The Complete Guide to Student Loans for Law School
Getting into law school is difficult enough. Paying for it is another story. This guide will help break down your expenses, help you plan for, and understand the total cost of attending law school.
Congratulations on getting accepted to law school! This is an awesome accomplishment that represents the culmination of years of hard work. Now, it’s time to set yourself up for success financially during law school and beyond, and avoid paying more money than you need to.
This guide walks you through the process of paying for law school – including how to find scholarships and grants, how to negotiate your law school financial aid package, how to get the best loan that fits your needs, and how to restructure your loans after you graduate in order to save money and accomplish your goals.
That is where Juno is here to help. We are on a mission to increase access to and reduce the financial burden of law school. Juno is a student-led initiative that utilizes the power of group buying to negotiate lower rates on private student loans and refinancing existing loans. We’re not a lender. Instead, we use collective bargaining to negotiate with lenders. People who sign up have no obligation to take our deals, nor do we ever charge our members.
Negotiating with lenders is easy when we’ve got thousands of members like you. We’ve done this successfully for a few years now, and have already saved students 26 million dollars. It’s free to join, and if you do, you’re not committing to anything. We’ll just add your voice to our collective and let you know when we wrap up our negotiations, giving you the option to take the deal or go elsewhere.
We are also committed to helping students save money any way we can. We offer scholarships, loan information guides like this, scholarship databases, loans calculators, and more. Becoming financially informed on your student loan options is the first and best step you can take toward achieving your educational, professional, and financial goals.
Throughout this guide you will see ways that Juno can help you save money during law school. We will be completely transparent and always do our best to provide you with the information you need to make the best decision for your financial situation. Please reach out if you have any questions.
Before Borrowing Money: Scholarships & Your Financial Aid Offer
The best way to minimize your student loan debt is to exhaust your other resources before borrowing. Before deciding which school to attend, it is important to consider the cost of attendance at your preferred school and the financial aid that they offer.
Many law schools have significant amounts of money to offer as scholarships to draw students to their school. Be sure to compare your offer and negotiate it before accepting your acceptance letter. Law schools want to remain ranked competitively so they will allow you to negotiate your scholarship offer (or lack thereof) with them if you can improve their ranking and add value to their incoming class. In these cases it helps to have offers from other similarly ranked schools that you can use as leverage.
Juno : Check out Juno’s law school financial aid tracker to compare your offer to similarly situated students (those at your same school with a similar LSAT score and GPA).
→ When applying to law school, consider applying to several schools to have more options and leverage with your preferred school. The earlier in the application cycle that you apply, generally the better chances you have of acceptance and the better scholarship offer you will receive (some schools even offer special early decision scholarships, but they will require you to withdraw from consideration from other schools if accepted).
Similarly, explore scholarships from other sources as well. Some scholarships are only available to incoming students, but most are available for current students. Law firms and potential employers also frequently have large scholarships that you may qualify for and they often include an option to work for them as a summer associate. Check back regularly during law school and keep applying for scholarships.
Juno : Juno has a law school scholarship database that you can use to find scholarships that you qualify for. There are options for students in each year of law school (as well as other law programs).
It is also important to take the time to create a budget for each year that you borrow. Most law schools have an estimated cost of attendance that predicts what tuition, rent, textbooks, food, etc. will cost, but it is always a good idea to create a budget for your unique situation to know how much you need to borrow.
Don’t forget the cost of living and any employment you may have over the summer months, including when taking the bar and preparing to start your job in the fall after graduation. Many law school estimates do not take the summer months into account in their cost of attendance budget. Remember that although students are approved for a loan at the beginning of the school year, the loans are disbursed in two installments each school year: at the beginning of the fall and spring semesters, and you can plan your borrowing accordingly.
Juno : If you need additional money to pay for the bar, a bar prep course, or to get you through the summer before you start work, Juno has a bar prep negotiation pool that you can join. We pool students to negotiate lower interest rates on loans and negotiate volume discounts on prep courses as well—saving students hundreds of dollars over the summer.
Finally, it is important to consider what employment opportunities will be available after you graduate from the law school you are considering. Depending on the rank of your law school and your performance, your employment opportunities and expected salary may change significantly. Carefully consider your ability to repay loans before deciding what school to attend, what type of loan to use, and how much to borrow.
Student Loan Fundamentals
Before deciding how you are going to finance your legal education, it is important to understand the student loan fundamentals. If you feel that you are familiar with these concepts, feel free to skip down to Two Types of Student Loans: Federal & Private. Otherwise, keep reading below.
When choosing which loan is right for you, there are a few key factors to consider:
- Interest Rates. A student loan interest rate is the percentage of money that your loan accrues as a borrowing cost each year that must be paid back over time. The interest rate is stated as an annual percentage, but the interest actually accrues every day. When it comes to the actual interest rates, don’t assume that all lenders’ rates are the same. Some lenders offer better pricing than others and you can take steps to lower your rate.
- Juno : We pool large groups of students and graduates together to get a volume discount on loan interest rates. By getting multiple lenders to compete for your business, everyone in the group gets a lower interest rate than they could get by themself.
There are two types of interest rates: fixed and variable. At Juno, our partners allow you to choose from competitive Variable and Fixed Rate options.
- Fixed Interest Rates are locked in for the life of the loan. They are often slightly higher than what initial variable interest rates offer, but they are predictable and will not go up with market fluctuations. The only way to change a fixed interest rate is through student loan refinancing, and many students choose to refinance when the fixed rates drop. For these reasons, the majority of students choose a fixed rate loan.
- Variable Interest Rates are subject to change throughout the life of the loan. Student loan lenders typically set variable rates based on an economic indicator known as the London Interbank Offered Rate (LIBOR). Lenders determine variable rates by adding the LIBOR rate to a base rate (which is determined by your credit score). When the LIBOR changes each month, your rate goes up or down accordingly which changes your monthly payment. While the variable interest rate may be cheaper on the day of your application, you should consider your personal tolerance for the risk that it could go up or down over the years.
→ Be aware of Capitalized Interest. Capitalized Interest is unpaid interest that's added to your student loan, increasing the total you repay. Each month that you have an unsubsidized loan or don’t pay your interest, additional interest accrues. The following month’s interest will then charge interest on both the principal and interest from the previous month. For that reason, whenever it is possible you will save money by at least making your interest payment each month.
- Fees. All student loan lenders do not charge the same fees. Some lenders may charge:
- Application Fees: A fee charged by a lender to apply for the loan.
- Origination Fees: A fee charged by a lender when you first take out a loan.
- Prepayment Penalties: A prepayment penalty is a fee you'll have to pay if you pay back your loan ahead of the predetermined schedule.
- Juno : We screen our partner lenders and push them to eliminate all fees. We do not accept unless they ensure that they do not charge any of these fees. No application fees, no origination fees, and no prepayment penalties.
Caution: Some lenders may not make certain fees very obvious. Ensure you call the lender and ask them specifically if they have any application fees, origination fees, or prepayment penalties.
- Repayment Term. How long you have to repay your loan varies by the repayment plan you choose. The repayment term represents how many years of monthly payments you must make in order to completely pay off your loan. Shorter repayment terms have lower interest rates and allow you to repay your loan faster. This allows you to pay less total money, but also requires larger monthly payments. The standard repayment term is 10 years, but lenders also often have options for 5, 7, 15, and 20 years.
- Repayment Plan. No matter which repayment plan you choose, interest will start to accumulate on your loans as soon as they are dispersed. There are four common repayment plans for private student loans, although not all lenders offer all of them:
- Immediate Repayment: Under this plan students make full monthly payments while in school. This saves money, but is not realistic for most students.
- Interest-Only Repayment: This permits students to make payments on the interest that accrues each month. That way, when you graduate, interest will not have accrued and you will not owe more than you borrowed.
- Partial Interest Repayment: Students can also choose to make a fixed monthly payment that covers only part of your loan interest. This slows how fast your loan balance grows while in school.
- Full Deferment: This plan lets you defer any payments until after you graduate; however, your loan balance will grow the entire time.
The biggest decisions when it comes to choosing a repayment option are:
- Whether you want to make payments while you are in school or defer repayment until you graduate.
- How much you want your monthly payments to be while you are in school.
→ Note that it may be better to borrow less money up front rather than to use a portion of your student loans to pay towards interest. Money you earn while a student can go towards payments.
Making in-school payments helps reduce the overall cost of the loan as you start paying down interest sooner. Some lenders will give you more options than others.
At Juno, our partners allow you to choose from a wide variety of repayment options:
- Fully Deferred (or no payments in school)
- Flat (or monthly payments in school)
- Interest Only (or interest payments in school)
- Full Repayment In School (or principal and interest payments in school)
- Auto Pay Discounts. Many, but not all lenders, will offer an Auto Pay Discount. An Auto Pay Discount reduces your interest rate when you set up your account to make payments using automatic payments from your bank account. Juno partners offer these.
- Reminder: The Auto Pay Discount usually only applies when you have payments due. If you select a repayment plan which defers payments while you are in school, the auto pay discount only begins once you’ve graduated and begin making payments. For this reason, if you can afford to make the minimal interest payments each month under the flat repayment plan then you can save money by lowering your interest rate even more.
- Special Discounts. Some lenders will offer unique opportunities to reduce your interest rate even further. For example, you may see a “relationship discount”. A relationship discount can reduce your interest rate for using additional products or services offered by the same lender (for example a credit card, auto, or home loan). The discount you get for being a Juno member is typically considered to be in this category.
- Cosigners. A co-signer is a person who is obligated to pay back the loan just as you, the borrower, are obligated to pay. It could be your spouse, a parent, guardian, or a friend. They only have to pay anything if you default on your loan—they’re typically just the backup plan. A cosigner who has a good credit score and a regular source of income is best.
Juno pays close attention to the makeup of our borrowers and if they have co-signers or not. Based on that, we negotiate the option for our borrowers not to have a co-signer.
Two Types of Student Loans: Federal & Private
Once you know how much money you need to borrow and understand the student loan fundamentals, the next step is to consider what type of loan you will get.
Federal Student Loans
Federal student loans are offered by the federal government, whereas private student loans are offered by private lenders.
While there are many types of federal student loans, U.S. Citizens and eligible non-citizens pursuing their JD, LLM, or MSL (or any law program) can typically access Direct Subsidized Loans (undergrads only) Direct Unsubsidized Loans and Direct PLUS loans (also known as the Grad PLUS loans, only available to graduate students). Most applicants qualify, regardless of credit score.
All federal student loan interest rates and fees are set by Congress on July 1st of each year and remain fixed for the life of the loan. Students who need financial aid apply for loans each academic year (usually dispersed before the start of each semester) and rates differ from academic year to year. That means that when you graduate, each loan for each year of school likely has a different interest rate. Federal loans come with a standard repayment schedule and offer a wide range of repayment assistance options.
Direct Unsubsidized Loans are more affordable (they have better interest rates and origination fees) than Direct PLUS Loans; however, law students are only able to use the Direct Unsubsidized loans for the first $20,500 they need to borrow each year. Direct PLUS Loans are utilized for any amount beyond that. Direct Unsubsidized Loans do not require a certain credit score to qualify whereas Direct PLUS Loans do; however, the credit requirement is quite low and most all students exceed it.
→ Why is it called a Direct “Unsubsidized” loan? These loans are called “unsubsidized” because the federal government does not pay the interest while you are in school, it begins to accumulate right away and will capitalize unless interest payments are made. This is in contrast to Direct Subsidized Loans, which are available to undergraduate students, and have the benefit of federal government subsidized interest payments until six months after you graduate or drop below half-time enrollment in college. Direct Subsidized Loans have the same balance the day you get them as the day you graduate.
For loans disbursed after July 1st 2021 & before July 1st 2022, the interest rates and fees are:
Direct Unsubsidized Loans
Direct PLUS Loans (Graduate students only)
Maximum Loan Amount
Up to Cost of Attendance minus other aid received
*Origination fees vary slightly based on when you take out your loan in the school year. The fee is updated every year for loans disbursed on or after October 1st, meaning that if you borrow the same amount of money each semester, your origination fee will likely be different.
What’s an origination fee? Origination fees are one time fees – basically a processing fee for signing up with the lender. Essentially, you have to borrow $10,106 before interest to receive $10,000 for school through a Direct Unsubsidized Loan. And you have to borrow $10,424 to receive $10,000 for school through a Direct PLUS Loan. The original loan balance plus the origination fee becomes your new principal balance that interest begins accumulating on. That means that interest begins accumulating on $10,424 right right away.
The fees become even larger when you account for the cost of a typical year of law school. For example, if you borrowed $70,000 to pay for a year of school the origination fees for the first $20,500 under a Direct Unsubsidized Loan would be $332 and the fees for remaining balance under a Direct PLUS Loan would be $2,103 for a grand total of of $2,435 in origination fees.
Juno : Juno members never pay origination fees on any of their private loans. That’s potentially thousands of dollars saved.
Aside: To apply for federal student loans, students must complete the Free Application for Federal Student Aid (FAFSA).
How are the federal loan interest rates set? All federal student loan rates are set by Congress, which passes the interest rates set by the Department of Education into law each year. The rates are based on 10-year Treasury notes, plus a fixed increase.
Student loan rates are set in the spring and are effective from July 1 to June 30 of the upcoming school year. To ensure interest rates don’t rise too high, Congress also includes rate caps for each type of student loan.
The formula used for different types of loans, from the Congressional Budget Office (CBO), is as follows:
- Direct unsubsidized loans for undergraduates: 10-year Treasury + 2.05%, capped at 8.25%
- Direct unsubsidized loans for graduates: 10-year Treasury + 3.60%, capped at 9.50%
- Direct PLUS loans: 10-year Treasury + 4.60%, capped at 10.50%
Based on the above formula, undergraduate students pay the least to borrow for college. Parents and graduate students will usually pay more to finance educational costs.
Private Student Loans
Private student loans are offered by private banks and lenders. These loans are available to fund law school upfront and can be used to refinance both private and federal loans after graduation. To apply for these loans, students must apply directly through the various lender websites. Some companies, like Credible, allow you to input your information and compare rates from multiple lenders at once to find the interest rate and repayment terms that work best for you.
Juno : At Juno, we do the comparison and research for you, and work with a larger array of lenders than Credible. We use group buying power to negotiate with lenders and get you a rate significantly lower than what you could get by yourself.
How are private loan interest rates set? Every private lender has their own unique underwriting process and standards for student loan applicants; these eligibility requirements help lenders decide whether to give an applicant a loan, and at what interest rate. As part of the loan application process, lenders will require a credit check to evaluate your ability to repay and how risky you are. If you have a credit score in the high 600s you will likely qualify for a loan, and the higher your score is the better rate you will be offered. Keep track of your credit score in the months leading up to applying for a loan and take steps to raise your score if possible.
→ How can I know my credit score? There are several sites where you can go to check your credit score for free. These sites also have recommendations on how to improve and monitor your score.
In order to lower your rate even more or improve your chances of getting accepted, lenders will allow you to add a cosigner. You can get a loan without a cosigner especially if you’ve got a good credit score, but the amount of time you’ve held an account (like a credit card) is one of the factors in calculating a credit score so a good one takes time to develop.
Many law students also choose to refinance their student loans after they graduate and start full-time work because they will get a significantly lower interest rate than they had in school. You normally need to have three paychecks from your new job in order to qualify.
Juno : We also pool together recent graduates and alumni who are looking to refinance their loans. Sign up and join the pool to have access to a lower rate than you could get by yourself. The more people who join the negotiation pool, the more money everyone saves – it’s a volume discount.
After you submit an application and receive approval for a private student loan, you
typically will be presented with multiple options such as:
1. Variable or Fixed Interest rates
2. Loan Term (also known as Repayment Term)
3. Repayment Plan
*See the Student Loan Fundamentals section for more information about each of these options
In addition, you will see the interest rates offered to you as well as any fees associated with the loan. It’s important to understand what you’re choosing between. The following sections will help you understand any student loan options presented to you.
What’s the Difference?
How to Know if a Federal or Private Loan is Right for You
There are pros and cons to both federal and private loans. At its most fundamental level, federal loans offer a type of “insurance”—protections that exist to help you with payments in the future if you don’t make enough money to make your monthly payments. However, this insurance comes at a significant cost in the form of higher interest rates. In order to make an informed decision, it is important to understand your unique circumstances and future employment expectations, as well as what benefits federal loans could offer you. Only then will you be in a position where you can make an educated decision about what is best for you.
The following chart summarizes the advantages and disadvantages explained in further detail below.
Why Do Private Loans Have a Lower Rate?
Federal student loans generally do not screen creditworthiness (or the ability to repay), whereas private student loans include a more rigorous credit review to determine the borrower’s anticipated ability to pay. Even for Direct PLUS Loans, which do require a credit check, the necessary score required to get a loan is quite low. Therefore, the federal government has to price loan interest rates at a level that takes into account the risk profile of everyone they lend to. As a result, those with good credit scores often receive better rates from the private market.
Additionally, and most importantly, there are benefits unique to the federal program such as Income Driven Repayment Plans and Public Service Loan Forgiveness. The disadvantage is that these programs come at a cost—they require higher interest rates which cause you to spend significantly more money than you otherwise would. Some federal borrowers end up paying for benefits that they never receive, and in turn end up subsidizing the benefits of others.
Essentially federal loans are a form of insurance that gives you protections in certain situations—just like car insurance or insurance on a cell phone. Before determining whether you want to pay for this insurance via higher interest rates, be sure to understand the programs that follow.
Featured Aside: If you have a good credit score (650+), private student loans can often offer lower interest rates and fees than federal loan options. For example, a majority of Juno members in 2019 reported receiving a ~5% fixed interest rate for a 10-year term with no origination fees. Interest rates for 2020-2021 have dropped significantly, which allows Juno to negotiate even lower rates for our members—rates that will still be significantly lower than federal loans.
Federal Student Loan Options for Lawyers
Once a law student graduates with federal loans, they have a 6-month grace period before payments are due. During this time, the federal government automatically enrolls you into the Standard Repayment Plan (a 10-year repayment plan with fixed monthly payments). Under this plan, you pay the same amount during your first year out of law school as you do 10 years later. This is the same repayment plan (at a higher interest rate) that a borrower with private loans might have. If you feel that you cannot afford to make your monthly payment, the federal government allows you to opt into an Income Driven Repayment Plan which may lower your payment.
Income-Driven Repayment (IDR) Plans
IDR plans can benefit lawyers in the public or private sector who have a low income relative to their loan amount (public interest lawyers must also be on an IDR plan to qualify for PSLF, see below). Most federal loans qualify, including Direct Unsubsidized Loans and Direct PLUS Loans made to grad students. For a full list of eligible federal loans, see the federal student aid eligibility website.
Anyone can apply, but IDR plans set your monthly student loan payment at an amount that is intended to be affordable based on your income, family size, state of residence, and tax status, so if your income is too high relative to your family size it will not change your monthly payment. You need to fill out an application to see what you qualify for. The federal government also has a loan simulator that you can use to help choose which plan, if any, you qualify for and which would be best for you.
Currently, there are 4 different IDR plans:
1. Revised Pay as You Earn Repayment Plan (REPAYE Plan)
- Payment amount = generally 10 percent of your disc
SmarterCollege came into existence to help students and families save money through scholarships, student loans and other financial products. The SmarterCollege Team has worked with tens of thousands of students and families to help them save money.
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