Tim Cunningham was broke when he graduated from the University of Michigan law school in 2009 — so broke that he had to take out a $10,000 private loan to cover the cost of his bar exam and living expenses during the months he spent studying for it.
That loan brought his total to 16. After undergraduate and law school, and now taking the bar, Cunningham had accumulated around $170,000 in federal and private student loan debt.
His experience isn’t uncommon. The average lawyer has $140,616 in student loans from undergraduate and graduate school combined, according to a 2014 report by the New America Education Policy Program. However, there are several ways lawyers can ease their debt burdens, including student loan refinancing and federal loan forgiveness or repayment assistance programs.
» MORE: Compare bar loans for 2018
For high-earning lawyers who have good credit: Student loan refinancing
Lawyers with high incomes, good credit and a low debt-to-income ratio are good candidates for student loan refinancing. The refinancing process allows borrowers to change a loan’s terms, typically to get a lower interest rate. But borrowers who refinance federal loans lose federal repayment benefits, including forgiveness programs (more on that below) and income-driven repayment plans. Lawyers should only refinance if they’re certain they don’t want to use those options.
For public interest lawyers: Public Service Loan Forgiveness or Loan Repayment Assistance Programs
Lawyers who have federal loans and work for the government or a nonprofit may qualify for the Public Service Loan Forgiveness program or a Loan Repayment Assistance Program. Qualifying borrowers can participate in both programs.
- Public Service Loan Forgiveness: This federal program eliminates loan balances for borrowers who work for a qualifying employer and make loan payments for 10 years. To save more money through this program, switch to an income-driven repayment plan.
- Loan Repayment Assistance Program (LRAP): Many states and law schools will give borrowers money for loan payments. Every program has different stipulations, but many require lawyers to have incomes under specific limits. Unlike the Public Service Loan Forgiveness program, some LRAPs are available to those with private student loans. The American Bar Association has a list of state LRAPs, and the nonprofit organization Equal Justice Works has a list of law school LRAPs.
For lawyers who have both federal and private student loans: Focus on the highest-interest loans
Lawyers who have a mix of federal and private student loans and don’t qualify for the options above should focus on paying off their highest-rate loans first. In general, private students loans tend to have higher interest rates than federal loans.
You can go into deferment or forbearance on your federal loans and use the money you save to pay down your higher-interest private loans, says Jan Miller, a student loans consultant who formerly worked for the federal loan servicer Nelnet. Both deferment and forbearance allow you to temporarily stop making federal loan payments. Deferment is for borrowers with a financial hardship, but almost anyone with federal loans can qualify for forbearance, Miller says.
All loans accrue interest when they’re in forbearance, and unsubsidized loans accrue interest while in deferment. If possible, keep paying the interest on such loans during these periods so your balance doesn’t grow.
Borrowers can also switch to an income-driven repayment plan to get a lower monthly payment on federal loans, freeing up cash to pay off private loans more aggressively.
The best repayment strategy for you depends on your job, your financial situation and the types of loans you have. For example, Cunningham’s good credit qualified for refinancing, which lowered his interest rate from around to 7.25% to 4.45%. He estimates that this will save him about $25,000 in interest.
Still, Cunningham will pay about $2,000 per month toward his student loan debt for the next several years. But he says he doesn’t regret shelling out big bucks for law school.
“I love my job,” he says. “Having a law degree is the price of admission.”
This post has been updated with more accurate data for average student loan debt for lawyers.