The average law school student leaves school owing $160,000 in student loan debt, according to EducationData.org. If you’re one of the 74% of law school students with loans, you might be thinking about how to pay off law school debt as painlessly as possible.
While paying off law school debt isn’t easy, there are strategies you can use to conquer your loans. Here are some tips for paying off your law school loans, followed by stories of three lawyers who managed to pay off their law school debt ahead of schedule:
From applying for income-driven repayment to refinancing your loans for lower interest rates, these five strategies will help you manage your law school debt.
1. Consolidate your federal student loans
2. Apply for income-driven repayment
3. Make extra payments on your student loans
4. Consider refinancing your student loans for better rates
5. Pursue student loan forgiveness
If you owe multiple federal student loans from your undergraduate studies and law school, it might be worth consolidating them to simplify repayment. With Direct loan consolidation, you can combine your student loans into a single monthly payment.
You can also apply for a new repayment plan if the standard 10-year plan doesn’t work for you. Income-driven plans such as Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE) and Income-Based Repayment (IBR) can be especially helpful since they offer some relief on subsidized loans.
While federal student loans are automatically placed on the standard 10-year repayment plan, they don’t have to stay there. If you need to make your payments more affordable, consider applying for an income-driven repayment plan.
Income-driven plans adjust your payments to 10% to 20% of your discretionary income while extending your loan term to 20 or 25 years. If you still have a balance after this time, the remainder will be forgiven.
The REPAYE, PAYE and IBR plans (as mentioned in the previous section) can be especially helpful for law school graduates with high debt loads since they come with an interest subsidy. If your monthly payments don’t cover all the interest that’s accruing on your loans, the government might step in to help.
Here’s how it works:
- REPAYE covers 100% of the interest on your subsidized loans for up to three consecutive years and 50% of the interest after that. It will also pay 50% of the remaining interest due on your unsubsidized loans throughout your term.
- PAYE and IBR cover 100% of the interest on your subsidized loans for up to three consecutive years. You’ll pay the interest after that. You’re also responsible for the interest that accrues on your unsubsidized loans.
Because of its more robust interest subsidy, the REPAYE plan is likely your best option. However, compare the details of all income-driven plans to find the one that’s most beneficial for your individual situation.
As your income increases, you might be able to pay more on your student loans to chip away at your debt faster. Even if you’re on an income-driven repayment plan, you can make extra payments on your student loans at any time without penalty.
Even occasional extra payments can help you cut down on interest and get out of debt ahead of schedule. Play around with our prepayment calculator to see how extra payments on your student loans would impact your repayment schedule.
For example, let’s say you owe $100,000 at a 5.0% interest rate. Over 10 years of fixed payments, you’d pay $27,279 in interest. But if you could throw an extra $200 per month at your loans, you could save $5,621 in interest and get out of debt nearly two years faster.
If you do choose to make extra payments on your loans, make sure that your loan servicer is applying them directly to your principal balance and not saving them for the following month’s payment.
One of the hardest parts of paying off student loans is keeping up with interest, especially when you’ve got a large amount of debt. As you saw in the previous example, $100,000 of debt accrues nearly $30,000 in interest over 10 years.
But if you can lower your interest rate through refinancing, you can keep more of your hard-earned money in your own pocket. Banks, credit unions and online lenders offer refinancing options to borrowers with strong credit and stable incomes.
Depending on your credit, you could qualify for a lower interest rate than you have now. Since many lenders let you prequalify for refinancing online with no impact on your credit score, it’s worth exploring your options.
Just note that refinancing federal loans turns them private, making them ineligible for federal repayment plans, such as income-driven repayment and loan forgiveness programs. Make sure you don’t need any federal benefits before refinancing your federal loans with a private lender.
You might also explore your options for student loan forgiveness for lawyers. The Public Service Loan Forgiveness program, for example, will forgive your federal years after 10 years of working in a nonprofit or other qualifying organization.
Other programs, such as the Department of Justice Attorney Student Loan Repayment Program and the John R. Justice Student Loan Repayment Program, also offer significant student loan assistance to qualifying lawyers.
You might also find a student loan repayment assistance program from your state or alma mater. It’s worth exploring your options for student loan forgiveness, especially if you owe a large amount of debt.
Note that some of these programs require you to work in the public sector, which could mean you earn a lower salary than you would in the private sector. If you’re going to pursue loan forgiveness, make sure that any requirements are in line with your own professional and financial goals.
The amount of time to pay off law school debt will vary, as it depends on factors such as your total debt balance, income and repayment method. According to EducationData.org, the average lawyer working in the public sector will take 26 years to pay off their law school debt if they use 20% of their income.
The average student borrower takes 20 years to pay off their student loans, with some taking 45 years or longer to become debt-free. However, you might be able to pay off your loans faster if you use some of the strategies discussed above.
If you can find ways to increase your income and keep your living expenses low, you could use any leftover money each month to pay off your loans faster. As mentioned, you might also get out of debt ahead of schedule if you can qualify for student loan forgiveness.
Paying off law school debt ahead of schedule isn’t just a fantasy. These three lawyers graduated with serious law school debt — but managed to beat it back.
Each had their own method, from leveraging a well-timed investment to using strategic repayment tactics. They’re lawyers just like you who turned an expensive education into one that paid for itself through work they feel passionate about. Here’s how they did it:
Joshua Berman’s law school debt repayment was untraditional. But so was his foray into the field of law.
In 2009, Berman graduated into one of the worst legal job markets in history and had a $100,000 job offer rescinded because of the market. He ended up in a paralegal position earning $50,000 per year, and even that job was difficult to get given the number of lawyers looking for work.
Still, Berman paid off his $125,000 of student loan debt in only eight years. And it was all because he bought a home that turned into a great investment.
“I bought a house in an area I thought would have great potential for growth,” he explains. “A year and a half later, my home’s value skyrocketed. I refinanced the mortgage, cashed out the equity and paid off the loan.”
Although this payoff method might be untraditional, Berman has no regrets. His student loan interest rate was 7.785% — much higher than his new mortgage rate of 3.50%.
That fact speaks to the important question of whether you should pay off your student loans or invest your money. Many times, the answer reveals itself in the interest rates.
Of course, it’s not easy to buy a home when you’re deep in debt. For Berman, several things helped.
He and his wife chose to buy a foreclosure from a contractor, who then renovated the home. They also designed a basement apartment for his brother to live in for one year, which he was willing to pay for in advance so they’d have enough cash to close on the home.
Between those factors and the gift money he and his wife received from their wedding, they were able to purchase the house that would eventually enable them to pay off his law school debt. And Berman kept his wife in mind the whole time.
“I wanted to get rid of the loan as quickly as possible because I felt it was holding me and my wife back,” he says. “She married into my loan, but I wanted it to be as little of a burden as possible for as short of a time as possible.”
Berman’s story highlights the changing tides of luck — and the importance of making the most of every opportunity you have.
Here’s Berman’s advice to young lawyers in debt: “When I graduated law school, I truly felt like I would never pay off my loan. Every month I made a payment, it seemed like I would never be done. But the best thing I think you can do is focus on developing as a professional, and the opportunity to pay off the loan will follow.”
Evan W. Walker graduated with $120,000 in law school debt.
But with the help of the debt avalanche method, he paid it all off.
“I paid down the loans with the highest interest rate first,” he explains. “I took the smallest of those and paid it off first. Then, I moved on to the second-highest, etc., until I paid off all of those loans. Then, I started paying the smallest of the lower-interest-rate loans and set a weekly limit of money I was willing to spend.”
Even with a strategy in hand, it wasn’t always easy. During that intense three-year repayment period, Walker drove an old beater car, and his wife covered the rent, utilities and groceries — without having anything extra to save.
That’s a large reason Walker credits not only discipline but also a supportive spouse with the success.
“My wife is a generous and kind woman,” he says. “We both knew it was best for us both that my loans were paid off as soon as possible. I was determined to see it done.”
Now that he’s debt-free, Walker has the future in mind. He plans to “run a successful solo practice, support [his] family and give.”
Kyle Dickmann, founder of Dickmann Tax Group in Denver, graduated with a student loan balance of $120,000.
But since his graduation in 2009, he’s paid off more than $70,000. Here’s how:
- He chose a 30-year student loan repayment plan rather than a 20-year plan, lowering his monthly payments and making them more manageable.
- Whenever he had extra money, he paid an individual loan in full rather than applying it toward his total debt. That strategy aligns with a method called the debt snowball.
- He tried to think of his law school loans as a “mortgage” for his career, which inspired him to keep current on his loans.
Because the interest rate on his loans is relatively high, he isn’t tempted to use his funds for investment instead of repayment.
“My average [interest rate] exceeds 7.00%,” he explains, “so there really isn’t a better ‘investment’ tool to use than the repayment of my student loans.”
Dickmann also finds motivation in his work, especially because his firm helps people settle their tax debt. He helps others experience the same relief he feels when he pays off more of his law school debt.
“Most of our clients are struggling financially, and we end up being their last option before bankruptcy,” he says. “Hearing the appreciation in their voice after the debt has been settled never gets old.”
But that doesn’t mean staying the course on debt payoff is easy, even for Dickmann. He and his wife love to travel — but his debt means taking more quick road trips rather than grand world tours.
Although Dickmann and his wife have made this and other lifestyle sacrifices, he sees it as a reasonable trade-off for having gone to law school. And as frustrating as debt can be, it has helped Dickmann create the life of his dreams.
“I would certainly do this all over again,” he says, “but I’m kind of lucky in that I’ve been able to start a company (which is something that I’ve always wanted to do). And so far it’s gone well enough that I’ve been able to pay my debt off faster than I would have expected going into it.”
There’s a light at the end of the tunnel for law school debt
Graduating with six figures of debt isn’t easy. But as these stories illustrate, there is a light at the end of the tunnel.
If you need some tools to help you along the way, consider refinancing your student loans at a lower interest rate (although you should weigh the pros and cons before refinancing federal loans with a private lender). You also could consider an income-driven repayment plan to ease your monthly burden, perhaps with the plan of increasing your payments once you’re making more money.
You survived four years of undergrad study, three years of law school, high-intensity internships and the bar exam. If you can do all that and come out the other side, what could student loan debt possibly have on you?
If you’re feeling motivated to conquer your debt as quickly as possible, check out these additional strategies for paying off student loans fast.
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