Private lenders are profit driven. That means the terms you get will be extremely dependent on your credit, your co-signer, and the market. While the federal student loans have rules that remain constant, private loans tend to change with the economic winds.
This distinction is important − at least for law students. Your borrowing amounts are likely going to be larger and the timeline of repayment is different as well, along with the start of your repayment schedule. As a result, private student loans for law school need more scrutiny than just a side-by-side comparison of their rates.
Start with Realistic Expectations of Your Career Path
Visions of high-paying jobs immediately during law school are common among law school students. Some will get them. Many will not. Outcomes in terms of salary vary based on your degree, your school, and even where you live.
Now taking a look at your potential route − something worth doing before you borrow.
- Public interest positions
- Clerkships
- Mid-sized firms
- Corporate roles
Each is a different earning path. Realizing this can prevent you from taking out loans that your post-graduate salary will find it hard to cover.
Look Beyond the Interest Rate
Most borrowers quit looking once they find a reasonable rate. However, private loans are more than the number you see at the top of the page.
- Important Features You Must Evaluate
- How quickly interest starts growing
- If it is possible to pause your payments while you are bar prepping
- For lenders which provide hardship assistance
- Ability to modify your payment method
This is more valuable than a few tenths of a percent because it will help bring stability to those early formative years of your legal career.
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Outline a Borrowing Strategy Based on Your Timeline
Law school goes through cyclical periods: classrooms, years in internships, externships, bar prep, and job hunting. If you are going to benefit from this lesson and have a strategy for the loan, it should correspond to the phase.
A Practical Approach
- Take out a smaller amount in your first year when you are still assessing what your expenses will be.
- Change your requirements in subsequent years when you understand the true cost of your program.
- Preplan your bar prep costs so you are not desperately trying to find loans right before.
This step-by-step method limits the total amount you borrow.
Understand the Co-Signer Impact
Most law school private student loans need a co-signer. This creates shared legal responsibility. Your co-signer suffers a credit hit, too, if you miss payments. If you are thinking of asking or involving anyone else, please ensure that you both understand the risks involved, how and when you will pay them back, and what happens when you run out of money and cannot pay them back.
Start Paying Back Before Your First Job
Repayment typically begins shortly after graduation. Among the top reasons that we decided to exclude certain areas from the loan survey were: Bar exam months are stressful enough without adding loan surprises on top of them;
Now, get a baseline monthly budget together. Compare it to what it could cost to pay off a loan. Look into bar study grace periods or bar study assistance lenders if those numbers are tight during your bar study.
Final Thoughts
Law school is an investment in your future, and law school private student loans can be an essential part of the funding picture. However, the most astute borrowers see beneath the surface. Know what your careers will be, look beyond the rate, time your borrowing to your degrees, and take some of the pain of repayment upfront. That way, you can be confident that your legal education will serve your future rather than limit it.
