This is a guest post by Andrew Josuweit, the CEO of Student Loan Hero, a company that combines easy-to-use tools with financial education to help millions of Americans living with student loan debt. All opinions and information contained in this post are those of the author, not of Legal Ease Consulting, Inc. or the Legal Ease blog.
If you’re a lawyer, it’s hard to forget the three years you spent after college in law school, doggedly studying. Not to mention the months after that studying for the bar. Plus, all those student loans you took out to pay for everything.
After all that, don’t you think you’ve earned a break – especially on the financial end? The good news is there are a variety of programs in place to help ease the burden of law school debt that comes from your federal student loans.
Student Loan Hero recently did a study on law school debt. In the survey, we found that the typical law student faces an average of $111,752 in debt from law school alone.
When you compare that number to a lawyer’s average starting salary of $73,710, it’s no wonder lawyers may need help some assistance navigating their student loan payments at the start of their careers.
But the burden of law school debt doesn’t have to be insurmountable. Read on to find out if you qualify for any repayment or forgiveness programs so you can get back to what really matters: the work.
1. Check out income-driven repayment plans
One of the first things you can try if you need to lower your student loan payments is an income-driven repayment (IDR) plan.
These plans lower your monthly payments to a percentage of your income (the percentage varies based on the plan), which means you won’t have to pay based on your current plan. But you do have to reapply for your plan each year – a fact many aren’t aware of.
Income-driven repayment plans don’t just lower your monthly payments; they can also result in student loan forgiveness. Just make sure you follow the guidelines for how many consecutive payments you need to make to ensure you remain eligible for forgiveness.
It’s important to note that you may be required to pay taxes on any amount that is forgiven. While the laws on this can change, as of right now (June 2017), any amount that is forgiven is considered to be taxable income the year the debt is forgiven.
2. Consider Public Service Loan Forgiveness (PSLF)
If you’re currently working for a government organization, a 501(c)(3) nonprofit, or another qualifying nonprofit, you might be eligible for Public Service Loan Forgiveness (PSLF).
To qualify for PSLF, the first thing you should do is fill out the PSLF Employment Certification Form. This form needs to be re-submitted each year and again if you’ve changed employers.
The way PSLF works after that can be a little bit confusing because the program is a forgiveness program, not a repayment program.
In other words, you can apply for PSLF only after you’re qualified. And you don’t technically qualify for PSLF until a certain amount of eligible payments have been made.
Here’s how to qualify:
- Your loans have to be Direct Loans.
- If you have FFEL or Perkins Loans, you can consolidate them under the Direct Consolidation Loan so they’ll qualify.
- Private loans will never qualify.
- You must work at least 30 hours per week for a qualifying employer.
- Your employer’s qualification will be confirmed by the Employment Certification Form that you fill out every year.
- You must sign up for an income-driven repayment plan.
- If you don’t and choose to stick to a 10-year Standard Repayment Plan instead, there will be no loan amount left to forgive by the time the qualifying payments have been made.
- You must make 120 qualifying payments.
- They don’t have to be consecutive, but qualifying means they need to be paid in the full amount, no more than 15 days late, and meet several other stipulations, found here.
One thing to keep in mind: the Public Service Loan Forgiveness program has been under fire lately and might cease to exist for students hoping to use it in the future. If this is something your employer qualifies you for, you might want to consider signing up while you still can.
3. Look into student loan repayment assistance programs
Another beneficial tool for lawyers (and many other professionals) is student loan repayment assistance. Student loan repayment assistance programs are offered by employers, universities, and even states.
Below you’ll find a list of student loan repayment assistance programs (also referred to as LRAP). But the list doesn’t include more specific programs such as those offered by universities or employers.
If you want to quickly find out if your alma mater offers an LRAP, go to their website and search for a loan repayment assistance program. You can also reach out to your human resources department to see if your employer offers this kind of program.
4. Research loan repayment assistance programs by state
Read below for a snapshot of LRAP programs available by state, but remember that these can change each year.
For example, some of the programs listed have already run out of funding for the year, but it’s important to be aware of them so you can check back again next year.
- District of Columbia
- New Hampshire
- New Mexico
- New York
- North Carolina
- North Dakota
5. Apply for the John R. Justice Student Loan Repayment Program
Depending on what state you live in, another option could be The John R. Justice Student Loan Repayment Program. This program is only available to state public defenders and state prosecutors who agree to hold their respective jobs for a minimum of three years.
To find out if your state is currently participating in this program, you can use this list of contacts to reach out to your local state agency. Participation does fluctuate, especially based on funding.
As difficult as your law school debt burden might be, it doesn’t have to be insurmountable. By taking advantage of federal programs to lower your payments when you need them and student loan repayment assistance programs when you qualify, you can finally get that leg up you need.