5 Ways to Manage and Shrink School Loans

James Herbert, Head of Student Loan Refinancing, First Republic Bank
March 9, 2020

According to an Oliver Wyman study, the median law school debt is $138,000 upon graduation. That expensive new reality, combined with escalating living costs in the areas where legal jobs are concentrated, means getting ahead of student loan debt, buying a home and establishing a wealth creation strategy can be a daunting task.

But there is reason to be optimistic. The following five tips could result in substantial interest savings and peace of mind as student loans are repaid:

Save money by securing lower interest rates.

In the past decade, many law students suffered with interest rates upwards of 6.95%. If you count yourself among them, then you’re well acquainted with just how little of a monthly payment goes to paying down principal and how most of it goes to paying interest.

Today, you can find fixed rates as low as 1.95% APR with discounts1. If you’re paying more, consider refinancing student loans to take advantage of current low interest rates. With lower rates, you can either decrease your monthly payments or accelerate how quickly you become debt free. Refinanced already? You might consider looking again as interest rates have fallen across many lenders. In short, this step can keep more money in your pocket for other living expenses or financial objectives.

To get the best rates on a refinance, borrowers should demonstrate a strong credit history, high credit score, steady income and a savings record.

Use this free student loan refinance calculator to see your custom loan rate in less than a minute.

Refinance to fit your financial goals.

The immense burden of student loans is prompting some young professionals to delay major life and financial goals until that debt is off the books. It may be worthwhile to refinance with a loan that fits your life goals and current situation, which is likely quite different than when you were focused on finals. Look for shorter-term loans to save interest expense and get out of debt quicker or for longer-term loans to reduce your monthly payments. As most loans have no prepayment penalty, making additional payments to principal, if possible, can speed up the pay-off process even more.

Before embarking on any refinancing process, it is important to know your current loan terms — whether private or federal — and understand how a new loan may differ. Some loans have income-based repayment or forgiveness provisions, and those provisions will likely be lost in a refinance. Similarly, for those who currently qualify for interest rate deductions, it will be important to confirm tax ramifications of refinancing.

Consolidate loans into one monthly payment.

Keeping track of multiple student loan balances and payment dates can be cumbersome, particularly if loans are spread across various servicers. Consolidating all loans into one eases the burden; with one monthly payment to manage, the chances of missing a payment may be reduced.

Having one lender relationship also streamlines recordkeeping, makes it easier to track pay-off progress, and simplifies efforts when addressing questions or concerns. Moreover, taking out one big loan could provide some savings if you are able to capture a lower interest rate during the consolidation process.

Establish a banking relationship.

Kick-starting a legal career is more than a full-time job, yet establishing a wealth creation strategy early is critical to maximizing your potential. Building a relationship with a trusted banker who can provide personal service and guidance allows attorneys to focus on their careers while having confidence their financial goals are on track.

A banking partner can model scenarios for paying down a student loan or making the most of bonus income. They can also offer financial guidance throughout career developments and as new wealth goals take hold, such as establishing emergency funds, buying a home, investing accumulated wealth or embarking on a private practice.

Explore employer contributions.

Financial institutions and employers are beginning to take an active role in helping alleviate student debt. According to the Oliver Wyman study, four percent of employers now offer student loan repayment contributions as a benefit. That number is likely to rise quickly as professionals with student debt ranked student loan repayment assistance as their top choice of how they would like employers to allocate any additional money for benefits.

Overcome the distraction of student loan debt.

Navigating student loan repayment doesn’t have to be a burden you carry alone. By taking advantage of lower interest rates and the right term for you, establishing a personal banking relationship and setting up a wealth creation strategy, young lawyers can alleviate the distraction of student loans and focus on what really matters: their careers.


Refinance your student loans – fixed rates as low as 1.95% APR with discounts.

1] Annual Percentage Rate. Rates effective as of March 9, 2020 and are subject to change. The terms of this loan may differ from terms of your current loan(s). For example, this loan does not contain special features such as forbearance periods or income-based repayment plans available for some student loans. If the debt you are refinancing was all incurred for qualified higher education expenses or to refinance a qualified education loan under the Internal Revenue Code, the interest you pay on this loan may benefit from certain deductions thereunder, and it may also be the case that this loan will not be dischargeable in bankruptcy. Applicants should contact their legal, tax and financial advisors for advice on deciding whether this is the right product for them.

Borrower must open a First Republic ATM Rebate Checking account (“Account”). Terms and conditions apply to the Account. If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: 1) 2.00% for maintaining automatic payments and direct deposit with the Account, 2) 0.50% for depositing and maintaining a deposit balance equal to the greater of 10% of the approved loan amount or $5,000 into the Account; and 3) an additional 0.25% for depositing and maintaining a deposit balance equal to the greater of 20% of the approved loan amount or $10,000 into the Account.

Product is not available in all markets. For a complete list of locations, visit firstrepublic.com/locations. Applicants must meet a First Republic banker in person to complete paperwork. This can be done at any First Republic Preferred Banking Office. This is not a commitment to lend, all loans are subject to First Republic’s underwriting standards. Applicants should discuss loan terms, conditions and account details with their banker.

The strategies mentioned in this document may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. First Republic Bank does not provide tax or legal advice.

This article originally appeared on Above the Law.