The Ultimate Guide to Refinancing Law School Loans

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Higher education isn’t cheap, and law school is no exception. Just ask anyone with law school loans.

If you’re one of the many lawyers in the U.S. who have as much as six figures in student loan debt, there are ways you can make your payments more manageable. In fact, refinancing your student loans can even help you pay them off faster.

Here’s a rundown of what you need to know about law school and loans, including…

How does your debt compare to the average law school graduate’s?

After making it through law school, studying for the bar and potentially working long hours at your first job, tackling law school debt might not have been your top priority.

But the first step in managing student loans is understanding what you’re dealing with. Knowing how your debt compares to the average might also help you feel less alone in your efforts to get a handle on your debt. According to the National Center for Education Statistics:

  • The average student loan debt for those who completed a law degree in 2016 was $186,600.
  • In 2016, those completing professional doctorate degrees, such as law degrees, had the highest amount of average cumulative debt — from undergrad and grad school — per person.
  • Between the years 1999-2000 and 2015-16, average student loan balances for those completing professional doctorate degrees, such as law degrees, increased by 90%.

Why should you refinance law school loans?

If you want to ease the burden of your law school debt, one strategy is to refinance your law school loans. Refinancing can lead to a lower interest rate, which will free up more money to go toward your principal balance.

But that’s not the only benefit of refinancing your loans. Doing so could also help you achieve a more favorable repayment plan, depending on what that means to you.

For example, if you want to get out of debt as soon as possible and have the income to manage it, you can opt for a shorter repayment plan. Or, if you’re looking for more flexibility in repayment, you can opt for a longer repayment plan that might lower your monthly bill.

You can also choose a hybrid option: Get a longer repayment plan and then apply any extra money to your student loan payments on top of the minimum amount due. You can put your tax refund, bonuses at work and any gift money from loved ones toward your loans, for instance.

How much can you save by refinancing law school loans?

Your individual savings will depend on your loan balance, current interest rates and the new interest rate you’ll qualify for, based on factors including your credit score and income. Plug your information into our student loan refinancing calculator to see how much you could save per month and on interest overall.

Make sure that the new interest rate you qualify for is low enough that you’ll save a meaningful amount by refinancing. If it is, and you have room in your monthly budget to get aggressive with debt payoff, opt for the shortest repayment term you can manage. You might end up with a higher monthly payment after refinancing, but you’ll pay less in interest and get rid of debt sooner.

How to refinance your law school loans

If you’re considering refinancing law school debt, it’s possible to see whether you’re eligible, and rates you might qualify for, without impacting your credit score. Here’s how.

1. Compare offers

Many private student loan refinancing lenders perform what’s called a soft pull on your credit score. This means they can prequalify you for offers without the inquiry appearing on your credit report. You can collect multiple offers at a time and only apply for your best offer.

To see what you might prequalify for, check out some of the top private student loan refinancing lenders. You’ll be able to see most of their eligibility requirements along with the range of rates and terms they offer.

2. Choose the best loan for your payoff goals

After comparing offers, think carefully before choosing a lender. It might be tempting to go with the lowest interest rate, but there are other important factors to consider. Here are a few things to think about as you choose the right loan for you:

  • Is the interest rate lower than what you have now?
  • Does the lender offer other benefits, such as an interest rate deduction for signing up for automatic payments, unemployment protection, interest-only payments if you hit a financial snag or cosigner release?
  • Can you afford the monthly payment your preferred lender offers?
  • Is your main goal to reduce your payments or the amount of time you’re in debt?

3. Remember that you’ll lose federal loan benefits

Finally, consider whether you’re willing to lose federal protections on your student loans. Whenever you refinance a federal student loan, you’re paying it off with a private student loan. That means you lose access to income-driven repayment plans, forgiveness programs and generous forbearance and deferment options.

If you can reasonably assume you won’t need protections like these in the future — or if you earn enough to pay your student loans off before any major life changes may occur — then losing access to these benefits may not be a concern.

But if you’ve started your own practice or question your career stability, then maintaining the ability to take advantage of federal student loan benefits could be more important. In that case, consider only refinancing private loans.

Other options for managing law school debt

While refinancing is one of the most effective ways to save money on interest and pay off law school loans faster, it’s not your only alternative.

If you’re a lawyer who opted to work for the government or a nonprofit and have federal loans, forgiveness is a possibility. People who work full time for government organizations and 501(c)(3) nonprofits can potentially qualify to have their student loans forgiven tax-free through Public Service Loan Forgiveness (PSLF).

To participate, enroll in an income-driven repayment plan to lower your monthly payments to a percentage of your income. Then apply for forgiveness under PSLF after you make 120 qualifying PSLF payments. You’ll need to ensure you have eligible loans and that your work meets the requirements for the program.

Many law schools and states also have loan repayment assistance programs, known as LRAPs, that can provide funding to help you repay loans if you work in certain occupations. Check out our guide to loan repayment assistance programs to see which ones you qualify for.

Take control of your law school loans now

By prioritizing your student loans, you have the opportunity to pay them off much faster than the standard repayment plan offers. Plus, it will feel like you get an instant pay raise when you see all the money that was going to your loans go straight to your bank account instead.
Handle your loans now so you can build the future you’re dreaming of and focus on what you really care about: practicing law.

Larissa Runkle contributed to this report.

Published in Career & Jobs, Refinancing & Consolidation, Student Loan Repayment

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