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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.


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