Financial resources are available for law school. These resources include: scholarships, work-study, VA Benefits, wages, employment benefits, and loans. There are virtues and drawbacks to all the resources I listed. I will address the most common type of financial aid for law students: the loan programs. -- Dean Aguilar.

There are private educational loan programs and loan programs guaranteed by the federal government. The virtue of these loan programs is that they make funding available to assist students in paying for their educations. The drawback is this borrowed money must be repaid with interest.



What distinguishes these programs are the details of interest rates, what happens to accruing interest while the students are enrolled, what are the repayment options, and if loan cancellation or forgiveness apply to the individual programs.

Private education loans, also known as alternative education loans are offered by private lenders-most often banks.



A virtue - due to the low primary credit rate set by the Federal Reserve Board, the private student loan programs have relatively low interests rates. However, if we enter an inflationary period the current interest rate will climb.

A drawback - borrowers are unable to take advantage of income based repayment options, loan forgiveness opportunities, and loan cancellation due to death or disability offered through the federally guaranteed loan programs. Also, borrower may defer payment on the loans while enrolled, but interest does accrue during that time period meaning they owe a larger amount on the loan than what was originally borrowed.


Federal student loans are essentially made under three programs: the Federal Family Education Loan Program or FFEL Program; the William D. Ford Federal Direct Loan Program; and the Perkins Loan Program. The loans under these programs are Stafford, Graduate PLUS, and Perkins Loans. All of these loans have fixed interest rates which will not change.



A virtue - A portion of the Stafford Loans (up to $8,500 annually) and all of Perkins Loans are subsidized.

A drawback - The Graduate PLUS and the remainder of what a student borrows from the Stafford Loan program is unsubsidized. However, a student borrower can make quarterly payments on that interest significantly reducing the cost of the loan over a ten year repayment period. Of course, these payments should not be made with loan money.

A virtue - The Stafford and Perkins Loans are very easy to qualify for. A student borrower simply cannot be in default on another federally guaranteed student loan. Other than that, students' credit will not affect their eligibility for the Stafford or Perkins Loans.

A drawback (potentially) - The Graduate PLUS Loan program is a credit-based loan. The credit check is not as strict as the private loan programs and if a person has a negative credit record it is easier to rehabilitate in order to qualify for the Graduate PLUS loan program as compared to the private loan programs.

Finally, virtues of the federally guaranteed loan programs include the repayment options and loan cancellation or forgiveness that are available to borrowers.



Stafford and Graduate PLUS Loans have multiple repayment options. The standard ten year repayment option means you will have the same monthly payment for the ten years it will take to pay-off your debt.



Next week Dean Aguilar discusses: How law students get in financial trouble and how to avoid it!


Edited: 01/20/2010 at 04:04 PM by matthewniziol