Pros and cons of the various payment options for law school
Law school is many things, but cheap is not 1 of them.
In 2018, the average per-year tuition among ABA-approved private law schools was $47,754. What’s more, tuition is far from the only factor to be considered when calculating the total cost of law school. Prospective law students must also factor in the cost of housing, food, books, transportation, and other personal expenses.
So how does a recent college graduate go about paying the high cost of law school?
In this article, we’ll take a look at the various payment options available to prospective law students.
A small percentage of law students are able to pay for law school with personal funds. Personal funds might include personal savings or contributions from family members.
Similarly, some law students work during law school and use the income to help pay tuition costs or other personal expenses, including housing.
The advantage of using personal funds to help pay for law school is that you can avoid taking out costly loans (or at least reduce the amount you need to borrow).
You may not think there are any disadvantages to using personal funds to help you pay for law school (and for the most part you’d be right), but a recent study found that the more money parents pay for their children’s college educations, the worse their children perform. The theory being that students don’t value their education as much if they aren’t paying for. The same might apply to law students whose parents help pay for law school.
Scholarships and grants
Scholarships and grants are awards that don’t need to be paid back. Most scholarships and grants are offered by the law school you attend and are based on merit, need, or both.
Though most law students receive grants or scholarships (less than 30% of law students pay full tuition), the availability of grants and scholarships outside of law school is extremely limited. Nevertheless, there are a handful of organizations that offer grants and scholarships from time to time, including:
- Local bar associations
- Fraternities and sororities
- Social clubs
- Religious organizations
- United States Department of Veterans Affairs
Because scholarships and grants don’t need to be paid back, there’s no disadvantage to using them to help pay for law school (though sometimes the applications can be time consuming). The main problem with scholarships and grants is that there simply aren’t enough of them available to meet the needs of students.
Federal student loans allow students to borrow money for law school directly from the federal government.
There are 3 types of federal student loans all of which must be paid back via monthly payments following graduation:
- Direct subsidized loans are need-based and, therefore, only available to students who meet certain financial requirements. The interest on direct subsidized loans won’t start to accrue until after you graduate.
- Direct unsubsidized loans aren’t based on financial need. Instead, the law school determines the amount you can borrow based on the cost of attendance (tuition plus an estimated cost of living calculated by the law school) and the other financial aid you receive. Interest starts accruing while you’re in law school, but you don’t have to start paying the interest until after you graduate.
- Direct PLUS loans (for graduate and professional students) are credit-based loans available to law students with adequate credit. You can borrow up to the cost of attendance minus any other financial aid you’re receiving. Similar to direct unsubsidized loans, interest begins to accrue as soon as the loan is disbursed, but you don’t have to start paying the interest until after you graduate.
The main disadvantage to paying for law school with federal loans is that–unlike grants and scholarships–federal loans must be paid back (along with interest).
There are, however, a number of advantages to taking out federal loans (especially when compared to private loans). These advantages include:
- Flexible repayment plans that cap your monthly payment at 10–15% of your discretionary income
- Loan forgiveness options for qualifying individuals
- Fixed interest rates for the life of the loan
- No credit history required to be approved
Private loans are non-federal loans provided by a private lender, such as a bank, credit union, state agency, or school.
Private loans operate like federal loans in that they must be repaid. However, there are a number of disadvantages when compared to federal loans, including:
- Private loans generally have a higher interest rate
- Private loans might have a variable interest rate (an interest rate that changes as market interest rates change)
- Fewer repayment plans
- No loan forgiveness options
Law school is expensive, but it doesn’t have to be cost prohibitive. Talk to the financial aid officer at your school about the options described in this article and good luck!