Federal and Private Loans
What Type of Loan Should You Apply For?
About Law School Loans
Loans, in one form or another, are the dominant method of financing law school for students. According to the Law School Admission Council (LSAC), roughly 80% of law school students today use loans to finance a significant part of their legal education, and the average student graduates from law school with approximately $100,000 in debt. That’s a lot of money, and it dramatically affects a law school graduate’s life after law school. According to the LSAC, law school graduate debt of $100,000 amounts to almost $1,225 a month on a standard repayment plan.
| ANNUAL AMOUNT | INTEREST RATE | WHEN INTEREST ACCRUES | LENDER/ LENGTH OF REPAYMENT | |
|---|---|---|---|---|
| Federal Subsidized Loans (Stafford) | Up to $8,500 | 6.8% (as of July 1, 2011) | 6 months after graduating, withdrawing, or dropping out. | Lender is either U.S. Dept of Education or private participating lender. You must repay within 10-25 years, depending on amount borrowed and payment plan selected. |
| Federal Unsubsidized Loans (Stafford) | Up to $20,500 (amount includes subsidized & unsubsidized) | 6.8% (as of July 1, 2011) | When you receive the funds. | Lender is either US Dept of Education or private participating lender. You must repay within 10-25 years, depending on amount borrowed and payment plan selected. |
| Federal Perkins Loans | Up to $8,000 (max of $60,000, including undergrad loans) | 5% | 9 months after graduating, withdrawing, or dropping out. | Lender is your law school. You must repay within 10 years. |
| Federal Graduate PLUS Loans | Max amount equals the cost of attending law school, minus other student aid. | 7.9% if borrowed through the Direct Loan program; 8.5% through other lenders. | When you receive the funds. | Lender is either US Dept of Education or private participating lender. You must repay within 10-25 years, depending on amount borrowed and payment plan selected. |
| Private Loans | Whatever your credit permits, up to the total costs of your legal education minus other loans and scholarships. | Varies. | When you receive the funds. | Lender is a private bank, credit union, or other private participating lender. You must repay according to the terms and conditions the private lender offers. |
Federal Subsidized Loans (Stafford)
The US federal government offers subsidized Stafford Loans to law students who can demonstrate a financial need for the loan. If you qualify based on financial need, the US Department of Education will subsidize (i.e., pay) the interest that accrues while you’re in school until 6 months after you graduate, withdraw, or drop out. You may obtain a subsidized Stafford loan through 1 of 2 programs: (1) the William D. Ford Direct Loan Program (“Direct Loan”); or (2) the Federal Family Education Loan Program (“FFEL Loan”). With Direct Loans, you borrow money directly from the Department of Education at participating law schools, and the US government subsidizes the loan. Then, when you finish law school, you repay the money directly to the Department of Education. With FFEL Loans, you borrow money from a private lender that participates in this federal program, and the federal government subsidizes the loan with a guaranteed rate of interest and by paying the interest that accrues until 6 months after you graduate, withdraw, or drop out of law school. Then, when you finish law school, you repay the loans directly to the private lender.
To apply for a subsidized Stafford Loan, you must complete the FAFSA. If you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions.
Federal Unsubsidized Loans (Stafford)
The US federal government also offers unsubsidized Stafford Loans that are not based on financial need. You may obtain an unsubsidized Stafford loan through either the Direct Loan or the FFEL Loan programs. Again, with Direct Loans, you borrow money directly from the Department of Education at participating law schools and repay the loans directly to the Department of Education. Likewise, with FFEL Loans, you borrow money from a private lender that participates in this federal program and then repay the loans directly to that lender.
For these unsubsidized loans, your law school will determine your eligibility by subtracting other financial aid you already are receiving from the cost of attending that law school. With unsubsidized Stafford Loans, you pay the interest from the time the loan is disbursed to you until the time you have paid off the loan in full. So, you may choose to either pay the interest as it accrues, or defer any interest payments and allow it to be added to the principal amount of your loan that you will begin repaying after graduation. Obviously, if you choose the latter option, you will have to repay a bigger loan amount. The total amount of Stafford Loans you may accumulate in college and law school combined is $138,500, and only up to $65,500 of this amount may be in the form of subsidized Stafford Loans.
To apply for a subsidized Stafford Loan, you must complete the FAFSA. If you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions.
Federal Perkins Loans
The US federal government also offers subsidized, low-interest loans through participating law schools to students who can demonstrate a financial need for the loan. If you demonstrate financial need, the Department of Education will subsidize the interest that accrues on these loans until 9 months after you graduate, withdraw, or drop out of law school. You may obtain a Perkins loan from participating law schools, and you repay the law school (or its agent) after the 9-month grace and deferment periods end.
To apply for a Perkins Loan, you must complete the FAFSA. If you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions.
Federal Graduate Plus Loans
The US federal government also offers PLUS loans to law students through either the Direct Loan or the FFEL Loan programs. The maximum loan amount is based on a student’s cost of attendance minus other student aid received, and student borrowers must not have a negative credit history. Although interest accrues during law school, borrowers benefit from a relatively low, fixed interest rate for the life of the PLUS loan.
Private Loans
Many private lenders (including private lenders who participate in federal loan programs) also offer purely private loans. These loans are available based on your credit score/history and ability to repay, and they usually do not require that you fill out a FAFSA form. They come in varying sizes with varying repayment terms and conditions–you can obtain information on these loans by visiting the websites of these private lenders (banks, credit unions, and other private lending institutions), including those listed below. In addition, many lenders offer loan consolidation programs, whereby you can consolidate all your loans with 1 lender and make 1 payment to that lender to cover all the loans.
Loan Providers
There are a bunch of federal and private loan providers out there. Compare the options below to help you find the right fit for you.
Access Group
www.accessgroup.org | 800.282.1550
Access Group, Inc. P. O. Box 7430, Wilmington, DE 19803-0430
Access Group is a nonprofit student loan provider with over 25 years’ experience specializing in federal financial aid and graduate and professional student loans. Because student loans are their only business, they can put you – the student – first. With money-saving payment discounts and helpful educational materials, Access Group is a smart choice for students seeking federal student loans. Today, the Access Group offers federally guaranteed FFEL Stafford and PLUS loans, but it recently stopped its private loan program.
Chase
www.chasestudentloans.com | 866.306.0868
JPMorgan Chase, 270 Park Avenue, New York, NY 10017
Global financial powerhouse JPMorgan Chase offers “Chase Select Private Student Loans” in addition to participating in Stafford and PLUS FFEL loans for law students. According to Chase’s website: “A Chase Select loan is a credit-based private student loan that must be certified by your school’s financial aid office. Your school may require you to complete the Free Application for Federal Student Aid (FAFSA) to determine your loan eligibility. You can add a cosigner to the loan, which may help you get approved for the loan and qualify for a lower interest rate.”
Citizens Bank
www.citizensbank.com | 888.910.4100
Citizens Financial Group, One Citizens Plaza, Providence, RI 02903
Citizens Bank offers private TruFit Student Loans, in addition to participating in Stafford and PLUS FFEL loans for law students.
Discover Student Loans
www.discoverstudentloans.com | 877.728.3030
Discover Student Loans, P. O. Box 30947, Salt Lake City, UT 84130-0947
The credit card company offers Certified Private Loans in addition to participating in Stafford and PLUS FFEL loans for law students.
Nellie Mae
www.collegescholarships.org/loans/nelliemae.htm | 800.367.8848
Sallie Mae, Inc. P. O. Box 9532, Wilkes-Barre, PA 18773-9532
Nellie Mae, a subsidiary of Salle Mae, is a broad provider of private and federally guaranteed Stafford and PLUS loans. Nellie Mae now offers private Sallie Mae Smart Option Student Loans.
PNC Bank
www.pnconcampus.com | 800.762.1001
PNC Loan Education Center, 2600 Liberty Ave., Suite 200, Pittsburgh, PA 15222
PNC Bank offers private PNC Solution Loans, in addition to participating in Stafford and PLUS FFEL loans for law students.
Regions Financial Corp
www.regions.com | 800.734.4667
Regions Financial Corp., 1900 Fifth Avenue North, Birmingham, AL 35203
Regions “is a financial holdidng company headquartered in Birmingham, Alabama, which operates throughout the South, Midwest, and Texas. Regions provides traditional commercial, retail and mortgage banking services, as well as other financial services in the fields of investment banking, asset management, trust, mutual funds, securities brokerage, insurance and other specialty financing.” Regions offers Stafford and PLUS FFEL loans, as well as private Sallie Mae Smart Option Student Loans by Regions Bank.
Sallie Mae
www.salliemae.com | 888.272.5543
Sallie Mae, Inc. P. O. Box 9532, Wilkes-Barre, PA 18773-9532
Sallie Mae, a Fortune 500 company, is a leading provider of saving, planning, and paying for education programs. According to its website, Sallie Mae “provides federal and private student loans for undergraduate and graduate students and their parents.” Sallie Mae offers two private loans for law students (in addition to Stafford and PLUS Loans): (1) the Sallie Mae Smart Option Student Loan; and (2) the Sallie Mae Bar Study Loan. “With the Smart Option Student Loan®, you can borrow up to the full cost of your education, less other aid received. Designed to help you graduate with less student loan debt and help you pay it off faster, the Smart Option Student Loan requires making interest-only payments while in school and during the six-month separation period to avoid capitalized interest. A creditworthy cosigner may also help you qualify and/or receive a lower interest rate.” The Bar Study Loan “helps finance bar exam costs, such as bar review course fees, bar exam deposits and fees, as well as living expenses.”
Suntrust
www.suntrusteducation.com | 800.552.3006
SunTrust Banks, Inc., 303 Peachtree St., NE Atlanta, GA 30308
Atlanta-based SunTrust Banks, Inc. is one of the nation’s largest financial holding companies. SunTrust’s private loan for law students is the Academic Answer Loan, which is available for law students enrolled at least half time who are US citizens and permanent residents and whose legal residence is not in Illinois, Iowa, Texas, Washington, or Wisconsin.
Wells Fargo
www.wellsfargo.com | 800.378.5526
Wells Fargo Education Financial Services, P. O. Box 5185, Sioux Falls, SD 57117-5185
Wells Fargo, now combined with Wachovia, offers private Wells Fargo Graduate Loans and Wells Fargo Bar Exam Loans, in addition to participating in Stafford and PLUS FFEL loans for law students.
