Financing Your Law School Education

Understanding Your Student Loan Options

It’s no secret that law school is expensive and worrying about paying back student loans can be a stress that lasts for many years. Don’t worry, this article is here to help! The first important step in accomplishing your financial goals is to understand your options. Then you can feel confident in your plan and know that you are making the right decision for your financial future. 

Know Your Student Loans Options

Even if you tried to save money during school, you are probably like the other 75% of law graduates with student loan debt. In fact, the average graduate has $145,500 in loans.  That’s where knowing what student loan is right for you comes into play. Many attorneys believe that the loans they received from the federal government during school are their best option after graduation—despite the very high interest rates that federal loans come with. The truth is that for many people there are more options to consider.

That’s where Juno is here to help. Juno is a collective bargaining initiative that utilizes the power of group buying to negotiate lower interest rates on student loan refinancing. Essentially, it’s a volume discount. They unite large groups of alumni and then negotiate with private lenders on their behalf to get attorneys a better deal on student loans than any single borrower could get by themself. 

Juno is free to join and signing up doesn’t commit you to anything—they just add your voice to the collective and let you know when they wrap up their negotiations, giving you the option to take the deal or keep your current loan. However, in past years the average lawyer who takes the deal they negotiate has saved about $30,000 on interest and fees over federal loans.

We recommend all lawyers join Juno so that you know what your options are. The following sections elaborate on how to make the choice that is best for you.


Two Types of Student Loans: Federal and Private

When it comes to borrowing money for law school, historically most students have turned to the federal government to finance their education. Then, after graduating, many lawyers choose to refinance to get a lower rate or better terms. At the same time, a large number of lawyers choose to keep their federal loans because of the benefits they provide. Each option has unique pros and cons and what is best for you varies by your situation. 

Federal Student Loans. All U.S. Citizens and eligible non-citizens can typically access federal Direct Unsubsidized Loans and Direct PLUS Loans. Most applicants qualify, regardless of credit score, and the interest rates are higher than what is offered in the market due to the riskier pool of borrowers. Direct Unsubsidized Loans have lower rates and fees than Direct Plus Loans, but they are only available for the first $20,500 that you borrow each academic year. The rest of your cost of attendance is made up of Direct PLUS Loans, which are more expensive (meaning that they have a higher interest rate and origination fee). 

All federal student loan interest rates and fees are set by Congress on July 1st of each year and remain fixed for the life of the loan. If you borrowed money for all three years of law school, each loan likely will have a different interest rate. 

For example, federal loans disbursed after July 1st, 2019 and before July 1st, 2020, the interest rates and fees were:
Although federal loans have significantly higher interest rates than private loans, they do have some protections like Income-Driven Repayment Plans and Public Service Loan Forgiveness. Carefully consider these programs and if you will want access to them in the future when selecting your loan. The federal government has a loan simulator that you can use to help choose which plan, if any, you may qualify for. Keep in mind that there is no guarantee that these plans will always be around.

Private Student Loans. These loans are offered by private banks and lenders. They are also the loans and discounts that Juno negotiates on behalf of its members. Private student loans are used to refinance loans after you graduate when you are eligible for lower interest rates. To apply for these loans, borrowers must apply directly through the various lender websites. If you access a lender website via Juno you can be confident that you are seeing your best rate.

The interest rate offered to each attorney varies. Every private lender has their own unique underwriting process and standards for student loan applicants; these eligibility requirements help lenders decide whether to give an applicant a loan, and at what interest rate. As part of the loan application process, lenders will require a credit check to evaluate your ability to repay and how risky you are. If you have a good credit score (650+) you will likely qualify for a loan, and the higher your score is the better rate you will be offered. Adding a co-signer can also lower your rate. 

Which Loan is Best for Me?
 
The choice of which loan to use will vary for each attorney depending on their debt, income, job sector, and risk tolerance. When comparing your options, it is important to consider the extra money that you are paying each month for federal loan protections and whether that is worth it to you. Juno has a calculator which makes the cost difference easy to visualize. Here’s an example comparing a 2019 federal student loan to a private loan negotiated by Juno:

Essentially, federal loans make you pay for a type of “insurance” in the form of low-income federal protections. Private loans will likely save you a lot of money over federal loans, but it means that you will have to give up federal protections such as Income-Driven Repayment Plans and Public Service Loan Forgiveness, which are unavailable under private loans. 

If you think you likely won’t benefit from the federal protections, you may be overpaying for benefits that you do not get to take advantage of. For this reason, lawyers should consider researching their options and receiving their Juno offer before deciding which loan to take. To understand if federal loan protections are worth it, you need to know how much you are paying for them. For more information on making your decision, you can check out this Complete Guide to Law School Loans

Should COVID-19 Impact My Decision?
Due to COVID-19, some Juno members are waiting to refinance their federal loans until administrative forbearance ends (an interest-free period announced by President Trump). As of this writing, 0% interest and paused payments will continue until December 31, 2020. Be aware that refinancing rates offered will likely change between now and then. Seeing as how rates are currently at historic lows, it may still be a good time to refinance depending on your risk tolerance. 

Conclusion
Regardless of your situation, it is always empowering to know what your student loan options are. You likely will not know what choice is best for you until you run the numbers on your unique situation. Sign up for Juno today to join the collective and get access to your best rates.