This essay is from a finalist for the 2019 Student Loan Planner Scholarship.
I’ll never forget the first gathering for the incoming 1L class. Coordinated by some of our more extroverted classmates through Facebook, it took place at a campus bar, wasn’t school sanctioned, and was the first time we’d come face-to-face with our new colleagues. I had no idea what to expect.
It just so happened that it occurred the same day that we all received our first student loan disbursement. Three months out of college, at age 21, having never previously borrowed a dime, I’d never had so much money in my checking account at a particular moment in time.
Apparently, I wasn’t alone in that regard. Fast forward 2 hours into the evening, and some of my new classmates were treating the entire bar to rounds because it was “disbursement day.”
We all appreciated the gesture, but I shudder to think about their bar tabs at the end of that night. In reality, I don’t think any of us had a clue about borrowing money, or that our generous classmates would still be paying for those drinks for decades to come—with interest.
It’s been over a decade now since I started law school, and as I reflect on that experience, here are 8 pieces of advice I’d offer to students who are about to embark on their law school journeys with the assistance of federal student loans:
Don’t Rent The Ritz.
Assuming you’ll be renting a place to lay your head during your 3-year tour, look for something reasonably priced.
You might be tempted by the flexibility you’ll have to increase your disbursement if you want more money for living expenses—I was. Resist this urge, to the extent it’s driven by a desire to have the apartment complex with every amenity. You’re probably not going to be there often, anyway.
I also realize that each student’s circumstances differ, and you might be relying on these loans to support a family while you’re in school— a totally different scenario.
I’m simply trying to quash the perception that it’s the right time to “live high on the hog” given the illusion of wealth, all thanks to that magic disbursement fairy who came once a semester.
Look Into Public Service Loan Forgiveness (PSLF).
You might be surprised to know that working for any company that qualifies as a 501(c)(3) likely makes you eligible for tax-free loan forgiveness after 10 years.
This is true even if you’re being paid handsomely by said non-profit. You might also be surprised to learn that jobs that seem like they should qualify for PSLF, like being a private criminal defense attorney, don’t.
It’s all driven by the employer (at least under PSLF in its current state).
Look Into Loan Forgiveness Programs Offered by Your School, State Bar, and Employer.
Read up on the variety of Loan Repayment Assistance Programs (“LRAP”) programs offered in each state on the ABA’s website.
Also, seek to understand whether your prospective employer offers any student loan assistance or loan repayment benefits—these are increasingly popular as employers endeavor to distinguish themselves.
Develop a Plan of Attack for Your Loans While You’re Still in School.
I wish there was a class in law school that taught you the ins and outs of this stuff. As your 3L year draws to a close, have a plan of attack for your loans. You’ll have a very short window of time after graduation before you’ll have to start paying them back.
The standard plan is the default. I can’t imagine this is the best plan for most borrowers.
Is consolidation right for you? Maybe you should consider refinancing with a private lender? Have you used an online calculator to determine if you’ll have a lower payment under IBR/PAYE/REPAYE?
Do you have a spouse with federal student loans? Do you have a spouse with no loans who is a high earner? Do you file taxes jointly? Many factors play into deciding which payment plan is best for you—these are just a few.
But study up on this! Don’t let gravity direct where this goes, despite the temptation.
Don’t Assume Your Student Loan Servicer is Right.
I married a law school classmate and we both took out loans to finance our JDs. Two years in a row, at recertification time, my loan servicer failed to take into account my husband’s student loans when calculating my monthly payment.
I had to bring this to their attention and it took months for it to be recalculated.
How did I know the amount was incorrect? I do the math, every year, after we do our taxes and I know our AGI. Here’s the calculation you should run:
- Look up the HHS Poverty Guideline for a family of your size, for the year in question
- Multiply the applicable HHS Poverty Guideline by 150%
- Calculate the difference between your AGI and the applicable HHS Poverty Guideline
- Multiply the difference by 10%, then divide that number by 12 to get the amount of your monthly student loan payments (**if you are a 2-borrower family like we are, this number will be the collective amount that you’ll pay together each month)
Be Your Own Advocate.
Piggybacking off the above, be the squeaky wheel when it’s appropriate and I can’t stress this enough: Document your interactions with your loan servicer.
Any good lawyer knows that documentation is critical—this is no different. Any time I have a phone conversation with the customer service department at my loan servicer, I jot down the rep’s name employee ID (rattled off at the start of the call), and I do a summary letter after the call, recapping the discussion.
I upload these to my loan servicer’s online portal and keep a copy in my file. This has proved immensely helpful in dealing with issues that have arisen.
Find Reputable Blogs, Experts, and Sources of Information To Stay Apprised.
Everyone is talking about student loan reform. Since you can’t troll the internet for student loan stories every moment of the day, find some reputable websites and sign up for their newsletters.
I’ve found this to be a great way to stay abreast of proposed legislation, borrower lawsuits against loan servicers, challenges to PSLF, et cetera.
Work & Save During School.
In this economy, there are ample paying jobs available for law students, both over summer vacation, and during the school year on a part-time basis. Head to your Career Services office for assistance with your cover letter and resume and take advantage of these opportunities.
Maybe you can start setting aside funds for that “tax bomb” once you reach the point of taxable loan forgiveness (if that’s the plan of attack you’ve set up); maybe you’ll have a smaller loan with a higher interest rate that you’ll be able to pay off before you consolidate and you can lessen the interest rate on your remaining balance; or maybe next semester, your loan disbursement can be lessened because you made beaucoup bucks over the summer and obtained valuable legal experience.
Any type of practical experience is great—paid or unpaid—but in my humble opinion, go for the paid gig unless that unpaid opportunity is something truly remarkable/distinguishable.
In sum, take the time to study up on your student loans during law school. Be conservative in your spending when you’re living on loans. Have your plan of attack ready to execute after graduation. If you run into issues with your loan servicer, advocate for yourself the same way you would for a client. You’ve made a rewarding career choice—welcome to the practice of law.