Loans: The Dark Mistress of Educational Financing

If you couldn't score any scholarships or grants, don't worry; a good portion of students rely solely on loans for their financial aid package. The question is what kind of loans do you use?

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First in line are need-based loans. These are either sponsored by the school or they come in the form of a Federal Perkins Loan (FPL). Again, there are a limited number of these loans to give out, so if you do want to qualify as need-based, you must apply on time. Generally, need-based loans have a fixed low-interest rate of around 5 percent and are capped off somewhere around $5,000 a year. Check with your financial aid office to see what need-based loans are available and if there are any published criteria of qualification for these need-based loans.

LIVING LIKE A STUDENT

Welcome to the world of the poor, the wretched, the law student. If you've been holding down a job for the past couple of years, making a nice plump living, kiss that lifestyle good-bye for a couple of years. You are now on a much smaller budget. Remember Ramen soup? Reacquaint yourself with that old friend.

It's actually not that bad, but remember that you won't have a paycheck coming in every couple of weeks, so for all practical purposes, assume that what you have in the bank is all that you have to your name. Invest in a financial program for your computer, such as Microsoft Money™ or Intuit's Quicken™. These applications not only help you balance your checkbook, but also keep track of what and where you spend your money. If at the end of the month you check out what you've spent your money on and are treated to a pie chart that is three-quarters red and the legend says that "red" equals "beer fund," you may need to rethink your spending habits.

Your financial aid has been calculated to last for a single school year. This is usually about nine to 10 months. Don't count on using that money for the summer. You don't want to stretch yourself too thin. In fact, try to under-budget yourself each month and put a little money aside for a nice trip somewhere on spring break (especially if you go to school in the Northeast, where spring break normally lands somewhere in, oh, winter).

ONE LAST POINT

So you've made it through the jungle of forms, red tape, endless phone holds, ambiguous answers, and unfathomable fear of not being able to find a job to pay off all of this debt.

Here's what you do next: Forget about it all! The moment you've deposited or signed your last check is the moment you need to accept the fact that you are in school to learn, not to worry about money. So you'll be in debt-most law students are. Under no circumstances should you let your fear of not being able to repay loans influence your first-year experience. As long as you stay realistic about your financial aid and your career expectations, you'll stay sane and happy (which, as you'll find, have become variable terms in the world of law school).

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THE LETTER THAT SEALS YOUR FATE

If all of this sounds complicated, it's not. Just remember the four simple rules and you'll be fine. If you've done everything correctly, you will receive an award letter from the financial aid office. Unlike Ed McMahon's award letters, yours will not say, "YOU COULD ALREADY BE A BILLIONAIRE!" in big gaudy letters on the envelope. Oh no. Your award letter from financial aid is nothing but a paradox. Students are excited to get their "award" letters, but then they open them and are disappointed to read the following: "Congratulations! You, student, have jumped through the red tape hoops of both the federal government and a university's financial aid system. We have reviewed your application and your reward is as follows: $8,500 subsidized Stafford loans; $10,000 unsubsidized Stafford loans. You may now apply for loans. Good luck, bucko." What the hell kind of award is that? That's right, friend, you've essentially been awarded the opportunity to go into debt.

The award letter is the school's way of distributing available in-school resources. If you're not happy with the results, there's always the appeal process. Say you really think you deserve one of those super-duper low-interest school-granted loans. Your appeal letter would simply state that you feel your award was a little on the skimpy side and that your financial circumstances merit a review. Often, your award will be minimal if you have worked for at least one year before you entered school (as the school may be calculating your need off of your income tax return from last year, when you were pulling down oodles of cash that you didn't bother saving) or if you can still be claimed as a dependent on your parents' taxes (as the school may be basing your need off your parents' income tax return). Either way, this may have a serious effect on need-based aid.

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