Dealing With Law School Debt: Options For All Incomes and Situations
For those who haven't noticed yet, there's a massive (and growing) student debt crisis in the United States. Nobody's more keenly aware of that fact than recently graduated lawyers – who enter the field with an average debt of $145,550. That figure puts recent legal grads in rare company, with only medical students (with an average of about $200,000) carrying higher debt burdens.
Despite the shocking figures, lawyers are all but ignored in the mainstream plans to address the crisis. Almost none of the current array of tax breaks, loan programs, and other financial tools are sufficient to help a new lawyer dig out from under that mountain of debt.
Part of that reality stems from the fact that as a group, even fledgling lawyers are expected to command higher-than-average salaries. As any practicing lawyer can tell you, though, that's not always the case. What results is a scenario where lawyers of all stripes are left to fend for themselves with respect to repaying their student loans.
To help those in that situation, here's an overview of some student debt repayment options and strategies fit for new lawyers in any strata of the field. Let's begin with options for lawyers on the lower end of the salary scale.
The Veterans Legal Corps
For law school graduates who want to enter public service, but are afraid that doing so will trap them in a debt cycle for life, it's important to know that there are ways you can serve the public trust while paying down your school debt. One of them is called the Veterans Legal Corps. It's a fellowship program run by AmeriCorps that gives new lawyers a role in helping US military veterans with their legal issues, in exchange for a variety of benefits.
Participating lawyers receive a yearly living expense stipend, housing support, health insurance – and most importantly – student loan repayment assistance. The details vary depending on the organization hosting each fellow, but in general, participants receive a set amount toward loan repayment per service year. They also receive student loan forbearance and payment of accrued interest while serving. Together with continued monthly payments, participating in the program can make a significant dent in your total debt in a reasonable amount of time.
The John R. Justice Program
Another option that can help lawyers entering public service repay their debt is the John R. Justice Program, which is administered by the DOJ's Bureau of Justice Assistance. It's a program aimed at prosecutors and public defenders, as well as support personnel that work within the justice system. It's important to note that the program offers payments of up to $10,000 (up to a $60,000 lifetime maximum) per year towards FFEL and direct federal student loans only. Repayment amounts are set on a sliding scale based on need, so the tougher your debt situation is, the more you'll benefit from the program.
Public Service Loan Forgiveness
Another useful option for attorneys in the public sector is the Public Service Loan Forgiveness program. It offers debt cancellation for direct federal student loan borrowers (and certain other federal loans once consolidated) who meet certain criteria. Among them, you'll have to:
- Work full-time for a Federal, State, or Local agency (tribal governments and certain non-profits qualify)
- Have an existing income-driven repayment plan in place
- Make 120 qualifying loan payments while employed by a qualifying employer
One of the most effective ways to use this program is by spacing out your qualifying years of public service (service years and qualifying payments need not be consecutive) and spending time in other programs that offer forbearance or deferments, so as to maximize the eventual loan forgiveness amount available upon completion of the program requirements.
Strategies for Lawyers with Higher Salaries
Speaking generally, new lawyers fortunate enough to land high-salaried positions out of law school don't have too many options to deal with their student debt other than just gritting their teeth and paying it down over time. That comes with the territory of having a job that will grant you years of far-above-average pay. That doesn't mean, however, that there's nothing that can be done to make the repayment process less painful. In almost every case, the winning strategy consists of:
- Refinancing High-Interest Private Loans – By turning to refinancing specialists to cut your interest rates on any outstanding private student loans, it's possible to shave thousands of dollars off of the total amount that you have to pay back. Most of the time, though, this comes at the cost of a shorter repayment term than you started with.
That's why it's important to weigh your options before taking this step. If your total debt load consists mostly of private student loans, it may be advantageous to refinance only the most expensive loans first, so as to get them out of the way sooner and at a lower cost. Then, keep repeating the process as needed (and as long as interest rates remain low) until everything's paid off.
- Choosing an Advantageous Federal Repayment Program – To deal with outstanding federal student loans, it's often the best move to choose a repayment schedule that includes a graduated-payment amount. That will buy you the time to get your career off to a good start without having too much of your early earnings siphoned off. Of course, this is only a short-term strategy. The sooner you can switch back to making bigger monthly payments the better – putting off your debts will only spell trouble later on.
- Making the Necessary Sacrifices Now – For some young lawyers, there's no more depressing a thought than earning a six-figure salary but living like someone earning half as much. Still, there's an excellent argument to be made that doing exactly that for the first few years is the smartest student debt repayment strategy you can use. Making sacrifices early on like remaining in less expensive housing and economizing on day-to-day expenses can help you pay down debt much faster than you might think. Remember, the sooner your high monthly payments are over with, the sooner you'll be able to build the kind of lifestyle you imagined when you entered law school.
(Your) Bottom Line
It should be obvious by now that there's no easy route to dealing with high student debt available to today's students. If it stays this way for much longer, there's a pretty good chance that future students will opt for more non-traditional routes to high-paying jobs like their contemporaries overseas already do.
Lawyers, more specifically, face a tougher road than most. They either have to commit to many years of public service to get their debt down to manageable levels, or jump through multiple financial hoops and sacrifice like crazy to dig themselves out of debt. None of the options are easy, but as you can see, there are ways to accomplish that goal. And believe me, when you're done – it'll be impossible to wipe the smile off of your face.
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