Given that getting into Law School is very competitive and that it costs a lot of money. you are probably wondering how in the world anyone can afford to go to law school. Good question. Here are some things to consider, and some possible answers:

Set Costs (Current as of Fall 2004)

LSAT Exam	$112
LSDAS Fee (includes one report)	$ 103
LSDAS Reports sent to five more schools	$ 50
Letter of Recommendation Service	$ 0
LSAT Telephone Score Release	$ 10
NEIU Transcripts	$ 10
LSAT-Related Total:	$285
Law School Application Fees—6 at $50.00 average	$300
Grand Total:	$585

Other Costs

The above figures do NOT include:

Late fees that you might incur;
Prep courses range from $250 for an on-line course to approximately $1000 for a full-length Kaplan or Princeton Review course;
Preparation materials (books, old LSAT exams, etc.) that you might wish to purchase to study for the LSAT;
Additional LSDAS Reports and law school application fees;
Photocopies and long distance phone calls;
Postage for your applications;
Visits to law schools or to the Chicago Law School Forum;
Your mental and emotional energy.

Many, if not most, students take out loans to pay for law school. There are a number of loan programs for graduate students, and some specifically for law students. In order to be eligible for loan aid, you must submit the FAFSA (Free Application for Federal Student Aid). The first day for submitting the FAFSA is January 1 of any given year; you should plan to have your FAFSA in as early as possible. Also, you should plan to do your tax returns early that year as well.

Because you will be in graduate school, the federal government for the most part considers you an independent student. That means you can qualify for many—but not all—forms of financial aid on your own, without providing your parents’ or guardians’ income. If you are married, you probably will have to provide your spouse’s income to be considered for the widest possible variety of aid sources. Be sure to check with each law school to which you apply to determine its specific requirements.

In general, most schools participate in a wide variety of loan programs. When you submit your FAFSA, they will automatically check your eligibility under all loan and scholarship programs to determine what type of aid you will receive. Do not be misled when schools claim that high percentages of their students receive financial aid. Almost all law schools make this claim, but they consider student loans “aid,” so the money is not free. You should try to find out what percentage of incoming students receive non-loan financial aid—that will give you a better idea of how generous the school really is.

There are too many loan programs to detail. These are the most common types:

Federal Government Loans:

The primary federal student loans for college and graduate school were commonly called Stafford Loans. They’ve had a name change, and are now referred to as Direct Loans (or Stafford Direct Loans) and FFEL Loans (or Stafford FFEL Loans). As far as the student is concerned, these two loans are virtually identical; the main difference is in who provides the funds. In the Direct Loan program, the federal government provides the loan. In the FFEL program (Federal Family Education Loans), a bank or other private lender makes the loan.

Both of these loans can be either subsidized (meaning that the government pays the accruing interest on your loan while you remain in school) or unsubsidized (meaning that you have to pay the accruing interest as you go along or have it added to your loan balance). The unsubsidized loan is awarded without regard to financial need. Graduate students may borrow up to $18,500 per year in combined subsidized and unsubsidized loans. (2003 figure) However, an unsubsidized loan can become pretty costly. If you cannot afford to make the quarterly interest payments, they will be added to your loan balance. Over the years of law school, those interest amounts could add a few to several thousand dollars to your balance, depending on how much you borrow, and for how long.

The Perkins Loan program and NDSL (National Direct Student Loan) program are also available to graduate students. Eligibility is based on need, and the amount you borrow cannot exceed $30,000 for undergraduate and graduate school combined.

Law School Loans:

Often a law school has its own pool of money to lend out. While scholarships are better (because they’re usually free money), a loan from your law school can be at a lower interest rate than government loans or private loans, making them a good deal. Law schools develop their own rules for lending their money, although most will consider both merit and financial need.

Private Loans:

Private loans come from private lenders like banks, credit unions, and non-profit educational lenders like ACCESS. These loans are used primarily to pay additional costs above and beyond those covered by government loans. The interest rates are market driven. If you attend an expensive law school where, for example, tuition alone exceeds the government loan limit of $18,500, you will need to make up the difference. Most students turn to private lenders. These loans can be relatively easy to obtain UNLESS you have screwed up your credit rating. See the discussion of credit rating, below. The Good News: It's a way to pay the costs of an expensive graduate school education. The Bad News: Borrowing lots of money can make for a lower standard of living later on.

Like it or not, the #1 factor in obtaining a scholarship from a law school is often your LSAT score. Law schools compete for top candidates, and use free money in the form of scholarships and tuition waivers to attract them. This approach is true even of lesser-ranked schools: a school with a median LSAT of 154, for example, might not be able to compete for the very best students, so it instead offers money to students who will contribute to raising that median score—meaning that students who score, say, a 156 or 157 may be targeted for scholarship aid.

After the LSAT, scholarships are generally given on the basis of financial need. There are also targeted scholarships to help underrepresented groups, children of alumni, etc. These scholarships are particular to the school and are awarded by each school’s financial aid office. You may qualify for a scholarship at one school and be completely shut out at another. Awarding free money is a very school-specific undertaking, and it is often impossible to predict what a law school will do for you. Consequently, your best course of action is to submit your completed law school and financial aid applications as early as possible. There’s more money available at the beginning of the admissions cycle than at the end. It is not unusual for a law school to award all of its scholarship aid by mid-February; applications that arrive later are eligible only for the “leftovers.”

There are a number of federal scholarship and grant programs for needy individuals, plus a number of private programs. You need to do your homework to see which ones you might be eligible for. Sometimes these programs can be very idiosyncratic—“awarded to the children of union laborers,” for example—so research extensively to see if there are any that match your background. The Internet is an indispensable tool for searching for graduate and professional school scholarships—use it, as they say, early and often.

Helpful Tips

1. Limit the number of credit cards you have. One or two is plenty.

2. Make your monthly payments on time. Even if you just pay the minimum balance, you must do so in a timely manner.

3. Reduce or pay off your loan balances before law school.

4. Obtain a copy of your credit report(s) once per year. Correct any mistakes.

5. Beware of “hidden” credit accounts. First, close all accounts you aren’t using, like old department store accounts. Second, check to see if some of your services are treated like credit accounts (e.g., cell phones and ISP accounts).

6. Give up luxury goods. ACCESS, for one, believes that a student does not need a cell phone. If you wish to claim poverty to receive financial aid, you need to demonstrate it. Cell phones and sometimes even automobiles are suspect.

1. Keep a good credit rating.

2. Keep your credit card balances low or pay them off.

3. Watch your other indebtedness (car loans, college student loans, etc.)

4. Fill out the FAFSA immediately and send it in. Similarly, send in your law school applications as early as possible.

5. Kick butt on the LSAT to have the best chance of receiving scholarships and grants.

6. Think about what job you want, and what its likely salary will be. Ask the law schools for the placement histories and average salaries of their recent graduates.

7. Consider taking time off before going to law school to earn money or pay off college debt.

8. Establish, if possible, residency in a state to take advantage of the lower in-state tuition at public law schools. Rules for residency vary from state to state; you’ll need to contact each law school to find out its current requirements.

9. Read up on educational funding sources and apply for all scholarships and grants that you can.

10. Apply to many law schools to maximize your chances of receiving financial aid. Compare your financial packages and see if your schools can do better or can match other offers that you have received.

1. Generally, student loans and the interest accruing on those loans can be deferred while you are in school at least halftime.
   

2. Most loans have a grace period of 6-9 months.
   

3. You must NEVER lose track of your loans—keep a central file and put every bit of loan info in it. Start now!
   

4. If you end up with a lot of debt and multiple lenders, you should consider loan consolidation. Loan consolidation means that a single lender (Sallie Mae, for instance) pays off all of your individual loans. In exchange, you get one new loan for the same overall amount at a fixed interest rate. The interest rate might be better or worse at the time you consolidate. (Right now, spring 2003, interest rates on consolidation loans are at an all-time low.) The consolidation loan can be paid over 10, 20, or even 30 years depending on the offerings of your lender. Lenders often also offer sliding scale payback, where you start off with lower payments that gradually increase over time.

• One lender to deal with;

• One monthly payment;

• Significantly lower payments if you spread your loan repayments out longer than 10 years;

• Potentially lower interest rate;

• Makes other financial transactions easier, such as buying a house. Some mortgage companies strongly urge you to consolidate your debt.

• If you spread your loans out over several years, you will incur significantly higher interest charges. You may even double the amount of money you will ultimately pay back on your loans;

• Potentially higher interest rate.

• Under current law, you can only consolidate once.

In the “old days,” the common rule of thumb was that you needed a 20% down payment when you bought your house, and that a person with too much debt could not obtain a mortgage. Today, buyers rarely put 20% down on a home, and mortgages are much more readily available, even to persons with significant student loan debt.

The common debt-to-income ratio used by large banks is 30%. That means when you compare your debts to your income, the total amount of the debt payments you must make each month should not exceed 30% of your total income. Banks will take into account other assets you may have, of course, in determining loan eligibility, but the debt-to-income ratio remains a significant factor in lending decisions.

All is not lost, however. Many credit unions and non-traditional lenders such as mortgage brokers permit higher levels of debt. Mortgage brokers, in particular, are used to dealing with persons with high student loan debt, and may allow debt-to-income ratios of 50% or even 55%. However, in order to qualify for such a loan, you must have an excellent credit history, meaning that you have borrowed money and paid it back on time with few if any “black marks.” Once again, a good credit rating is crucial. If you are a conscientious borrower, a mortgage broker will work with you to help you obtain a mortgage. If you qualify for a “non-conforming” mortgage, as they are called, you usually have to pay a slightly higher interest rate on your loan.

So the prospects for home ownership are not lost. Far from it. Nevertheless, decisions you make today about your credit and spending habits will be very relevant down the road when you want to buy a house. Therefore, it is never too early to practice good debt and credit management skills. Before enrolling in law school, it’s a good idea to sit down and make a financial plan, one that details not only how you will pay for your education, but also how you will pay for the things that you will want and need upon graduation. You need to accurately assess the kind of lifestyle you will have after law school if you borrow heavily now to pay for it.

The bottom line is this: if you want to go to law school, you can borrow enough money to do so. The ceiling on graduate student loan borrowing is very high—well in excess of $100,000—and there are enough loan programs out there for you to obtain the money you need. Schools like to lend money, because it brings more people and tuition money in the door and it doesn’t cost THEM anything—it costs YOU!

Therefore, you must seriously consider whether you might be “making a deal with the devil” in taking out sizable student loans. Take a look at your local newspaper or any national magazine: they are replete with stories about the mounting student loan debt of the middle class. They should be! Lawmakers, and particularly Congress, decided years ago that the best way to help citizens pay for higher education was to loan them the money to do so, and to allow each student to choose where the money would be spent. (The other alternative, used commonly in elementary and secondary school funding, is to give large sums of money directly to the institutions, not the students.)

If you borrow substantial sums of money, you should expect a reduced lifestyle upon graduation. You may be forced to take a high pressure, high paying job that you do not enjoy. You may postpone having children. You may not be able to relocate easily. There are many potential negative consequences when you accumulate massive debt. (And, just so you know, student loan debts generally are not excused if you file bankruptcy!)

That being said, law school should not be reserved simply for the children of the rich. Student loans exist for middle- and lower-income students in part so that this doesn’t happen. Student loans are there for you to take advantage of, to better yourself and eventually to obtain a higher standard of living.

The key for you, then, is to make a careful, informed decision about how important a legal career is and how much you are willing to sacrifice to pursue it. That means you should do your homework. This includes not just your financial aid homework, but more importantly the homework involved in discerning whether a legal career is for you. Know what you are getting into before you start, and you’ll be better off when you finish.

Good luck!