Borrow as little as you absolutely need to during law school; every dollar you don't borrow can be as much as two to three dollars you never have to pay back.

Most law students finance some part of their education through loans.  This overview should help you understand the different types of loans available, and their relative advantages and disadvantages. For more information on federal loans, the US Department of Education has an extensive explanatory website.

These days, students primarily finance their legal education through three federal loan programs: the Direct Unsubsidized Loan (formerly known as Stafford), the Direct PLUS Loan, and the Perkins Loan Program.  In the first two programs, the federal government is your lender, in the third, your law school is the lender.  Both the Direct and the Direct PLUS are unsubsidized, meaning that interest accrues on your loan from the day it’s disbursed to you. 

Direct Unsubsidized loans have a fixed interest rate (5.4%, as of August 2013), which means that the interest rate won’t change during the life of the loan. There is an origination fee of 1%, meaning that 1% of your total loan is deducted when your loan is disbursed to you.  And you can borrow up to $20,500 each academic year.

The Direct PLUS Loan also has a fixed interest rate (6.4% as of August 2013) a 4% origination fee, and students can borrow up to the Cost of Attendance certified by their law school (the school’s COA less any scholarships or other resources you may have). Direct PLUS borrowers cannot have an “adverse credit history” as defined here.

The federal Perkins Loan program is a federally approved lending program operated by individual law schools (i.e., your school is your lender).  There is a fixed interest rate of 5%, there is no origination fee, and the annual borrowing limit is $8,000.  The Perkins is only available to students with “exceptional” financial need, and not all schools participate in the program.

Most students should be able to meet their costs of attendance through a combination of these three programs.  However, some students may need to seek private loans, in particular those who are not US citizens and those who have been convicted of certain drug-related crimes.  In those situations, you may need to seek loans from a private lender.  Private loans vary widely both in the terms of the loans, and in the availability.  Your best source of information for private loans is your law school’s financial aid office.

Your law school financial aid office should also provide you with up-to-date information about how to apply for the federal loans.

It is critical that you try to minimize the amount you borrow. Your law school will certify you to borrow up to their expected cost of attendance.  In many cases, the cost of living expenses that they calculate are higher than what students actually spend, especially if they are savvy renters.  You don’t have to borrow as much as they certify you to borrow!  Every dollar you don’t borrow can be as much as two to three dollars you never have to pay back (depending on interest rates, term of your loan, etc.)—it’s like giving your future self more money! Live like a student, not like a lawyer.