Your income after law school is an important factor in determining what constitutes manageable payments on your education loans. Although it may be difficult to predict what kind of job you will get (or want) after law school, or exactly what kind of salary you will receive, it is important that you make some assessment of your goals for the purpose of sound debt management. The money you borrow will be paid out of your future earnings and may have a significant impact on your lifestyle. In addition to assessing expected income, you must also create a realistic picture of how much you can afford to pay back on a monthly basis while maintaining the lifestyle that you desire.
You may have to adjust your thinking about how quickly you can pay your loans back, how much money you can afford to borrow, or how extravagantly you expect to live in the years following your graduation from law school.
Your education loan debt represents a serious financial commitment that must be repaid. A default on any loan engenders serious consequences, including possible legal action against you by the lender or the government, or both.
Law school graduate debt of $100,000 amounts to almost $1,187 a month on a standard 10-year repayment plan. Federal loans offer graduated, extended, and income-driven repayment plans that lower monthly payment amounts but increase the number of years of repayment. The Federal Direct Consolidation Loan allows students to refinance any of their existing eligible federal student loans on an extended repayment schedule, lasting up to 30 years.
As such, borrowers have quite a bit of flexibility in managing their loans, depending on their income and the loan amounts. The federal government has
loan repayment and budget calculators.
Strategies for Graduates Seeking Public Interest Careers
Students who seek to work in public service or the public interest sector of the profession face special challenges in financing their legal educations because salaries for such jobs are often lower relative to comparable work in the private sector. Students graduating from law school with the average amount of indebtedness may find that the average entry-level public service or public interest salary will not provide the resources needed to repay their law school loans and cover their basic living expenses.
Students can employ a number of strategies to make it easier (or possible) to pursue a career in government or public interest law. First, students can borrow less during law school (attend a lower tuition institution; follow some of the debt management strategies mentioned in While in Law School: Living on a Budget). Students may also take advantage of programs developed at some law schools to relieve the debt burden for those interested in public interest careers, including fellowships, scholarships, and loan repayment assistance programs (LRAPs). LRAPs provide financial assistance to law school graduates working in the public interest sector, government, or other lower-paying legal fields. In most cases, this aid is given to graduates in the form of a forgivable loan to help them repay their annual educational debt. Upon completion of the required service obligation, schools will forgive or cancel these loans for program participants. The number of law schools sponsoring LRAPs is limited. Most schools are unable to provide assistance to all applicants. LRAPs are also administered by state bar foundations, public interest legal employers, and federal and state governments to assist law graduates in pursuing and remaining in public interest jobs.
The federal government offers some options to assist graduates seeking legal careers in public service, including the new income-driven repayment options, such as Income-Based Repayment (IBR) and Pay As You Earn (PAYE) for federal loan repayment and the Federal Loan Forgiveness Program. IBR and PAYE will allow federal education loan borrowers the opportunity to make lower monthly payments on their federal loans (including, but not limited to, those employed in public service positions), provided that income qualifications are met. Monthly payments under these repayment plans are based on a percentage of your household’s adjusted gross income (AGI) and your household size rather than on the amount of your federal student loan debt. The Federal Loan Forgiveness Program allows borrowers who work in government or nonprofits the opportunity to make payments under IBR or PAYE, then have their outstanding balances forgiven on their Federal Direct loans after 120 months of qualifying employment and qualifying payments. Please check with your schools or directly with the Department of Education at studentaid.ed.gov/publicservice for details on these programs.
NOTE: All figures and calculations are based on current interest rates, loan terms, and fees, and are subject to change.