Options for Managing Law School Student Loan Debt
Nov 5th, 2009 | By mrposse | Category: Student loan debt, Top Story
The average law student who graduated from a private university in 2008 borrowed more than $91,500 on the way to earning that degree, and in 2009 the figure was more than $100,000, according to the nonprofit Equal Justice Works. Combine that with leftover undergraduate debt and the shrinking job market, and you realize the immense pressure contract attorneys are under.
If you’re a recent law school grad, student loan repayment plans are set around December 1st. If you’re like most of the May 2009 law graduates you are also either deferred, unemployed, or working for barely a decent wage at a contract attorney position.
If your loans fall under the FFELP program you can opt for a repayment extension. For many the extended repayment can lower your monthly federal student loan payments and free up additional money each month to help you make ends meet. But note:
1. Extending the repayment term increases the total amount paid.
2. This payment option gives you up to 25 years to pay off your federal student loans and there is no penalty for prepayment.
3. Borrowers must be in grace or repayment to choose this repayment option.
4. This repayment plan is available only for borrowers (1) whose first FFELP loan was borrowed on or after October 7, 1998, or (2) who, on the date he or she obtained the post-October 7, 1998 FFELP loan, had no outstanding balance on a FFELP loan obtained prior to October 7, 1998.
5. Borrowers must have FFELP loan debt (outstanding principal and interest) in excess of $30,000.
6. Repayment can be extended over a maximum of 25 years, with either standard or graduated payments.
To sign up for the extended program click here. For information on the FFELP program click here.
Debt is often sold on the secondary market, with the debtor as the income stream. One loan can be sold many times, making it tricky to know who owns yours. One option is to use www.nslds.ed.gov which is the U.S. Department of Education database that has information on all government-backed loans, the vast majority of student debt. It’s the best resource for finding out how much you owe — and to whom. Posse List members have told us that once they tracked down who was collecting their payments, they asked about loan consolidation and extension. Standard terms call for student loans to be repaid in 120 equal monthly installments over 10 years. There are various payment plans, especially for government-backed loans including Stafford, Perkins and PLUS.
We are trying to collect information on coping with student loan debt and we welcome from Posse List members any information or suggestions or links or info on organizations that Posse List members can provide to help fellow Posse List members on the student loan issue. Please email us at manager@theposselist.com
As information comes in we will update this page.
My student loan debt is over $100,000. Thankfully only $33K of that is private, but both SallieMae and AES wouldn’t provide true deferment last time I asked. They wanted to charge a fee for me to apply for deferment and then I’d still have to make a minimum payment every month. I’m awaken every morning by multiple calls from SallieMae (they call from two different numbers and already called six times today). It’s insane the amount of pressure we’re under because of these loans. It’s not like we’re going to abscond on them. We just need to hit the pause button for a bit.
http://laidofflawyer.wordpress.com/2009/10/10/third-day-of-accounting/
I graduate don 2009 and have more than $140K in debt from my law school. It currently have no job, hence I can’t make any payments. As u suggested, I opedt for deferement, but again, as u suggested, this will only make my end amount grow. It is beyond my comprehension how the federal government bails out multi-million dollar corporations but cannot present any sort of aid to those us whose debt has been acquiered only in search of a better future.
I know that you are tired of school but one way to defer your loans is to enroll in 6 units of classes at a community college. This will qualify for in-school deferment. The interest on your subsidized loans will stop and you will not be required to make payments on any of your school loans. I try to make payments while on deferment because the payment applies to principle. You can choose any courses. I suggest on-line courses.
How about some information regarding taking government or non-profit jobs and obtaining loan forgiveness?
Several Posse List members have indicated they have opted for forbearance because the qualifying paperwork was confusing and complicated even for an experienced attorney that they could not determine how to qualify for the deferment. Has anyone gone through the requirements?
The Posse List
I take classes at community college too. I actually enjoy taking a couple of night classes, meeting new people and learning something new, and qualifying for the Lifetime Learning tax credit!
What about help with private loans? Longer period of deferment and consolidation programs for private loans. Also some sort of forgiveness programs as well. The problem is the PRIVATE LOANS. They are the biggest burden.
For in school deferment, isn’t it a bit more complicated than taking six credits. From memory, I think one needs to be eligible for, and receive, a loan for the classes, adding to the debt. I hope I’m wrong.
I think you are wrong, bre, because I took a couple of real estate classes when I was thinking of buying a home and my loans automatically went into deferment.
Now that I’m unemployed and can’t pay my loans, I took a couple of more classes. I didn’t have to file or do anything; Sallie Mae automatically put me into in-school deferment.
If those loans defer, which appears to be the case, then it MIGHT make sense to take the deferment but only after doing the math. If one was going to take the classes anyway then it doesn’t matter. If, however, the sole reason for taking courses is to prevent payment on one’s SLs then one should think about it first and do some serious number crunching. In New York, it costs almost $200 a credit at the state school. With six needed in the fall, spring, and summer that would require 18 credits a year costing $3600 each year. That’s more than one would save if one were paying 3.5% on a $100k.
And if you are taking a class for six hours a week you can’t be working those six hours. Even if we assume you will have no study time needed outside of class, no travel time to class, no supply costs, a 50 week year, and a very conservative $20 ph wage, that’s an opportunity cost of another $6000 for a total of $9600. Now your paying almost $10,000 to avoid paying about $3500.
The net result is that this will cost you $6500 and your principle will not go down one cent. This is something you want to walk into with your eyes open.