How to Pay for Law School

Legal education can be an expensive investment. The cost of attending law school is a figure that includes tuition, fees, books, housing, and other living expenses for the academic year. It can vary significantly from one school to another. Tuition alone can range from a few thousand dollars a year to more than $60,000 per year. After adding in housing, food, books, and personal expenses, the figure may go well beyond $275,000 for a three-year law school education.

Fortunately, there are a number of ways to finance a law school education, but doing so—unless you are independently wealthy— requires thoughtful planning.

There are numerous financial sources from which a student may draw, including family contributions, personal savings, summer and part-time job earnings, scholarships, fellowships, grants, and loans. Most students combine family contributions, summer and/or part-time job income, and loans to pay for law school.

Law school catalogs usually have a section on financial aid. They will list the federal loans available along with institutional aid specific to that particular school or geographic region. In any case, follow the instructions given regarding what forms to obtain and fill out, and what deadlines you must meet. The overall procedure for obtaining financial aid is discussed briefly in the next section, but it is best to follow the guidelines set forth by the individual schools.

Financial Aid Forms and Need Analysis

The first step in applying for financial aid for law school is to complete the Free Application for Federal Student Aid (FAFSA), available from your college or university financial aid office or from the law school to which you are applying or online at fafsa.ed.gov. This is a free form and you need not pay to file it. The FAFSA is a need analysis tool developed by the U.S. Department of Education. There is no charge for the collection and processing of data or the delivery of financial aid through this form. The FAFSA form asks for information about your income, assets, and other financial resources. The information you provide will be used to compute how much you and your spouse should contribute toward your legal education. Most schools also require copies of annual federal tax returns to verify financial information; some schools also require students to fill out a supplemental form to be considered for institutional aid. Once the analysis is complete, the financial aid officer at the school can determine what types of aid you will need—such as scholarships, grants, loans, or work-study—to pay your law school expenses. A brochure published by the Law School Admission Council, Financial Aid for Law School: A Preliminary Guide, is available at most law school financial aid offices and is also accessible on our website, www.LSAC.org.

For complete and individualized information on financing your law school education, contact the financial aid office at the individual law school(s) to which you apply.

Determining Eligibility

The law school's financial aid office will review your application and calculate your eligibility for the various forms of financial aid from all sources. It is important to review carefully your package and to understand the terms and conditions of all aid offered to you. The student's family size and other factors may be considered.

Your financial need is the difference between your resources and the total cost of attendance. Your unmet financial need is determined by subtracting the amount you are able to contribute toward your legal education, as well as any scholarships you receive, from the total cost of attendance. The student budget used for determining need includes tuition, books, and supplies as well as living expenses, transportation, recreation, and personal expenses. The budget is set by the law school after considering your particular circumstances. (However, consumer debt is not included in your student budget and should be paid before you attend law school.)

If your circumstances change after you complete and file your financial aid forms, notify the financial aid office so that your need analysis may be revised.

Independent/Dependent Status. All graduate and professional school students are independent for the purposes of determining federal aid eligibility. Law schools, however, may require parental income information for institutional grants, loans, and scholarships. You should be aware that the law schools themselves have specific guidelines regarding independent status for the allocation of institutional funds.

Home Equity. The equity in a home is not considered an asset in need-analysis calculations used to determine financial aid eligibility for federal aid, but it may be used in calculating eligibility for institutional aid.

The law school financial aid office will send you a letter explaining your financial aid eligibility.

The Package Concept

A financial aid package may include several different types or sources of assistance: grants, scholarships, loans, and work-study programs. Some or all of these may be available in combination to bring the cost of attending law school within reach. It's important for law school applicants to understand that law school financial aid packages normally consist of mostly loans and occasionally some grants, in comparison with undergraduate studies, where substantially more grant dollars are available. The amount of aid you receive in each category will depend on your own resources, determined by a need analysis (discussed on pages 82-83) and the financial aid policy of the school.

Scholarships, grants, fellowships. Depending on the school's policies, these types of awards—which do not have to be repaid— are given according to need and/or merit or in recognition of a special talent. Their availability is quite limited, and they are usually awarded by the law schools themselves. The law school's financial aid office can give you more information.

Federal Work-Study (FWS). This federal student aid program allows nonprofit institutions to hire students to work either on- or off-campus for the institution or other eligible employers. Work-study placement is usually awarded to second- and third-year students, because you are expected to concentrate fully on your schoolwork during your first year. Sometimes a student may be able to combine earned income for educational expenses with useful job experience, such as working in a legal aid office. Additional information is available from any law school financial aid office.

Loans. Education loans may be awarded directly by the school or through other private agencies. The largest student loan programs are funded or guaranteed by the federal government. Some are awarded on a need basis (see pages 82-83 for more on need analysis), while others are not need-based. Some types of loans will require a credit check. Federal student loans are usually offered at interest rates lower than consumer loans, and the repayment of principal and interest usually begins after the end of your educational program. Private education loans are offered at market rates.

Debt Management

Credit History

Approximately 80 percent of all law school students borrow money for some or all of their educational costs. If you think you will be among this group of borrowers, it is very important that you have a good credit history. In today's society, most students have already established a credit history through their repayment records as reported by financial institutions and major retail stores to national credit bureaus. Lenders refer to these credit bureau records to determine your credit-worthiness. The credit bureaus report the amounts you borrowed or charged, your outstanding balances, and the promptness by which payments have been made. Failure to pay your financial obligations in a prompt and timely manner will jeopardize your eligibility for some education loans.

Whether you have borrowed or are planning to borrow money for undergraduate school, or make practical use of credit cards during your college years, you must keep in mind that your ability to borrow money for law school—as well as to secure future credit for a home, car, or other loans—depends on how well you have managed the payment of your credit obligations all along the way.

If you have been denied credit in the past—or if you even suspect a problem with your credit history—it is wise to get a copy of your credit report. Usually, you can obtain it from a credit bureau in your area. Contact the bureau in writing, giving your name, address, and social security number. You can expect to pay a nominal fee, unless you have been denied credit recently, in which case the report may be free. Review your report carefully and clear up any problems you can. Keep in mind that it takes time—possibly months—to clear up errors or other problems, so do not wait until the last minute.

Loan Default or Delinquency

These two terms are often confused: neither are good. Delinquency occurs when you have begun repayment on a loan or other obligation and have missed one or more payment dates; default generally occurs when a delinquency goes beyond 150-180 days. Delinquencies appear on credit records and may hinder you from qualifying for an education loan that requires a credit check. Defaults are even more serious and are likely to prevent you from successfully applying for federal financial aid as well as disqualify you for most other educational loans. If you are in a default status, you must take steps to change your status if you wish to apply for a federally guaranteed loan for law school. Contact the servicer of your loan(s) for more information on this subject.

Planning Ahead: A Realistic Look at the Future

We've said that assessing your credit history before you begin applying for loans can save you undue time and can minimize stress by allowing you to straighten out any problems in advance. Similarly, realistically assessing your imagined future, specifically your career and salary expectations, before applying for a loan will help you determine just how much money you will be able to pay back, and how soon you can retire your educational debt once you complete law school. Your income after law school is an important factor in determining what constitutes manageable payments on your education loans. Although it may be difficult to predict what kind of job you will get (or want) after law school, or exactly what kind of salary you will receive, it is important that you make some assessment of your goals for the purpose of sound debt management. In addition to assessing expected income—and it is essential that you be realistic when you do so—you must also evaluate your projected lifestyle objectives. You will need to create a pragmatic picture of how much you can afford to pay back on a monthly basis and maintain the lifestyle that you desire. You may have to adjust your thinking about how quickly you can pay your loans back, or how much money you can afford to borrow, or just how extravagantly you can expect to live in the years following graduation from law school.

Repayment of Your Loan

Your education loan debts represent a serious financial commitment that must be repaid. A default on any loan engenders serious consequences, including possible legal action against you by the lender and/or the government.

There are alternatives available to you to lessen the burden of repayment following law school, including the federal loan consolidation program. A growing number of law schools are developing loan forgiveness programs for graduates who enter public service jobs. The financial aid office at your law school can advise you about repayment issues.

See the following articles for more information:

• Tricks to Finance your Degree
•