Student debt

What You Need to Know About Student Debt (and How to Manage It)

For many prospective law students things are about to get real, real fast. As law schools begin offering acceptance decisions – welcoming students to join the Class of 2020 – the financial impact of those acceptances are starting to hit home.

According to a recent study by The Wall Street Journal, the average law school graduate will leave law school with $140,616 in student loans. That’s a sobering number, and one that should not be easily brushed aside. Perhaps you’re already banking on being among the top students who will land one of those coveted $180,000/year starting jobs at an elite BigLaw firm. You hope that’s the case, but like any important undertaking, “hope” is never a good strategy. In fact, according to NALP.org, the median starting salary for law school graduates is $64,800. Instead of banking on hope, you need to take affirmative steps now that will provide you “better-than-average” options when loan repayment kicks in 9 months after graduation. Here are a few things to consider:

Find ways to significantly lower your debt load.

Scour the Internet for scholarships (both before and during law school). Check out the scholarships listed in AdmissionsDean.com’s Law School Scholarship Finder, or apply for the $10,000 Scholarship offered by BARBRI and the American Bar Association. Every dollar of free scholarship money you can secure now represents one less dollar you’ll have to finance with student loans (and repay) later.

Weigh your options.

Sure, that T14 law school has been your “dream school” since you first decided to become a lawyer at age 10. However, maybe a full or partial scholarship from a competitive (yet lower-ranked) school is a better choice for you – even for just one year. Assuming you do well enough to transfer after your 1L year to that “dream school,” and pay that school’s sticker price as a 2L and 3L, a sizable scholarship even just during the 1L year can dramatically decrease the amount of money you’ll have to borrow up front.

Read the fine print.

If law school X is offering you a very attractive financial package, determine whether the scholarship is “guaranteed” for all three years, or if it’s conditioned upon you preserving a certain GPA. As you probably know, it’s much more difficult to earn top grades in law school as compared to college, so you really need to understand the consequences of accepting a “conditional scholarship.” And by all means, make sure that your 1L GPA does not sink below the threshold that will prevent you from continuing to enjoy free money during your 2L and 3L years.

Inquire about retroactive scholarships while in law school.

Even if you weren’t a candidate for a scholarship upon entry into law school – or have no intention of transferring as a 2L – most law schools will still offer students at the top of their 1L class sizable scholarships (e.g. $10,000/per year) to ensure they don’t elect to transfer. The most savvy of these students have even been known to negotiate scholarships “retroactively,” making sure they receive additional money credited toward their 1L tuition.

Pay down debt while you’re in law school.

If you’re at the top of your 1L class, you’ll also be able to enjoy these additional (and substantial) financial opportunities:

  • BigLaw Fellowships that not only offer paid 1L summer employment, but also come with a $10k bonus – more money to throw at your student loans.
  • Additionally, students in the Top 10% of their 1L classes at most U.S. law schools will be invited by BigLaw firms to participate in Summer Associate clerkships during their 2L summer where they can earn upwards of $40,000 during their 10-week summer clerkship. With that kind of money, you should be able to sock away a healthy chunk of change to throw at your existing loans, or simply use it to pay out-of-pocket for your 3L tuition.

Earn a higher post-graduate salary.

If you haven’t guessed, most BigLaw firms will only offer these jobs to students who finished at the very top of their 1L classes and completed a “trial run” as a 2L Summer Associate; therefore, you’ll need to knock it out of the park academically during your first year to be considered for these options.

Secure a judicial clerkship bonus.

If you’re among the top law students and have been invited to sit on your school’s Law Review, you may decide to forego private practice for a year or two after graduation, and get hands-on training as a clerk to a federal judge. Not only does this job provide an amazing professional development opportunity for law grads, but BigLaw firms will pay handsomely for lawyers with this type of experience. Depending on the level of court, clerkship bonuses range from $50,000 to $250,000 – significantly impacting a student’s ability to satisfy their student loan obligations.

Take note, the overwhelming majority of these opportunities are only available to the students who finish at the very top of their 1L class. Consequently, the vast majority of law students in the country will not be in a position to afford themselves of all the opportunities that spring from top academic performance during the 1L year.

You really need to take steps now to insure that you are among those top students who can avail themselves of these financial opportunities later on. Excel academically during your 1L year and it could determine just how many post graduate years you’ll be consuming Ramen Noodles.