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Graduate of UPenn Law ’14
Understanding the different types of positions and salaries that graduates can obtain after law school, we now proceed to discuss how law school grads actually pay off their debt.
Your debt repayment will depend on your income and the type of loans that are outstanding. For instance, if you have taken out federal student loans, there will likely be a six month grace period immediately after graduation, meaning that you won’t need to start making payments until the seventh month after graduation. That said, interest will start accruing as soon as the loan is disbursed. If you take out federal loans, you will follow a payment plan. The standard repayment plan is a 10-year repayment plan, but you will want to find the best plan for you.
If you are having trouble paying off your loans, there are several things you can do to stay on track, including changing your payment due date, changing your repayment plan to an income-driven repayment plan, or consolidating your loans. If none of these solutions work, you could be eligible to postpone payments through a deferment or forbearance, but this will depend on your individual circumstances. Just keep in mind that seeking extensions or deferments may provide some relief in the short-term, but in the long run, you will be making more interest payments to your lender.
For private loans, your particular terms will vary depending on your loan agreement. You will need to contact your lender and read the fine print to understand your obligations.
A. Options for Certain Attorneys
As stated above, certain attorneys have an easier time paying off their law school loans as compared to others. The question of debt is why many graduating lawyers seek out Big Law jobs, pay off their loans, and then move on to a position that speaks to them. Those that are seeking out lower salaried jobs—particularly those in government or public interest positions—there are certain available programs that can make life easier. While this is not an exclusive list, some of the most notable programs are below.
1. Public Service Loan Forgiveness Program
Certain attorneys may be eligible for the Public Service Loan Forgiveness (“PSLF”) Program. The PSLF Program forgives the remaining balance on your federal direct loans if you make “120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.”
There are several follow-up questions to that definition, including what constitutes a qualifying monthly payment, qualifying repayment plan, and qualifying employer.
Luckily, the federal student aid website provides some clarification. A qualifying monthly payment is a payment made (1) after October 1, 2007; (2) under a qualifying repayment plan; (3) for the full amount due as shown on your bill; (4) no later than 15 days after your due date; and (5) while you are employed full-time by a qualifying employer. Further, the 120 qualifying monthly repayments do not need to be consecutive.
Qualifying repayment plans include all income-driven repayment plans for your federal student loans. That said, while the 10-year Standard Repayment Plan is a qualifying repayment plan for the PSLF, you still cannot receive the PSLF unless you enter an income-driven repayment plan, as you will have no remaining balance to forgive after you make 120 qualifying monthly payments. For more details, you can click here.
Finally, a qualifying employer includes government organizations at any level, nonprofits that are tax-exempt under 501(c)(3) of the IRS Code, and other types of nonprofits if their primary purpose is to provide certain types of qualifying public services. Employers that do not count for the PSLF program include labor unions, partisan political organizations, for-profit organizations (including for-profit government contractors) and nonprofits whose primary purpose is not to provide certain types of qualifying public services.
If you are interested in public interest or a career in government, you will absolutely want to inquire on whether you are eligible for the PSLF program.
Loan Repayment Assistance Programs (“LRAPS”) also offer loan forgiveness to law school grads who select careers in public service. Often, you must work in a public-interest role for ten years, along with having loans that are being actively repaid and in good standing. Like the PSLF program, LRAPS only forgive federal loans.
LRAPS aren’t available to everyone, however. Over 100 law schools offer LRAPS, but you will need to check if your law school offers this opportunity. You can click here to find a list of law schools that have LRAPS (as of January 1, 2017). You can also find more information by visiting the website of the LRAP Association.