Loan Repayment Program

Any Department of Justice employee serving (or hired to serve) as an attorney can be eligible for this program.

Its goal is to help with placement in hard-to-fill positions within the Department of Justice. Attorneys are selected annually on a competitive basis, and can renew their eligibility for subsequent years of employment. Accepting the assistance locks attorneys into a three-year service obligation.

For the extensive list of requirements, click here.

This program funds up to $6,000 per year with a lifetime total of as much as $60,000.

Benefits are taxable, and the benefit amount received depends on both the attorney’s income and student loan repayment plan. The DOJ will match the attorney’s annual student loan payment amounts up to the $6,000 maximum. Attorneys whose salaries are under the threshold amount for matching funds will automatically receive the full amount.

Any payments made under this program are made directly to the attorney’s student loan servicer.

John R. Justice Student Loan Repayment Program

This program focuses on public defenders and state prosecutors. Attorneys who qualify for this program must commit to remaining in qualifying employment for at least three years. The funds are administered through state agencies.

This program can pay up to $10,000 per year, for a lifetime total of $60,000.

To qualify, attorneys must meet the following requirements:

- - Prosecutors must be full-time employees of state or local government, including tribal government, who prosecute cases at the state or local government level.
  - Public defenders must be either full-time employees of a state or local government, including tribal government, or full-time employees of a nonprofit organization that contracts with the government to provide legal representation to the indigent or in juvenile delinquency cases.
  - Attorneys who supervise, educate, or train others who meet the above qualifications are also eligible.
  - Attorneys must not be in default on repayment of any federal student loans.

This program doesn’t have set income requirements, but does prioritize those who are least able to meet their obligation. Only federal loans — FFEL and Direct — are eligible. Parent PLUS loans, private, commercial, or alternative student loans are not eligible.

Click here for a list of state agencies that administer this program.

Resource: How to Refinance Your Student Loans in 15 Minutes

Herbert S. Garten Loan Repayment Assistance Program

This program offers as much as $5,600 per year in assistance, for up to three years. The assistance is made in the form of loans, which are forgiven at the end of the term provided the attorney remains in good standing throughout the term.

Attorneys must be employed by one of the program’s grantees. They must also meet certain other income and debt burden requirements. The system works by lottery and makes loans to approximately 70 attorneys each year, depending on funding levels.

AmeriCorps Fellowships

AmeriCorps is a Peace Corps like program that offers a small stipend plus a student loan repayment benefit to students working in underserved communities. Some of these programs are specifically for new lawyers.

For more information about legal services AmeriCorps programs, visit this page.

Federal Loan Forgiveness

The above programs are your best bet, most likely, for student loan assistance. They often have a much shorter time requirement than the federal loan forgiveness program we’ll discuss now.

However, if you don’t quality for one of these other programs — or if you still have loans left to pay after using these programs — keep the Public Service Loan Forgiveness program in mind. The Public Service Loan Forgiveness program will forgive part, or all, of your federal student loan balance after you meet certain qualifications.

To qualify, you need to:

- - Be employed by a government organization (federal, state, local, and tribal all count), a 501(c)(3) not-for-profit organization, or another organization that provides certain types of public service
  - Be employed full-time
  - Make 120 qualifying monthly payments, which are made:
    - After October 1, 2007
    - Under a qualifying repayment plan
    - For the full amount shown on your bill
    - No later than 15 days after your due date
    - While employed full-time by a qualifying employer

Got all that? Basically, it means that if you put in ten years working with a non-profit or government organization while you’re not in school, in your loan’s grace period, or in a period of forbearance or deferment, you can have the rest of your loan balance forgiven. This program applies to Direct Loans, including Direct Consolidation Loans.

You don’t have to make these 120 payments consecutively. So, let’s say you work for a non-profit for a few years, go for-profit, and then work for the government. Any full payments you make while in the first and third jobs count towards your total credits for this program.

Be careful. The standard student loan repayment program has you paying off your student loan balance within ten years. It doesn’t take a math whiz to see how that works out. If you make standard payments, you’ll pay off your loan right at the same time you qualify for forgiveness.

The program is set up that way so that it mostly benefits workers in lower-paying jobs who qualify for income-driven repayment plans. These plans base your minimum student loan payments on your earnings.

If you’re working as a strapped-for-cash public defender, you could qualify for a lower student loan payment. The lower payment will result in a longer repayment time frame. So, when you’ve made 120 qualifying payments, the government will forgive the remaining balance.

Federal Student Loan Consolidation

What about federal student loan consolidation? Some types of student loans, including FFEL and Perkins Loans don’t qualify for this program. However, if you can consolidate these loans with a Direct Consolidation Loan, their balances will then count.

Only payments made on the Direct Consolidation Loan, though, will qualify. So, if you’re aiming to take advantage of this plan and have non-qualifying loans, you should consider consolidating them sooner rather than later.

The bottom line: PSLF is a powerful program, but only if you work in a qualifying job for enough years to get the loan forgiveness.

Choose the Right Repayment Program

Once you’ve figured out which repayment assistance programs might best suit your needs, you’ll need to decide how those programs can work together.

Let’s say, for instance, that your state’s program will pay off $15,000 of your student loans over three years, leaving you with a $50,000 balance. Talk to the program administrators and experts at the Department of Education to determine if the remaining $50,000 balance is eligible for the federal forgiveness program.

If you’re aiming for forgiveness, the goal should be to pay as little as possible towards your student loan balances during the 10-year period. You’ll need to make regular monthly payments for the amount shown on your bill. But the right repayment program might significantly lower that amount.

For federal student loans, there are several income-driven plans that will set your monthly payment based on your income. Each plan accounts for your income and family size, but each will give you a slightly different monthly payment. When you’re aiming for student loan forgiveness after ten years, choose the plan with the smallest repayment amount over that ten-year period.

Here are the basics of the four income-driven repayment plans:

Plan	Repayment Amount
REPAYE Plan	10 percent of your discretionary income
PAYE Plan	10 percent of your discretionary income up to the Standard Repayment Plan amount
Income-Based Repayment Plan	10 percent of your discretionary income up to the Standard Repayment Plan amount for new borrowers before July 1, 2014. 15 percent of discretionary income up to the Standard Repayment Plan amount for new borrowers after July 1, 2014
Income-Contingent Repayment Plan	The lesser of: 20 percent of your discretionary income What you would pay on a fixed 12-year repayment plan

So, how do you figure out which of these plans has the smallest repayment amount? Use this calculator. You can log in with your student loan credentials to get exact amounts, or just click “Proceed” to fill in your student loan information manually.

The calculator offers an option to look at your situation under the Public Service Loan Forgiveness program, as well. That way, you can see the remaining balance that would be forgiven under this program. You can also see the total amount you’d pay over ten consecutive years of qualifying payments.

Resource: How to Consolidate Your Student Loans

Keep in mind that income-driven plans require you to re-qualify over time. You’ll have to continue to provide proof of income and family size. This could cause your payments to increase or decrease over time.

Choosing a plan that keeps payments at or below the Standard Repayment Plan amount can ensure that your payments never balloon to a huge monthly amount.

Please note that for the most part, these plans lend themselves well to Direct Consolidation. If you’re planning to qualify for the federal loan forgiveness program, this lends itself well to consolidating all of your federal student loans and then choosing the repayment plan with the lowest repayment amount.

Most (though, not all) federal student loans can be consolidated as a Direct Consolidation loan. And Direct Consolidation loans are eligible for the income-driven repayment programs.

What About Private Loans?

Some private lenders do have variable loan repayment programs, but this varies from one lender to the next. Private loans cannot be consolidated with federal student loans.

Some lawyer-specific student loan assistance programs allow for repayment of private student loans, though most do not. If you qualify for a program that does, consider using it to pay down your private loans first.

What If You Take the High-Paying Job?

So far, we’ve mostly been talking about repayment assistance programs for young lawyers who work in public service (read: lower-paying) legal jobs. But what if you land that six-figure job — or close to it — with a private firm right out of college? In this case, your options for dealing with your student loans are completely different.

There are three steps you should take.

- 1. First, keep refinancing in mind.
  2. If you don’t immediately qualify for refinancing, choose an affordable payment program.
  3. Pay off your loans as quickly as you can.

Let’s tackle these step by step:

Student Loan Refinancing

It used to be that refinancing for student loans was unheard of. Refinancing unsecured loans carries big risks for lenders, after all.

Nowadays, though, several organizations exist primarily (or even solely) to refinance student loans. These organizations include SoFi and Credible. They’re similar to crowdfunding organizations, but with a heavy focus on student debt.

Refinancing large student loan balances can save you tens of thousands of dollars over time, with a smaller interest rate or a tighter repayment time frame. Some of these organizations could cut your interest rate in half. Plus, many offer refinancing for both federal and private student loans.

Here’s the thing, though: you have to be in a good financial position to qualify for competitive refinancing terms.

This means you need a solid credit score and a steady income. When you first graduate law school, you may not have a good credit score, and some refinancing organizations will require a year or more of employment history to qualify.

Resource: What You Need to Know About Credit Scores & Student Debt Refinancing

With a high-earning legal job, you’ll likely be able to qualify for student loan refinancing fairly quickly if you take the following steps:

- - Make all your monthly payments on time. On-time payments will help your credit score gradually increase.
  - Consider using a credit card wisely. If you’ve never used a credit card, consider getting one that you pay off in full each month. This can also help increase your credit score.
  - Pay down revolving debts. If you already have credit cards carrying a balance, put some resources into paying down those debts, which can also help increase your credit score.
  - Maintain your high-paying job. Having a solid history of big paychecks will help you qualify for refinancing through companies like Credible and SoFi.

If you don’t qualify for refinancing right away, talk to the lender to see what you need to do in order to qualify.

Choose an Affordable Repayment Program

While you’re working towards qualifying for student loan refinancing, you may want to choose a more affordable federal loan repayment program.

With a high income, you may not qualify for income-driven repayment plans, even with a massive loan balance. But you could choose a graduated plan that will give you lower payments on the front end. These payments will gradually increase over time and will result in paying off your loan in the standard ten years.

Choosing a graduated plan now can help you free up spare cash for setting up your life as a young lawyer, like getting an apartment or saving for a down payment. If you have other outstanding debts, like credit cards, a graduated repayment plan can help you pay down those while you work to qualify for refinancing.

Learn More About Setting Effective Financial Goals

But don’t lean too heavily on this affordable repayment program for long. Paying 7% or more interest on your loans over 10 years just because that plan is available is likely not a wise use of your income.

These repayment programs can be helpful tools when you’ve first graduated. If you can, however, aim to pay off your loan in less than 10 years.

Pay Them Off Quickly

If you’re not going to qualify for a loan forgiveness program, your goal should be to pay off your student loans as quickly as possible, especially if you’re locked into a relatively high interest rate.

Once you qualify for refinancing at a much lower interest rate, you might be better off investing your extra cash each month rather than paying down student loans. But you might still wish to choose a shorter loan term so that you can offload your debt more quickly. This frees up cash to save or invest, once your debt is paid off.

Of course, we always advocate for a holistic financial plan. You may or may not want to continue saving for retirement, to buy a home, or meet other goals while paying off your debt.

The goal is to pay off your debt in a reasonable amount of time. But that doesn’t necessarily mean sacrificing all of your other financial goals to get this one done. Read more of our advice on the pay-off-debt vs. save-and-invest debate both here and here.

Putting it All Together

Combining all of this information together to form a plan that works best for your particular situation can be tricky. In general, though, here’s the process you should walk through:

- 1. Determine your career options and goals:
    - If you want to work for the government or a non-profit for just a short period of time, look into loan assistance programs that require a one- to five-year commitment.
    - If you want to work long-term for the government or a non-profit, look closely at the federal loan forgiveness program. Also ask how state, school, and employer programs might work with that program.
    - If you want to land a higher-paying private job immediately, aim instead to improve your credit score and income so that you can qualify for lower-interest-rate refinancing.
  2. Find out how programs interact:
    - The rules on using a short-term loan assistance program with the federal forgiveness program are unclear. But you may be able to use a short-term program to pay some of your loan balances while counting payments that you make for yourself towards the 120 qualifying payments for federal loan forgiveness.
    - If you’ll qualify for a non-profit or government loan assistance program for a few years, take that benefit. After all, it’s free money! Then if you move into a higher-paying, private sector job, consider refinancing the remaining loan balance to qualify for better terms.
  3. Decide whether to invest or pay your debts off more quickly:
    - When you’re in a job that qualifies for loan assistance, you may not have the extra cash to throw at student debt. Just worry about making your payments on time and qualifying for that bonus as long as you can.
    - Once you move into a higher-paying job, take stock of your financial goals and situation to determine if you should pay off your student loans as quickly as possible or pay them off on time while investing your extra cash.

Tools and Resources

That’s a lot of information, I know! To keep things simple as you figure out your student loan repayment plan, here are the tools and resources we mentioned in this article — plus a few extras:

Topics: debt

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Oliver S. Berryhill Blogs

Wednesday, June 21, 2017

The Ultimate Guide to Eliminating Your Law School Debt