Financing a Legal Education

Law school is expensive. The total cost of a three-year legal education can exceed $200,000 at a private law school in city with high living costs. If you or your family is wealthy and can fund your law school education from that wealth, then you don’t need to read this section any further.

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However, if you are like most people, you will need financial aid, whether in the form of scholarships or loans, and you will need to continue reading. 

Please note, however, that changes in financial aid rules and regulations are ongoing and that law school financial aid policies vary.  Ultimately, the best single source of information about financing a legal education is the financial aid office of the law school to which you are applying. 

Grants and Scholarships

Grants and scholarships are the best forms of financial aid because they do not have to be repaid. 

Unfortunately, there no federal grants, such as Pell grants, for graduate students, and there are very few state or private grants.  In addition, most private grants are restricted by geography, ethnicity, or other life circumstances.  For example, the Italian American Lawyers Association of Los Angeles County has a scholarship for residents of Los Angeles County, California who are of Italian American heritage.  The good news is that if you qualify for a private grant or scholarship, there may not be much competition for the money.  Private grants and scholarships are hard to find, and you need to take the initiative in finding these opportunities.  The Pre-Law Advisor has some information on private grants and scholarships as do some of the pre-law resources in the Buswell Library. 

Most grants and scholarships are conferred by individual law schools in the form of a discount off the full tuition price.  The amount available varies greatly from school to school and often depends on the size of the school’s endowment.  The trend is toward allocating more free financial aid money to merit-based scholarships rather than need-based scholarships to attract top students and propel the law school upward through the rankings.  Merit-based means that the availability and size of any law school grant or scholarship will be primarily based on your GPA and LSAT score.  The higher those numbers relative to the average numbers for a law school, the more generous the grant or scholarship is likely to be from that law school. 

A key issue with law school grants and scholarships is whether the law school places any conditions on their renewability for the second and third years.  A law school will often provide a grant or scholarship for the first year but will condition its renewability on maintaining a certain GPA.  Based on grade inflated undergraduate GPAs, the law school GPA condition may seem like a low hurdle.  However, many law school classes, especially those in the first year, are graded on a strict curve with only a small percentage of students receiving As, a small but larger percentage receiving Bs, and a much larger percentage receiving Cs. 

Law schools have also been accused of placing most of the students with GPA-conditioned grants and scholarships in the same classes to ensure that some of the grants and scholarships will disappear in the second and third years.  Before accepting an offer from a law school with a GPA-conditioned grant or scholarship, make sure you fully investigate the GPA spread at that law school and understand the probabilities of maintaining the required GPA based on how your undergraduate GPA and LSAT score fit within the incoming class.  In general, you need to fully understand and be comfortable with the risks associated with any condition placed on a scholarship. 

Working during Law School

To pay for the costs of law school, you can earn a paycheck doing part-time work during the school year and during the summer, either in a law school administrative department, such as admissions, as an assistant for a professor, or as a clerk for a law firm or other legal service provider. 

Federal work-study programs are available for positions at the law school.  Your hourly pay will at least equal the minimum wage, with 65% funded by the federal government subsidy and 35% funded by the law school. 
The primary cost of working during law school is your time, which can be a precious commodity while classes are in session.  During the first year of law school, full-time students are usually discouraged by their law school from obtaining any but the most limited part-time employment.

Loans

Unlike grants and scholarships, loans must be repaid with interest.  About 80% of law students rely on loans, either from the federal government or private sources, as their primary source of financial aid. 

The federal government offers Stafford loans (aka, Ford Direct loans) with an interest rate of 6.8%.  Stafford loans can be subsidized or unsubsidized.  A subsidized loan is need based and does not accrue interest while you are in law school because the federal government pays the interest.  Unsubsidized loans are not need based and accrue interest while you are in law school, but the payment can be deferred.  Whether subsidized or unsubsidized, you must begin repaying Stafford loans six months after you graduate, withdraw, or drop below half time.  You will have ten to twenty-five years to repay the loans.  The total amount available is $20,500 per year and up to $8,500 of this amount can consist of subsidized loans.  The remaining amount (the difference between the subsidized amount and the cap of $20,500) is unsubsidized.  The aggregate limit for graduate students is $138,500 (including undergraduate loans), of which not more than $65,000 can be subsidized. 

The federal Perkins loan is campus-based, so it is only available to at some law schools and is available in different amounts at different law schools.  The maximum annual loan is $6,000 with a $40,000 cap.  The interest rate is 5%, and all loans are subsidized.  This loan has a nine month grace period and forgiveness features for careers in law enforcement and direct services to at risk children. 

A federal Graduate PLUS loan is also available.  The money is borrowed through lenders, a credit check is required, and you cannot have adverse credit, such as being more than ninety days late on any other debt.  The cap is very generous – up to the total cost of attending law school less other aid.  However, the interest rate is not as generous as the other federal loan programs, and the loan is unsubsidized  In addition, you will pay origination fees on the loan.  Repayment is similar to the Stafford loan. 

To obtain a federal loans or federal work study, you must be a United States citizen or permanent resident, have completed a Free Application for Federal Student Aid (FAFSA), have a need as determined by the FAFSA (although the need only applies to subsidized loans, not unsubsidized loans), be registered with the Selective Service, not be in default on any federal loans, and not have a conviction for a federal drug offense. 

The College Cost Reduction and Access Act provides for federal loan forgiveness subject to a lot of caveats.  Only federal direct loans and not other forms of federal loans are eligible for loan forgiveness, although the latter can be consolidated into the federal direct loan program.  Eligibility is restricted to those working full-time for the government, in public interest law, such as in a prosecutor’s or public defender’s office, or in a legal aid clinic, or for a non-profit organization, and is further restricted to those who work in those positions for at least ten years.  The program permits the borrower to limit annual payments to 15% of discretionary income.  After ten years of making reduced payments, the remainder of the federal direct loan debt is forgiven. 

An increasing number of law schools also have loan reduction assistance programs (LRAPs), but they are not all the same and are limited in number, so you need to thoroughly investigate them to understand your chances of receiving their benefits.  The LRAPs exist to encourage students to enter public service jobs, and generally preference is given to candidates with the highest debt-to-income ratio. 

A limited number of states offer graduate school loans, and you will need to check with the state where you reside.

Since tuition alone at most law schools exceeds the federal loan limits, you will likely need to make up the difference with educational loans from private lenders.  Sources include non-profit private lenders, such as the Access Group, Nellie Mae, and Sallie Mae, along with for-profit banks, such as Citibank.

Unlike most federal loans, you will not be able to obtain private loans unless you are creditworthy.  The private lender will exam your credit report, and, if they don’t like what they see, they won’t extend a loan to you or they will charge you a higher rate of interest to reflect the higher risk that you won’t repay the loan.  The importance of creditworthiness with private loans highlights the need to establish and maintain a good credit history while you are in college.  Since the private lender will be examining your credit report, you may want to examine your credit reports first and address any issues before applying for private loans.  If you need private loans to attend law school but cannot borrow due to your credit history, you may not be able to attend law school. 

Private loans were traditionally easy to obtain, but they have become much harder to get with the recent credit crisis.  If you need private loans, you need to make sure at the outset that you can obtain financing for all three years of law school.  The worst case scenario is that you don’t have a law school degree, but you have to pay off the debt for one year of law school because you could not borrow enough money to complete law school. 

Since private loans are not subsidized or guaranteed, they usually have higher costs.  These costs include an interest rate based on a combination of the market rate, your creditworthiness, and the law school’s default rate, and fees, such as origination fees and guarantee fees.  Further, private loans may or may not offer deferrals on repayment. 

The average debt of a law school graduate is about $70,000 for those attending public schools and about $100,000 for those attending private schools, and these figures don’t include undergraduate loans, which average around $25,000, and credit card or other consumer debt.  Accumulating massive debt has many potential negative consequences, and you have to seriously consider whether you might be “making a deal with the devil” in taking out sizable student loans.  If you borrow substantial sums of money, you should not expect to live an extravagant or even a middle class lifestyle upon graduating from law school because of loan payments.  For example, you may have trouble qualifying for a mortgage on a house you want to purchase because you are already carrying the equivalent of a mortgage on a middle class house in a small, Midwestern city. 

A common rule of prudence is to limit your total education debt to what you expect to earn your first year out of law school.  Be realistic.  Most law students are not going to get the first year associate positions at large law firms and large cities that pay $160,000 per year to repay that debt.  The average lawyer’s salary is closer to $60,000.  Plus, these numbers only apply to those who get jobs.  During the Great Recession, many law students who didn’t graduate in the top of their class struggled to find jobs that paid enough to cover the huge debt load created by law school. 

The key to taking on debt is making a prayerful, informed decision about going to law school and what you are willing to sacrifice to pursue a legal career.  If you are going to law school to make a lot of money or because you can’t think of anything better to do with your liberal arts education, don’t.  The debt is less scary and the challenges of law school easier to overcome if you are going to law school in obedience to a sense of calling. 

The Process

You should start the financial aid process sooner rather than later.  Law schools have a limited amount of financial aid money for grants and scholarships, and they make financial aid decisions in conjunction with admissions decisions to recruit the best and brightest students and rise through the law school rankings.  You cannot wait until after you receive admissions offers to begin the financial aid application process.  If you do, there may be no financial aid left for you beyond loans. 

First, complete the Free Application for Federal Student Aid (FAFSA), a need analysis tool developed by the U.S. Department of Education that asks for information about your income, assets, and other financial resources.  The FAFSA can be obtained from the Wheaton College financial aid office, the law school financial aid office, or online.  The FAFSA can be filed any time after January 1st, and you should plan to file your FAFSA as soon as you can after the new year.  Some information required by the FAFSA is derived directly from your federal income tax return, so you will need to prepare that return as early as possible after the first of the year. 

All graduate students are considered independent for the purpose of determining federal aid eligibility, which means that your parents’ financial information does not count in calculating your need for federal financial aid.  Thus, be sure to answer “yes” to the question on the FAFSA “Will you be a graduate or professional student for the upcoming year?”  However, some law schools will request your parents’ financial information in determining how to allocate their institutional sources of financial aid, so you need to check with the law schools to which you applied.

Some law schools may require you to submit information in addition to the FAFSA, such as an institutional financial aid form, and these schools may also have early filing deadlines.  Again, you will need to check with each law school’s admissions or financial aid office. 

The law schools will determine your eligibility for federal financial aid based on a number called the cost of attendance (COA).  The COA is set by the law schools and includes tuition and fees, books and supplies, housing, food, personal expenses, transportation, the cost of a computer, and any dependant care or disability needs.  You should look at the COA of all the law schools in the same city to get a complete picture of the cost of living in that city, since law schools in the same city can have different COA numbers.  The COA may not include all the ordinary living expenses that are important to you, such as various forms of insurance, the costs of internet access and cell phone plans, clothing, entertainment, gifts, tithes, and taxes.  Deducted from the COA is what you are expected to contribute (called the EFC) based on the information provided by the FAFSA.  Whatever is leftover that is not covered by grants and scholarships represents additional amounts that you have to fund out of your savings or via loans. 

The grants and scholarships offered by each law school will vary.  In a law school application strategy based on applying to a mix of stretch, competitive, and safety schools based on your GPA and LSAT score, you will probably get the most attractive financial aid offers from your safety schools.  You may have a hard decision to make between the highest ranked law school that has accepted you and the highest ranked law school for the money.  While going to a highly ranked law school provides you with opportunities, graduating from law school with little or no debt also provides you with opportunities.  Factors to consider in this decision include what you plan to do after law school and the salary for that career option relative to the debt you will incur, whether the law school is a feeder school for that job market where you initially want to practice law and, and any special programs at the law school that interest you.  

When you receive aid packages from the schools that have accepted you, compare and contrast them.  Bargain diplomatically with the law schools that you are most interested in attending by sending a tactful letter or email to the law school financial aid office.  Point out that other schools have offered you a better aid package, but that you really want to attend this law school.  Politely ask if there is anything they can do for you.  Be prepared to be told “no,” but the only way to get a “yes” answer is by asking. 

Once you determine the law school that you will attend, apply for federal and private loans. 

To control your costs of attendance and minimize the amount of money you borrow, create an annual budget that is broken down into a monthly budget.  The goal of the budget is to keep expenses, especially controllable expenses, to a minimum.  During law school, you should be prepared to live like someone who has taken a vow of poverty to avoid the tyranny of a crushing debt burden after law school. 

For further information on financial aid, go to the Links and Resources section

However, if you are like most people, you will need financial aid, whether in the form of scholarships or loans, and you will need to continue reading. 

Please note, however, that changes in financial aid rules and regulations are ongoing and that law school financial aid policies vary.  Ultimately, the best single source of information about financing a legal education is the financial aid office of the law school to which you are applying. 

Grants and Scholarships

Grants and scholarships are the best forms of financial aid because they do not have to be repaid. 

Unfortunately, there no federal grants, such as Pell grants, for graduate students, and there are very few state or private grants.  In addition, most private grants are restricted by geography, ethnicity, or other life circumstances.  For example, the Italian American Lawyers Association of Los Angeles County has a scholarship for residents of Los Angeles County, California who are of Italian American heritage.  The good news is that if you qualify for a private grant or scholarship, there may not be much competition for the money.  Private grants and scholarships are hard to find, and you need to take the initiative in finding these opportunities.  The Pre-Law Advisor has some information on private grants and scholarships as do some of the pre-law resources in the Buswell Library. 

Most grants and scholarships are conferred by individual law schools in the form of a discount off the full tuition price.  The amount available varies greatly from school to school and often depends on the size of the school’s endowment.  The trend is toward allocating more free financial aid money to merit-based scholarships rather than need-based scholarships to attract top students and propel the law school upward through the rankings.  Merit-based means that the availability and size of any law school grant or scholarship will be primarily based on your GPA and LSAT score.  The higher those numbers relative to the average numbers for a law school, the more generous the grant or scholarship is likely to be from that law school. 

A key issue with law school grants and scholarships is whether the law school places any conditions on their renewability for the second and third years.  A law school will often provide a grant or scholarship for the first year but will condition its renewability on maintaining a certain GPA.  Based on grade inflated undergraduate GPAs, the law school GPA condition may seem like a low hurdle.  However, many law school classes, especially those in the first year, are graded on a strict curve with only a small percentage of students receiving As, a small but larger percentage receiving Bs, and a much larger percentage receiving Cs. 

Law schools have also been accused of placing most of the students with GPA-conditioned grants and scholarships in the same classes to ensure that some of the grants and scholarships will disappear in the second and third years.  Before accepting an offer from a law school with a GPA-conditioned grant or scholarship, make sure you fully investigate the GPA spread at that law school and understand the probabilities of maintaining the required GPA based on how your undergraduate GPA and LSAT score fit within the incoming class.  In general, you need to fully understand and be comfortable with the risks associated with any condition placed on a scholarship. 

Working during Law School

To pay for the costs of law school, you can earn a paycheck doing part-time work during the school year and during the summer, either in a law school administrative department, such as admissions, as an assistant for a professor, or as a clerk for a law firm or other legal service provider. 

Federal work-study programs are available for positions at the law school.  Your hourly pay will at least equal the minimum wage, with 65% funded by the federal government subsidy and 35% funded by the law school. 
The primary cost of working during law school is your time, which can be a precious commodity while classes are in session.  During the first year of law school, full-time students are usually discouraged by their law school from obtaining any but the most limited part-time employment.

Loans

Unlike grants and scholarships, loans must be repaid with interest.  About 80% of law students rely on loans, either from the federal government or private sources, as their primary source of financial aid. 

The federal government offers Stafford loans (aka, Ford Direct loans) with an interest rate of 6.8%.  Stafford loans can be subsidized or unsubsidized.  A subsidized loan is need based and does not accrue interest while you are in law school because the federal government pays the interest.  Unsubsidized loans are not need based and accrue interest while you are in law school, but the payment can be deferred.  Whether subsidized or unsubsidized, you must begin repaying Stafford loans six months after you graduate, withdraw, or drop below half time.  You will have ten to twenty-five years to repay the loans.  The total amount available is $20,500 per year and up to $8,500 of this amount can consist of subsidized loans.  The remaining amount (the difference between the subsidized amount and the cap of $20,500) is unsubsidized.  The aggregate limit for graduate students is $138,500 (including undergraduate loans), of which not more than $65,000 can be subsidized. 

The federal Perkins loan is campus-based, so it is only available to at some law schools and is available in different amounts at different law schools.  The maximum annual loan is $6,000 with a $40,000 cap.  The interest rate is 5%, and all loans are subsidized.  This loan has a nine month grace period and forgiveness features for careers in law enforcement and direct services to at risk children. 

A federal Graduate PLUS loan is also available.  The money is borrowed through lenders, a credit check is required, and you cannot have adverse credit, such as being more than ninety days late on any other debt.  The cap is very generous – up to the total cost of attending law school less other aid.  However, the interest rate is not as generous as the other federal loan programs, and the loan is unsubsidized  In addition, you will pay origination fees on the loan.  Repayment is similar to the Stafford loan. 

To obtain a federal loans or federal work study, you must be a United States citizen or permanent resident, have completed a Free Application for Federal Student Aid (FAFSA), have a need as determined by the FAFSA (although the need only applies to subsidized loans, not unsubsidized loans), be registered with the Selective Service, not be in default on any federal loans, and not have a conviction for a federal drug offense. 

The College Cost Reduction and Access Act provides for federal loan forgiveness subject to a lot of caveats.  Only federal direct loans and not other forms of federal loans are eligible for loan forgiveness, although the latter can be consolidated into the federal direct loan program.  Eligibility is restricted to those working full-time for the government, in public interest law, such as in a prosecutor’s or public defender’s office, or in a legal aid clinic, or for a non-profit organization, and is further restricted to those who work in those positions for at least ten years.  The program permits the borrower to limit annual payments to 15% of discretionary income.  After ten years of making reduced payments, the remainder of the federal direct loan debt is forgiven. 

An increasing number of law schools also have loan reduction assistance programs (LRAPs), but they are not all the same and are limited in number, so you need to thoroughly investigate them to understand your chances of receiving their benefits.  The LRAPs exist to encourage students to enter public service jobs, and generally preference is given to candidates with the highest debt-to-income ratio. 

A limited number of states offer graduate school loans, and you will need to check with the state where you reside.

Since tuition alone at most law schools exceeds the federal loan limits, you will likely need to make up the difference with educational loans from private lenders.  Sources include non-profit private lenders, such as the Access Group, Nellie Mae, and Sallie Mae, along with for-profit banks, such as Citibank.

Unlike most federal loans, you will not be able to obtain private loans unless you are creditworthy.  The private lender will exam your credit report, and, if they don’t like what they see, they won’t extend a loan to you or they will charge you a higher rate of interest to reflect the higher risk that you won’t repay the loan.  The importance of creditworthiness with private loans highlights the need to establish and maintain a good credit history while you are in college.  Since the private lender will be examining your credit report, you may want to examine your credit reports first and address any issues before applying for private loans.  If you need private loans to attend law school but cannot borrow due to your credit history, you may not be able to attend law school. 

Private loans were traditionally easy to obtain, but they have become much harder to get with the recent credit crisis.  If you need private loans, you need to make sure at the outset that you can obtain financing for all three years of law school.  The worst case scenario is that you don’t have a law school degree, but you have to pay off the debt for one year of law school because you could not borrow enough money to complete law school. 

Since private loans are not subsidized or guaranteed, they usually have higher costs.  These costs include an interest rate based on a combination of the market rate, your creditworthiness, and the law school’s default rate, and fees, such as origination fees and guarantee fees.  Further, private loans may or may not offer deferrals on repayment. 

The average debt of a law school graduate is about $70,000 for those attending public schools and about $100,000 for those attending private schools, and these figures don’t include undergraduate loans, which average around $25,000, and credit card or other consumer debt.  Accumulating massive debt has many potential negative consequences, and you have to seriously consider whether you might be “making a deal with the devil” in taking out sizable student loans.  If you borrow substantial sums of money, you should not expect to live an extravagant or even a middle class lifestyle upon graduating from law school because of loan payments.  For example, you may have trouble qualifying for a mortgage on a house you want to purchase because you are already carrying the equivalent of a mortgage on a middle class house in a small, Midwestern city. 

A common rule of prudence is to limit your total education debt to what you expect to earn your first year out of law school.  Be realistic.  Most law students are not going to get the first year associate positions at large law firms and large cities that pay $160,000 per year to repay that debt.  The average lawyer’s salary is closer to $60,000.  Plus, these numbers only apply to those who get jobs.  During the Great Recession, many law students who didn’t graduate in the top of their class struggled to find jobs that paid enough to cover the huge debt load created by law school. 

The key to taking on debt is making a prayerful, informed decision about going to law school and what you are willing to sacrifice to pursue a legal career.  If you are going to law school to make a lot of money or because you can’t think of anything better to do with your liberal arts education, don’t.  The debt is less scary and the challenges of law school easier to overcome if you are going to law school in obedience to a sense of calling. 

The Process

You should start the financial aid process sooner rather than later.  Law schools have a limited amount of financial aid money for grants and scholarships, and they make financial aid decisions in conjunction with admissions decisions to recruit the best and brightest students and rise through the law school rankings.  You cannot wait until after you receive admissions offers to begin the financial aid application process.  If you do, there may be no financial aid left for you beyond loans. 

First, complete the Free Application for Federal Student Aid (FAFSA), a need analysis tool developed by the U.S. Department of Education that asks for information about your income, assets, and other financial resources.  The FAFSA can be obtained from the Wheaton College financial aid office, the law school financial aid office, or online.  The FAFSA can be filed any time after January 1st, and you should plan to file your FAFSA as soon as you can after the new year.  Some information required by the FAFSA is derived directly from your federal income tax return, so you will need to prepare that return as early as possible after the first of the year. 

All graduate students are considered independent for the purpose of determining federal aid eligibility, which means that your parents’ financial information does not count in calculating your need for federal financial aid.  Thus, be sure to answer “yes” to the question on the FAFSA “Will you be a graduate or professional student for the upcoming year?”  However, some law schools will request your parents’ financial information in determining how to allocate their institutional sources of financial aid, so you need to check with the law schools to which you applied.

Some law schools may require you to submit information in addition to the FAFSA, such as an institutional financial aid form, and these schools may also have early filing deadlines.  Again, you will need to check with each law school’s admissions or financial aid office. 

The law schools will determine your eligibility for federal financial aid based on a number called the cost of attendance (COA).  The COA is set by the law schools and includes tuition and fees, books and supplies, housing, food, personal expenses, transportation, the cost of a computer, and any dependant care or disability needs.  You should look at the COA of all the law schools in the same city to get a complete picture of the cost of living in that city, since law schools in the same city can have different COA numbers.  The COA may not include all the ordinary living expenses that are important to you, such as various forms of insurance, the costs of internet access and cell phone plans, clothing, entertainment, gifts, tithes, and taxes.  Deducted from the COA is what you are expected to contribute (called the EFC) based on the information provided by the FAFSA.  Whatever is leftover that is not covered by grants and scholarships represents additional amounts that you have to fund out of your savings or via loans. 

The grants and scholarships offered by each law school will vary.  In a law school application strategy based on applying to a mix of stretch, competitive, and safety schools based on your GPA and LSAT score, you will probably get the most attractive financial aid offers from your safety schools.  You may have a hard decision to make between the highest ranked law school that has accepted you and the highest ranked law school for the money.  While going to a highly ranked law school provides you with opportunities, graduating from law school with little or no debt also provides you with opportunities.  Factors to consider in this decision include what you plan to do after law school and the salary for that career option relative to the debt you will incur, whether the law school is a feeder school for that job market where you initially want to practice law and, and any special programs at the law school that interest you.  

When you receive aid packages from the schools that have accepted you, compare and contrast them.  Bargain diplomatically with the law schools that you are most interested in attending by sending a tactful letter or email to the law school financial aid office.  Point out that other schools have offered you a better aid package, but that you really want to attend this law school.  Politely ask if there is anything they can do for you.  Be prepared to be told “no,” but the only way to get a “yes” answer is by asking. 

Once you determine the law school that you will attend, apply for federal and private loans. 

To control your costs of attendance and minimize the amount of money you borrow, create an annual budget that is broken down into a monthly budget.  The goal of the budget is to keep expenses, especially controllable expenses, to a minimum.  During law school, you should be prepared to live like someone who has taken a vow of poverty to avoid the tyranny of a crushing debt burden after law school. 

For further information on financial aid, go to the Links and Resources section