I was in Law School for almost 4 years, working 20 hours a week and barely being able to make ends meet, with a lot of student loan debt to boot. While I got through it, I did what I could to help myself out. Here’s how I did it:
Graduating from law school means you have a mountain of debt to pay off. If you think it will be quick and easy to get rid of your loans, you may be in for some big surprises.
Law schools are notoriously expensive. Not only do you have to shell out a boatload of cash to attend, but it will take years to finish your J.D. There are many articles written about how to pay off Law School debt, but most of them focus on the big three: Law School loans, Credit card debt and Private Loans. This article will focus on Law School Loans.
Lawyer wages have a well-documented bimodal distribution. There’s a good probability that a freshly minted attorney’s income will be between $80,000 and $190,000. However, she is unlikely to make the $126,930 that the Bureau of Labor Statistics estimates the typical lawyer earns (BLS).
This finding has far-reaching consequences for law school student loan repayment. It may make the difference between having job choices and not if you select the right repayment plan.
When it comes to repaying JD student debts, the majority of new attorneys make errors. Unless the attorney works in public interest law and the Public Service Loan Forgiveness program is involved, these errors are usually in the five digits. In this instance, errors may cost thousands of dollars.
This essay will concentrate on how to pay off law school debt quickly while working in the private sector.
Check to see whether paying down your law school debt makes sense.
Paying off your school debts fast is probably not in your best interest if you make $80,000 per year as a family law attorney in the DC suburbs, where living costs are high. Instead, you should attempt to maximize forgiveness by enrolling in the REPAYE income-driven repayment (IDR) scheme.
You must owe less than 1.5 times your salary to be a suitable candidate for student loan refinancing. It’s also OK if you reach your debt-to-income ratio within a few years after graduating.
With hundreds of thousands of readers and over 5,800 one-on-one customers, I’ve updated and refined my rule of thumb. If you work in the private sector and pass the criteria of owing less than 1.5 times your current or near future income, you might use a technique like the one I’ll show you.
You should also avoid paying off any law school debt that might have been forgiven or reimbursed on your behalf via state or federal loan forgiveness programs or a loan repayment assistance program. PSLF, of course, exists. LRAPs are also available in more than 20 states. Through the Attorney Student Loan Repayment Program, the Department of Justice will match up to $6,000 of your student loan payments (ASLRP).
As a young attorney, the advantages of student loan consolidation
During your grace period, the first step is to combine all of your federal student loans. A few weeks after graduating from law school, contact the Department of Education’s Direct Consolidation Loan staff. You may get the most recent number by looking for it on the Department of Education’s website. After a minute of searching on Google, I came across this:
You may also apply for a Direct Consolidation Loan online by clicking here.
When you combine, you should complete it right away so that your payments begin in two months instead of the usual six. If you do the consolidation right after graduation, you’ll be able to confidently claim that your income is $0 (by referencing your previous year’s tax return from while you were still in school). In the worst-case situation, you may be entitled to some summer intern pay.
The goal of this stage is to combine your debts as quickly as possible so that you may enroll in the Revised Pay As You Earn (REPAYE) plan. Why should I choose REPAYE over one of the three IDR plans? This is why.
Why does the REPAYE scheme assist attorneys in repaying their JD student debts more quickly?
When it comes to managing your law school debt, few individuals grasp the complexities of the REPAYE plan. You’ll get a 50% rebate on your total loan amount for the interest you don’t have to pay under the REPAYE plan.
If your monthly payment is $0, you are not obliged to pay any interest. That implies you’ll get a 50% discount on ALL interest for the first year.
What is the average amount of debt that law students have?
The average law school debt is $145,500, according to the most recent statistics from the National Center for Education Statistics (NCES). However, the “most recent” data is from 2015-2016. In a study done by the American Bar Association in 2020, it was discovered that the average law school debt upon graduation was $164,742.
Keep in mind that these are averages. Many law school grads will have much more debt than these figures indicate. Many of the people I’ve dealt with in the legal profession have school debt in excess of $200,000.
Assume Josh has recently gotten a Big Law position and will make $190,000 in New York City after he graduates from Boston College. He only graduated with $200,000 in law school debt at a 7% interest rate, thanks to some smart preparation.
He will owe no monthly payment if he consolidates and goes on REPAYE quickly. Normally, his interest would be $14,000 each year. On the REPAYE plan, however, he will only have to deal with $7,000 in interest accrual. Josh’s balance would remain unchanged if he paid $583 each month.
With a clerkship, how do you manage your law school loans?
Assume Josh earned $60,000 for his one-year clerkship. Josh’s REPAYE payment would be $4,165 per year. The interest that would be left over would be $9,835. All of that interest would normally accumulate.
The REPAYE plan, on the other hand, would cover half of that interest. Only $4,917.50 in interest would accumulate, resulting in a total interest payment of $9,082 less than $14,000. I’m simplifying things a little too much. However, this is how the calculation would work in general.
Because the interest benefit is not taxed, Josh will save even more money in pre-tax income when it comes time to repay the loan as an associate.
Making large payments on law school debt is critical.
You aim to pay as much as possible on your loans in your first year as an associate utilizing the REPAYE plan after completing the following goals:
Following that, I recommend living as frugally as possible and making large prepayments to reduce your law school debt. Using Josh as an example, he would owe approximately $153,000 in student debt after a year if he utilized REPAYE on his $200,000 in loans and paid about $4,400 each month.
Refinancing law school debts with First Republic
Provided you reside in New York City or most of California’s major cities, First Republic will provide you with the finest refinancing bargain in the nation if you have sufficient funds and a stable income. You must also establish a bank account with them.
While you may be reluctant at first, a five-year term may offer you very cheap interest rates, and they’ll even refund a portion of the money if you pay it off sooner than 48 months.
If I had a six-figure law school debt and wanted to pay it off fast, I’d check to see if I resided in their service region and refinance after a year of aggressive payments and saving. You’ll also receive a cash back incentive if you contact our banker after reading that post and mention Student Loan Planner®.
Request a consultation about your JD student debts.
Refinancing your law school debts with a national lender
If First Republic isn’t an option for any reason, you’ll need to refinance with one of the top national private lenders. If you have a good credit score, you should be able to get something with an interest rate that begins with a 2 if you select a five-year term.
After that first year of aggressive payments, you’d have a reduced needed payment, giving you piece of mind in case you decided to leave your profitable employment. You may also make large prepayments without incurring any additional fees. In the scenario I projected, if you paid over $4,000 a month, you’d be debt-free in under five years.
If the necessary payment for a five-year term concerns you, remember that you may always start with a seven or ten-year term and then refinance to a five-year term after you’ve paid off more principle.
Paying off law school debt in more than five years
There are many reasons why you should not repay your law school debts in less than five years. The majority of them center on having a large budget for your children or being able to easily qualify for your dream home with a low needed student loan payment.
However, there are three viable options for repaying law school debts.
- If you’re looking for a career in public interest law, go for PSLF.
- In the private sector, use PAYE or REPAYE for a 20-25 year forgiveness plan.
- Pay off all of your debts as soon as you can to become debt-free.
Your employment choices will be considerably more numerous after you are debt-free from your JD. Even though you may pay your law school debt depending on your salary under the federal system, my friends who are interested in entrepreneurship are concerned about keeping their law school debt around.
My recommendation is that if you have a high salary early in your legal profession, you should use it to pay off debt if the arithmetic makes sense. If you owe so much money that you’ll never be able to pay it off without living like a beggar, refinancing isn’t the best option.
Get rid of your law school debts to create the perfect lifestyle and job.
The notion that a career in law leads to easy money is no longer true. Everyone understands that in order to make a good living in the legal profession these days, you have to put in a lot of effort. In many instances, tuition at the top schools is also continuing to increase, making obtaining a debt-free JD virtually difficult.
If you have a good salary, you can max out your retirement, pay off any consumer debt, save your emergency fund, and pay off your law school debts all in under five years.
The good news is that using the REPAYE or PAYE student loan repayment alternatives to pay down your loan debt over decades may also make sense. That’s a whole different approach. The PSLF program may also be used to make it easier to get a job in the public sector.
Another thing to consider is that you may only have a high income for a short period of time. If you’ve determined that surrendering your 20s to Big Law isn’t for you, a long-term debt forgiveness strategy may be a better option.
Make a strategy for paying off your law school debts.
Refinance if you have a clear plan for paying off your law school debt and are currently making too much money to qualify for the REPAYE interest subsidy. You may earn a cash back bonus by using the links on this site. If you contact us, we’ll be glad to tell you what I think of the offers you’re getting.
Consider our consult service if you’re not sure whether you want to keep making the high salary you’re making, if you don’t make enough money to pay off your JD student loans, or if the progress you’ve made on your principal isn’t as much as you’d want. If you owe a lot of money to law school, we’ve created bespoke student loan programs for a lot of lawyers, and we’d be happy to do the same for you.
Get a personalized repayment plan for your law school student debts.
Do you have any suggestions for quickly repaying law school student loans? Please share your ideas or experiences in the comments section below!
Every lawyer needs to get his or her education on track as soon as possible. There are a few things to keep in mind: never take out a larger loan than you need; work every extra hour you can; get a job that pays well; and, if you have the option, take out a loan through a government program such as FAFSA or Income-Contingent Repayment. If you are considering attending law school, you should also know that the law school debt can be a burden for you and your family. However, there are a few ways you can alleviate the burden.. Read more about how much does a student loan lawyer cost and let us know what you think.
Frequently Asked Questions
Is it possible to pay off student loans in 5 years?
It is possible to pay off student loans in 5 years, but it will be difficult. You would need to make $50,000 a year for the next five years and you would have to find a way to save at least $10,000 each year.
How long do you have to pay off law school debt?
It depends on how much you owe, the length of your program, and the interest rate.
How can I pay off 100k student loans in 5 years?
It is not possible to pay off 100k student loans in 5 years.
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- law school debt calculator
- how much does a student loan lawyer cost
- student loan calculator
- how long does it take to pay off law school debt
- how to pay off student loans in 5 years
