Celebrate Independence from Law School Loans
For a long time, law school seemed like a dream come true. Three more years of school, and suddenly a comm major with no job skills whatsoever can make $160K at a law firm tastefully decorated with Chinese vases. Except, as with most balance sheets, you have to keep track of the money going out as much as the money coming in. For a law school student, that can mean racking up as much as $100k or more in debt before setting foot into a job. And in this recessive economy, with big firms pushing back start dates of first year associates or buying them off to get out of offering permanent jobs altogether, being aware of law school loans is even more critical.
Let’s say you just graduated from law school and are $100k in debt. And that’s accruing interest at 6% (rates fluctuate so we picked a reasonable number). If you want to pay back your loans in 15 years, this means your monthly payment has to be $850. Which means you need to be making approximately $1,400 in order to make that payment. And that’s before you’ve even contemplated rent, a car payment, a cell phone, or the newest CD from Britney Spears (she’s hot again; we should encourage that with patronage).
Which means that you can’t just graduate from law school with your $100k in loans and decide that you want to become the next poet laureate. Not a lot of money in poetry these days. Or even accept a lower-paying job in public interest saving the whales. Not a lot of money in whale-saving, either. In effect, unless you have another means to earn the money you need to stay indoors and pay off your loans, you’re stuck being a lawyer who makes a decent amount of money. Which for some people means a job in law that they’re not in love with. For a bunch of years.
Which is why, when The National Law Journal reported on the fact that legislation that promises loan forgiveness for graduate students goes into effect on July 1, we perked up like Scrappy-Doo upon spying a Scooby Snack. The program, as we understand it, essentially provides for two different options:
1. Loan forgiveness for public interest workers. After 10 years of payments, the remaining loan balance (for those who qualify) will be forgiven.
2. Income-based repayment option that can cap payments at 15% of the borrower’s discretionary income. After the borrower makes qualifying payments for 25 years, the federal government will forgive any remaining loan debt.
So for the first time in a long time, law students graduating with significant loans don’t necessarily have to be chained to the big law firm oar or rely on daddy’s trust fund (if you’re lucky enough to have one). You can actually work for the NAACP or start that girl rock band and not have to be in significant debt for the rest of your life.
Provided you qualify, of course. And this is a big caveat because if there’s one critique the new legislation has already received, it’s that the rules and qualifications can be murky. So read carefully to find out if the new loan programs work for you. But if they’re as good as they sound, it might just be the best news we’ve heard for the legal profession in a very long time.