I’m pleased to present the first of two guest posts from Radhika Singh Miller, who serves as program manager of educational debt relief and outreach at Equal Justice Works. This week’s post is on debt reduction options for public interest and public service lawyers. Next week’s will explore debt management options for those who find themselves unemployed.
When thinking about law school, one must consider the hefty price associated with earning a J.D., and for those interested in entering public interest law, the financial burden can be even more overwhelming. Law grads often leave school with over $100,000 in educational debt and, according to the National Association for Law Placement, public interest salaries are hovering around $42,000. This lower paycheck can be scary when facing mountains of debt.
So, what do you do with that burning desire to serve the underserved? Take a deep breath and take control of your debt. Look for scholarships and grants—these won’t need to be repaid at all. But even if you need to borrow to help pay for school, there are some programs you should know about that can help ease this burden considerably.
If you’re interested in public interest law, three major types of educational debt relief can help:
- Income-Based Repayment (IBR), which lowers monthly loan payments based on your income (you may be able to keep more of that lower public interest paycheck for necessities and rent).
- Public Service Loan Forgiveness (PSLF), which allows forgiveness on Federal Direct loans after 120 qualifying payments while working full-time in qualifying public service employment (employment in government and 501(c)(3) nonprofits count).
- Loan Repayment Assistance Programs (LRAPs), which provide funds to help make payments on educational loans.
Both Income-Based Repayment and Public Service Loan Forgiveness provide significant relief if you hope to go into public service. Through these programs, you can make lower monthly payments under IBR while working in public service and after 10 years of working, the government (the lender for your federal loans) will forgive the rest – no matter how much is left.
But even if you aren’t planning to work in public service, IBR can still help lower your monthly payments. Since IBR doesn’t have any employment restrictions, if you have a partial financial hardship you may still benefit. When enrolled in IBR, your monthly payments won’t be more than 15 percent of your monthly income. IBR also has its own forgiveness provision, so that if you’re still repaying after 25 years, the government will forgive the remaining debt.
Look at how Dara Defender finds relief under IBR and PSLF:
Dara graduates from law school with $120,000 in federal loans and takes a public defender position starting at $45,000.
- Under a 10-year repayment plan, Dara would pay $165,716 over 10 years and be required to pay $1,381 each month regardless of her income. This is more than half her monthly income.
- Under 30-year repayment, Dara would pay $281,632 over 30 years. She would have to pay $782 per month regardless of her income – still an enormous burden.
But Dara is in control because she knows about IBR and PSLF. She enrolls in IBR right after graduation.
- In her first year, Dara’s payments are $359 per month (less than half than a 30-year plan).
- Dara continues to work in public service. As she receives annual raises of 3 percent, her payments gradually rise because they’re income-based. In 10 years, her monthly payments are $467.
- After making 120 payments, Dara applies for PSLF. She has paid $49,447 (a little over one-third of the original principal) over 10 years and the federal government forgives $150,295, the balance of the principal and the interest left on her loans!
What if Dara didn’t qualify for PSLF? Here’s a look at how IBR can still help:
- Dara leaves public service after seven years and begins to earn $80,000. With 3 percent annual raises, in year 25 she will make $132,228 and her monthly payment will be $1,240 (still less than a 10-year repayment plan).
- Dara will pay $243,853 over 25 years and the government will forgive $38,781.
IBR and PSLF can make a huge difference. They can free up your income for things like rent, food and savings for the future as well as help you become debt-free more quickly and save you thousands. Dara saved over $150,000 by doing what she always dreamed – serving as a public defender.
In addition to IBR and PSLF, Loan Repayment Assistance Programs are available from a variety of sources, including law schools, employers, bar associations, and the federal and state governments. Since they provide funds to help you make payments on your loans, LRAPs are valuable independent of IBR and PSLF but if you can use all three, you can find tremendous relief. The perfect scenario is if you qualify for low monthly payments under IBR, can use LRAP funds to help you make these payments while working in a qualifying public service position, allowing you to earn PSLF – all without using your own limited income!
You can benefit from these programs, but you need to start taking the right steps now.
- Avoid borrowing private loans because only federal loans are eligible for IBR and PSLF. The Grad PLUS loan allows many law students to fund their legal educations solely through a combination of federal loans.
- You must fill out your FAFSA to qualify for federal grants and loans. Find it at www.fafsa.ed.gov. It’s required to secure federal student aid (grants and loans). Many states and institutions also use the information to determine eligibility for their financial assistance programs and if you don’t fill it out you may miss out!
- Do your research. When choosing a law school look at the school’s website to see what type of LRAPs, scholarships and grants are available. For those interested in public interest, utilize The Equal Justice Works Guide to Law Schools, our free, online tool that allows you to explore and compare schools’ financial options.
There are a few more things to know about IBR, PSLF and LRAPs, how they work and how to qualify. Equal Justice Works provides free educational debt relief webinars every month to help you learn more. You can view our schedule and register for the session that fits your needs on our website. When planning for how to pay for law school, the most important thing to remember is to do your research and be an education consumer – this information will help you choose the school that is best for you!