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Options for Managing Law School Student Loan Debt
The average law student who graduated from a private university in 2008 borrowed more than $91,500 on the way to earning that degree, and in 2009 the figure was more than $100,000, according to the nonprofit Equal Justice Works. Combine that with leftover undergraduate debt and the shrinking job market, and you realize the immense pressure contract attorneys are under.
If you’re a recent law school grad, student loan repayment plans are set around December 1st. If you’re like most of the May 2009 law graduates you are also either deferred, unemployed, or working for barely a decent wage at a contract attorney position.
If your loans fall under the FFELP program you can opt for a repayment extension. For many the extended repayment can lower your monthly federal student loan payments and free up additional money each month to help you make ends meet. But note:
1. Extending the repayment term increases the total amount paid.
2. This payment option gives you up to 25 years to pay off your federal student loans and there is no penalty for prepayment.
3. Borrowers must be in grace or repayment to choose this repayment option.
4. This repayment plan is available only for borrowers (1) whose first FFELP loan was borrowed on or after October 7, 1998, or (2) who, on the date he or she obtained the post-October 7, 1998 FFELP loan, had no outstanding balance on a FFELP loan obtained prior to October 7, 1998.
5. Borrowers must have FFELP loan debt (outstanding principal and interest) in excess of $30,000.
6. Repayment can be extended over a maximum of 25 years, with either standard or graduated payments.
To sign up for the extended program click here. For information on the FFELP program click here.
Debt is often sold on the secondary market, with the debtor as the income stream. One loan can be sold many times, making it tricky to know who owns yours. One option is to use www.nslds.ed.gov which is the U.S. Department of Education database that has information on all government-backed loans, the vast majority of student debt. It’s the best resource for finding out how much you owe — and to whom. Posse List members have told us that once they tracked down who was collecting their payments, they asked about loan consolidation and extension. Standard terms call for student loans to be repaid in 120 equal monthly installments over 10 years. There are various payment plans, especially for government-backed loans including Stafford, Perkins and PLUS.
We also spoke to Citibank, HSBC and a contact at Sallie Mae. They indicated that if you are unemployed and unable to make any payments you should ask your lender for a deferment or forbearance. Both delay payments for a defined period of time are more obtainable in this market, especially if you’re out of work. Your lender will tell you what the criteria for qualifying are. All recommended deferment, if possible, because the federal government will often subsidize the interest payments. With a loan forbearance, interest continues to accrue.
We are trying to collect information on coping with student loan debt and we welcome from Posse List members any information or suggestions or links or info on organizations that Posse List members can provide to help fellow Posse List members on the student loan issue. Please email us at manager@theposselist.com
As information comes in we will update this page.