Law Firms and Law School Student Loan Repayment: A Compensation Deal

Law Firms and Law School Student Loan Repayment: A Compensation DealThe first step for all law students in repaying their law school student loans is to reduce their monthly payments as much as possible through student loan compensation. Once this is done, the student should then look into Loan Repayment Assistance Programs (LRAP) that their law school may offer. Most of the top law schools in the country do have these, over 80 schools altogether. LRAPs were established by law school and state agencies to help cover the immense education debts that many law students ended up with. Usually they are applied to lawyers who choose to work for the government or in public interest. Generally, if you work full-time as a public defender or prosecutor or for some government agency, you should be qualified for an LRAP. Eligibility may also be limited by how much you make; $40 - $55,000 is generally the maximum threshold.Law school graduates who qualify will forgivable loans, grants or other financial assistance to a certain amount of your student loan payments. This assistance is usually contingent on being employed at the same place for a certain amount of time. Some schools require at least some contribution from students towards law student loan repayment. LRAP’s can vary quite a bit from school to school. Many are not adequately funded and so some applicants will not receive assistance. Applicants that have the greatest debt-to-income rations are most likely to be awarded. Another thing to keep in mind is that many programs will disqualify you as soon as you begin earning more than the income threshold allows.For those that have taken out Law School Federal Consolidation Loans, there are several options for repayment. The terms vary from 10 to 30 years, depending on how much money you owe. The first option is equal payments. This simply means that the borrower will pay equal monthly payments over the whole life of the loan. Another choice is to select 2/graduated payments. With this option, the borrower has to pay interest-only payments for the first two years of the loan. Once this period is over, the payments increase to the principal installments that also include interest for the remainder of the loan. Another alternative is the select 5/graduated payment. This option requires only interest payments for the first 2 years, and then in the third to fifth years, the loan payments go up to include some of the principal as well. After that, regular payments that include proportional principal and interest are the rule for the rest of the loan.Income-sensitive payments are also often available. With this option, loan payments are adjusted every year based on your expected gross income for the year. If you are married, this will include your combined monthly income with your spouse. Your school loans servicer will calculate your payment once you qualify. Usually this type of repayment program initially starts with the Select 2/Graduated plan and then advances from there.