There are certain concepts relative to financial aid that all applicants should know. All programs that are federally funded or sponsored have very strict requirements as to eligibility. Law school financial aid offices process the loan applications in accordance with these rules and regulations. They have very little leeway except in the awarding of institutional funds.
Need-based loans require a demonstration of need.
Merit-based aid does not require showing of need.
Federal Methodology (FM)
Federal Methodology is the federally mandated method of determining financial need.
Base year is the prior calendar year and is used to calculate need under FM.
Independent Student Law school students are deemed to be independent due to their professional student status.
The budget is set by the financial aid office each year. FM allows only required student expenses. These expenses are: tuition, fees, books, living expenses including room and board, transportation costs, an allowance for personal expenses, and miscellaneous expenses. Required student expenses will not cover, in most cases, car payments, credit card monthly payments, alimony, or mortgage payments.
Financial need is the difference between expected family contribution and the total cost of attendance.
Packaging policy is set by each law school and delineates the priorities for awarding financial aid.
Certain financial aid programs are referred to as campus-based. First in this category of aid would be scholarships and grants funded entirely by the law school. At most law schools the amount of money available for this form of aid is small. Since the money comes from the institution, the institution sets the requirements for receiving the aid. In most cases these awards will require a showing of need. Occasionally, a law school will have some merit-based aid.
Carl D. Perkins Loans are another form of campus-based aid. Each year the institution receives an allocation from the Federal Government for this program. It is basically a loan program administered by the institution in that the institution lends the money to the student and the institution is responsible for collecting the loans from the recipients. Perkins loans carry the lowest interest rate and at most schools are reserved for the neediest students. There is a cumulative limit of $30,000 on all Perkins loans, both graduate and undergraduate.
Another type of campus-based aid is the Federal Work Study Program (FWS). Again, the institution receives a yearly allocation from the Federal Government to fund this program. FWS is a need-based program and may be reserved for the neediest students. The financial aid award will indicate that the law student is eligible to receive a certain amount of money under the FWS program. This money can be earned either by working on campus or off campus. On- campus jobs take the form of working in the library or other law school offices or as research assistants for faculty members. Off-campus jobs can only be with nonprofit or governmental entities. Some examples would be work at a public defender's office, as a law clerk for a judge, or for a state or federal agency. FWS funds do not have to be repaid.
Federal Loan Programs
Other federal loan programs are available through banks, credit unions, savings and loan associations, and other private lenders. The Stafford Student Loan (formerly the Guaranteed Student Loan) is a relatively low-interest federal loan available to law school students. Stafford loans are insured by state guarantee agencies and must be approved by that agency. Subsidized Stafford loans require demonstration of financial need. Law school students can borrow a maximum of $18,500 per academic year under this program but may not exceed $138,500 in total Stafford loans for law school.
Other Loan Programs
Other loan programs are available to law school students but do not receive federal interest subsidies. These loan programs do not require demonstration of financial need and carry the highest interest rates. An applicant may also have to show a good credit rating or creditworthiness.
The Access Group has developed a loan program specifically designed to fit the needs of law school students. Under this program the student can apply for federally subsidized and unsubsidized Stafford loans as well as a private loan from The Access Group. This private loan is the Law Access Loan (LAL). Students with good credit can borrow up to the total cost of attendance.
There are other private loan programs available. Law Loans is one such program. Your financial aid office will have information on these programs.
Various foundations and business and professional organizations offer assistance in financing your education. Some programs are geared for minority and disadvantaged students such as the Council on Legal Education Opportunity, the Earl Warren Legal Training Program, and the Mexican American Legal Defense Education Fund. The financial aid office can give you complete information on these other programs. As funds for most of these programs are limited, you should apply early.
Another source of outside funding comes from various state and county bar associations that award scholarships. The amounts and requirements will vary, but this possibility should not be overlooked.
Some states also offer grants to needy graduate students. Contact your local state guarantee agency to explore this option. Your financial aid office (both graduate and undergraduate) can supply you with their names and addresses.
Money is available to finance your legal education. But at what cost? The interest rate increases as you move from the Perkins loan (lowest interest) to the Stafford and the private loans. Borrowing decisions should be carefully made as these loans ultimately have to be repaid.
All law schools require that the financial information necessary to determine financial need be submitted to a national processing center. Most schools use the Free Application for Federal Student Aid (FAFSA).
The FAFSA should be filed as early as possible. Processing time for the FAFSA is approximately four to six weeks. Read the forms carefully and answer all required parts. After the FAFSA has been analyzed, a report will be sent to the schools you have designated.
When the law school financial aid office receives your report generated by the FAFSA, it will review your file in accordance with its packaging policy. This means that the expected student contribution will be subtracted from the school budget to arrive at financial need.
Some schools' packaging policies will require that the first level of need be met by the Stafford loan. If there is any remaining need, you may be eligible for Perkins loan funds and Federal Work Study. After the financial aid office determines your level of eligibility for aid, you will receive notification. This may be four to six weeks or longer after the receipt of the FAFSA report.
The loan applications must be completed, signed, and returned to the lender. If a credit report is required, it is done at this time. If the lender/guarantee agency approves your loan, the check will be disbursed. The approval process can take up to six weeks. For most loans the interest starts to accrue when the check is disbursed. In most cases the check will be made co-payable to the student and the law school. When the check arrives, you will be asked to endorse it, and then the school will endorse it and credit it to your account. If the amount credited is more than is owed, the school will process a refund check for you.
It is possible to defer repayment on student loans you received as an undergraduate as long as you are a full-time student. You should request deferment forms from your lender. Take these forms to the registrar at your law school. Federal regulations require that you be a matriculated student so these forms will not be signed and sent to your lender until after the semester starts.
It is important to file deferment forms and to know if they have to be filed annually with your lender. If you are not granted a deferment, don't make payments on your undergraduate loans, and are declared in default, you run the risk of being denied loans for your legal education.
Repayment and Consolidation
While the money is available to finance your legal education, ultimately it must be repaid. You will have to start making payments six to nine months after graduation. There are several different ways to repay a Federal Direct Loan.
A Standard Repayment Plan has a fixed monthly repayment amount for a fixed period of time, usually 10 years.
An Extended Repayment Plan has a lower fixed monthly payment amount, and loan repayment can be extended beyond the usual 10 years.
A Graduated Repayment Plan usually begins with lower monthly payments, and payment amounts increase at specified times. Payments may be for the usual 10-year period, or they may be extended beyond 10 years.
An Income-contingent Repayment Plan for Direct Stafford loans sets annual repayment amounts based on the borrower's income after leaving school. The loan is repaid over an extended period of time, not to exceed 25 years.