Guide to Applying for Law School Loans

In this guide, I cover the types of loans you can apply for, information about terms for each type, and how you apply for each type of loan to give you the information you need to use loans to fill any funding gap you have for law school.

Types of Loans for Law School

If you choose to take out loans to fund law school, you have three main options: a federal Direct loan, a private loan, or a Grad PLUS loan. Each works a little differently with different in terms of interest and payments. Below I offer a broad overview of each type of loan for law school.

Federal Direct Unsubsidized Loans

During your undergrad, you might have qualified for subsidized loans, unsubsidized loans, or a combination of the two. The biggest benefit of subsidized loans is that the interest does not accrue while attending school because the Department of Education pays the interest. Also, the loan fee is only about 1 percent of the amount you borrow.

Law students are not eligible for subsidized loans but can apply for Federal Direct Unsubsidized Loans. They may borrow up to $20,500 each year. The loans start accruing simple interest while law students are in school. Law students have a six-month grace period after graduation before they have to start paying back Federal Direct Unsubsidized Loans.

Grad PLUS Loans

Grad PLUS Loans also come from the Department of Education, but they are not typically the best option for law students. Some big drawbacks of a PLUS loan compared to a Direct Unsubsidized loan include:

• Grad PLUS loan recipients must have good credit. Those with an adverse credit history will not qualify unless they have a creditworthy cosigner.

• The interest rates for PLUS loans are higher. For the 2021-2022 school year, the interest rate is at 6.28 percent.

• Borrowers need to pay a loan origination fee of over 4 percent of the total amount they borrow.

Like Direct loans, law students have a six-month grace period after graduation before repayment of their PLUS loan. Also, PLUS borrows accrue interest. They may pay interest-only payments in school or add the interest to their total loan amount.

Private Loans

When law students need money for school beyond any Direct Unsubsidized Loans they receive, some turn to private loans through banks, credit unions, and other private lenders. Private loans have advantages and disadvantages compared to PLUS loans. The right choice for a student really depends on their situation. Each private loan lender is different. Like PLUS loans, private loans require good credit or a cosigner. Private loans typically do not have a loan origination fee like PLUS loans, but interest rates are often lower. However, interest rates vary based on credit. Those with less than perfect credit might have to pay higher interest rates than a plus loan.  Many private lenders also allow students to begin repayment six months after graduation, but each lender is different. Some allow nine months or offer additional time for students who have clerkships.

Applying for Law School Loans

Even with an understanding of the different kinds of loans available for law school, your choice will be driven by what's available to you and what you qualify for. Here are the steps you need to take, including timelines to apply for law school loans.

1. Investigate financial aid procedures at the schools for which you are applying while you investigate admissions procedures and deadlines.

2. Complete your federal tax returns as early as possible each year because you will need your most current tax information to apply for federal or private loans.

3. Fill out your Free Application for Federal Student Aid (FAFSA). This is the same form you had to fill out for financial aid as an undergrad. The new form comes out October 1 for the following year. For example, if you want to enter law school in Fall 2022, you can fill out your FAFSA beginning October 2021. You should complete it as soon as possible; you can always update it with new tax information. At the very least, you should have your FAFSA complete by the time you complete your admissions package.

4. Wait for acceptance letters from the schools where you applied. If accepted, they will determine the type and amount of financial aid you can receive and send you instructions on how to complete your financial aid package.

5. After you choose your school, you need to apply for the funding you want. For Direct Federal Loans, you do not need to do anything special beyond filling out your FAFSA and accepting the loan. If you want to take out a PLUS loan, you need to fill out a separate application. If approved, you must also complete a Direct PLUS Loan Master Promissory Note that spells out the terms of your loan.

6. Apply for loans with private lenders if you do not get the funding you need or wish to borrow from a private lender instead of taking out a PLUS loan.

Loan Repayment Assistance Programs (LRAP) & Loan Forgiveness

LRAPs differ a bit with each law school. Typically, students receive forgivable loans for law school in exchange for working in the public interest sector or government for a certain length of time. Once a student completes their obligation, the LRAP forgives or cancels the loans. The American Bar Association offers this great resource for LRAPs.

Direct Federal loans and PLUS loans also qualify for the Public Service Loan Forgiveness Program. Law students who work in a particular sector and make payments for ten years can have their loans forgiven. During repayment, students are also eligible for income-based repayment (IBR) plans, offering flexibility not available with private loans.

However, private lenders also sometimes participate in forgiveness programs depending on the school and the situation. You should carefully research the options available at the schools where you apply.

Learn More About Law School Loans

For more information about applying for law school loans or any questions, visit my website to contact me and learn more.