You studied hard for the LSATs, were admitted to your dream law school and, after years of diligent work, made it to your first law firm. But going down the path to becoming an attorney wasn’t cheap, and law school came with a hefty price tag.
Private law school is nearly three times as expensive as it was in 1985 (after adjusting for inflation), and the average law school debt for graduates is $148,800 in total, for both undergraduate and graduate school.
Over a standard 10-year repayment plan, the total amount paid for law school can easily grow to $200,000, adding in the extra costs of interest. For many borrowers, the $1,000- to $2,000-per-month loan payments are unmanageable — making student loan refinancing an appealing option for those concerned about their personal finances.1
Refinancing law school loans can seem like a complex process, but you can make it simpler with a step-by-step approach.
1. Assess your circumstances.
For starters, take a holistic look at your financial profile. Spend time understanding how many law school loans you have (and from what lenders, for what amounts and at what rates) as well as your full debt load across other obligations, such as your car, home and credit cards.
Then take a look at your payback timelines for all outstanding debt obligations to start stacking your repayment requirements and interest rate burden against your current or future income expectations, monthly and yearly expenses and long-term life goals.
On a standard 10-year repayment schedule, for example, a person with $125,000 in loans at an average interest rate of 6.6% would have a monthly payment of roughly $1,400 (paying over $45,000 in interest over the 120-month term). Based on your own calculations, think carefully about whether making lower monthly payments is truly beneficial to you if it means a longer repayment term; to avoid extending the timeline, you may consider seeking out additional income to apply toward your debt load instead of or in addition to refinancing.
From there, get acquainted with your credit score and overall asset mix, which potential lenders will review to get an understanding of your risk factors as they determine appropriate interest rates for your law school loan refinance.
2. Consider all of your options.
Armed with some financial insight, you can start researching which refinancing options may work for you depending on your loan types and other factors.
Borrowers with federal student loans, for example, may be eligible for government programs like Public Sector Loan Forgiveness (PSLF), which is available to a small subset of qualified government workers, and/or an income-based repayment plan. These loan forgiveness options go away if you refinance through a bank or other private lender.
Borrowers with private loans may be eligible for certain kinds of help, though their options tend to be more constrained. For example, public service lawyers may qualify for loan repayment assistance programs (LRAPs) through their state, school or employer or the federal government. LRAPs provide extra funds to help you make payments on your loans.
Lawyers who are privately employed or seeking employment should check if the workplace offers student loan forgiveness or assistance as a benefit. Don’t hesitate to speak to more senior colleagues or financial experts as well, as they may have advice on refinancing options you’re unaware of.
3. Compare rates and terms.
If your research guides you toward refinancing your law school debt with a bank or other private lender, it’s usually wise to get acquainted with your options and kick-start the process right away. Because law school debt tends to be larger than undergraduate debt or other loan obligations, refinancing sooner rather than later can help you save significant money in the long term.
Checking with multiple lenders can help you secure lower rates — especially if you have good credit — or payback terms customized to your needs. Don’t be afraid to ask questions of the institutions you contacted to understand exactly what you’re getting into, as expectations and options vary widely across the market.
Some lenders will allow you to refinance with a cosigner on your loans, for example, whereas other institutions forbid that. Find out all the ways your lender can potentially help you — have all the necessary conversations to understand how the fixed or variable interest rates will affect you over time, whether loan forbearance or deferment is possible (and under what circumstances), and compare the pros and cons of working with the lenders you researched.
4. Stick to a strategy.
Once you’ve found a loan option you’re happy with, look at how it will affect your short- and long-term financial plans before completing the refinancing process.
If you’re obtaining a lower monthly payment and/or shorter repayment timeline, consider how the savings can support your larger goals. Map out how you’ll use it to make wise choices about your financial obligations — such as saving for retirement, paying off credit card debt, or financing future expenses like real estate purchases or your children’s education.
Create an accountability plan to help you stay on track with your objectives. Keep in mind that while refinancing will make your loan burden more manageable, making it go away is still your responsibility.
Paying your loans on time — and ideally paying over the amount of your monthly requirement, as it best fits into your financial plan — is key to realizing maximum value or savings through your choice to refinance. Extra payments help you pay down the loans faster because, in the case of fixed-term loans, they’re applied to the principal amount.
5. Launch your lender partnership.
Refinancing creates a new relationship to both your loans and the people behind them. As you enter into a new loan commitment, be sure to work with an institution (and a set of customer representatives) you trust.
Make sure the lines of communication are open so that you can pursue any potential money-saving opportunities that may arise — such as refinancing again if circumstances make it necessary or feasible later.
If “a journey of a thousand miles begins with a single step,” then consider full repayment of your student loans the destination you’re moving toward one step at a time. The health of your personal finances, and your ability to reach milestones on your financial road map, depends on establishing the right refinancing relationship that can grow alongside your goals.