Last updated: July 19, 2017
By Stephen G. Brown
Assistant Dean Fordham Law School
Financing your legal education is often seen as a complex and mysterious thing. It need not be! There are resources available and this short article should cover some of the basics. The best sources for information are the law schools themselves. The US Department of Education is also an excellent source for general information – www.studentaid.gov — or for detailed information about loans and loan repayment including IBR, PAYE, REPAYE and FPSLFP – studentloans.gov. The LSAC has information online – www.LSAC.org. The world of student aid is changing rapidly and you should encourage your students to check these sites frequently – especially as they get closer to making a decision.
What is financial aid for law school? Quite simply any type of funding used to pay for law school. Aid can be in the form of free money or loans. It can come from family and friends, schools, the federal government, banks, Veterans’ Administration, or other sources.
Aid awarded directly by the Law Schools or Universities often consists of grants or scholarships awarded on a need or merit basis – or both, on campus work, teaching or research assistants, residence assistants, fellowships or stipends, LRAPs or loan forgiveness. Federal aid includes Federal loans and Federal Work Study, Federal Consolidation loans, repayment plans like IBR, ICR, PAYE and the Federal Public Service Loan Forgiveness Program(FPSLF). There are also income tax benefits available to students and federal loan borrowers. In addition private loans, home equity loans and lines of credit, work, gifts and more are used to pay for law school.
Law School as an investment
The past decade has seen a dramatic shift in perceptions about law schools. Tuition and costs have increased dramatically, borrowing has increased at an even faster rate (due in part to the GradPLUS lack of loan limits), and law school is being seen more as an investment – a long term investment. Like all investments, expectations of returns are truly individualized. A great investment for some might be a poor one for others. The crystal ball is cloudy and looking into the future, whether it be three years, ten years, or a lifetime is not precise. Interests, ideas, expectations and life all change over time.
Law School Aid
Ah the free money, the funds most students desire, and with greater frequency, expect and feel entitled to. Law schools have moved over the past few decades from awarding money primarily on a need basis to awarding primarily on a merit basis. The change is significant and follows changes at the undergraduate level. It also recognizes the role of rankings and maximizing tuition revenue – which may be opposites.
Law schools have different enrollment goals, budgets, policies, application and award procedures and policies. Students are strongly urged to consult individual schools for details.
Need based awards almost always include students completing the federal FAFSA. Some schools may also require completion of a separate form. That form may be institutional or Need Access or Profiles or some other need analysis service. Though students are independent for federal aid, schools that award need based grants often require parental information on these forms. Students should be cautioned to pay attention to the deadlines established by the schools and complete the forms carefully. Copies of tax forms or other documentation may be required.
Merit based awards are awards made on a basis other than need. “Merit” may be defined on the basis of LSAT scores, undergraduate GPAs, geography, age, ethnicity, fields of interest, e.g. public service, or some combination of any or all of these. The definitions will vary by school and a student may receive “merit” aid at some schools and not others. Some schools require an application, some interviews, others award as part of the admission process. Students need to be aware of different schools’ policies. With growing frequency, students may find themselves having to decide among schools with disparate aid offers, perhaps a very high scholarship at one school and no school based aid at another. These can be very difficult decisions, requiring long looks into the future and real judgment. Consider not only the costs, but the opportunities. Some students have forgone opportunities – type of practice, geography, etc. for a deeper discount. A very tough decision, but a choice for your students.
Schools may also offer resident assistantships, research or teaching assistantships, on campus jobs, employee benefits or other types of aid for students with specific skills.
Some schools will offer Loan Repayment Assistance Programs (LRAP) for graduates pursuing public interest and/or government or other types of work. These programs vary tremendously in benefits, qualifying income, qualifying work, and other details. Consult the individual schools for the details. These programs (often in conjunction with the FPSLF program infra) may help graduates with real career choice beyond law school. The details are important, though, as the programs vary in their benefits.
The federal government is the largest provider of aid to law students. It is almost entirely in the form of loans. All federal loans are now made directly through the federal government – the “Direct Loan” program. Students have to complete a Free Application for Federal Student Aid (FAFSA) annually through the Department of Education. The website is www.fafsa.gov . The form is FREE and students should not have to pay to complete a FAFSA. All graduate and professional students (including JD and LLM students) are considered independent for federal aid purposes. Parental information is not required on the FAFSA. The Direct Loan Program offers two loans to law students, the Direct Stafford Loan and the Direct GradPLUS Loan.
Until 2012, the Direct Stafford Loan was partially subsidized and interest did not accrue while the student was in school at least half time. This is no longer true. The maximum Direct Stafford Loan is $20,500 annually. Interest accrues (for loans disbursed in 2017-2018) at 6.0% annually and is capitalized at repayment. There is a 1.068% fee deducted from each disbursement. Repayment begins six months after ceasing at least half time enrollment. The standard repayment term is 10 years. There are various repayment plans, deferment, forbearance and forgiveness options for these loans.
The Direct GradPLUS loan is supplemental to the Direct Stafford Loan. Students may borrow up to the school designated “Cost of Attendance” less any other aid received. Only students with an absence of bad credit will be approved for a GradPLUS loan, though there may be an option for an endorser. Bad credit includes any accounts 90 days or more past due at the time of the application or any major credit issues (write offs, bankruptcy, uncollectable debt, etc.) within the past 5 years. Interest accrues from disbursement at 7.0% (2017-18) and is capitalized at repayment. There is a 4.272% fee deducted from each disbursement. The standard repayment term is 10 years. There are various repayment plans, deferment, forbearance and forgiveness options for these loans.
The Direct Loan Program offers Federal Consolidation of federal loans so that students who may have prior loans may bring them together with their law school loans under one lender or servicer. The federal loan programs also offer graduated repayment options, Income Based Repayment, Income Contingent Repayment , Pay as You Earn (PAYE), REPAYE, and extended repayment options.
The Federal Government also offers the Federal Public Service Loan Forgiveness Program (FPSLF). This program requires the borrower work for 120 months in government, nonprofit or other eligible work while repaying their federal loans under the standard 10 year plan, IBR, PAYE, REPAYE, or ICR. Any balance remaining after 10 years is forgiven. Details on IBR are available at https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven (6/22/2017). Details on the FPSLF are available at https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public...
Private Educational Loans
Loans to students and/or their families may also be available, though private funding has become more of a challenge as access to markets has dried up. These loans often have variable rates and require a demonstrated ability to repay and a good credit score.
Your students can finance law school through a combination of their and their family’s resources, grants, scholarships and loans. Remember, law school is an investment. All law school applicants should learn about the schools, the financing options and the details. The Department of Education websites and the individual law school websites are the best starting resources. They should not be afraid to contact the law schools’ financial aid offices as well. They can be great sources of information.
There is a real possibility that the Higher Education Act of 1965 will be Reauthorized in 2017-18. It expired in 2013 but resolutions and other laws have essentially continued many programs. The Reauthorization should be a more comprehensive consideration of higher education funding. The Senate and House HELP Committee (Health, Education, Labor and Pensions) is the point committee for legislation.