Law School Loans
Many, if not most, 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 1st 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.
Because you will be in graduate school, the
federal government for the most part considers you an independent
student. That means you can qualify for many—but not all—forms of
financial aid on your own, without providing your parents’ or
guardians’ income. If you are married, you probably will have to
provide your spouse’s income to be considered for the widest
possible variety of aid sources. Be sure to check with each law
school to which you apply to determine its specific requirements.
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:
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 in combined subsidized and unsubsidized loans.
(2004 figure) 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.
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.
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 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.
Private Loans:
Private loans come from private lenders like
banks, credit unions, and non-profit educational lenders 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.
|
