Financial Literacy for Law Students

The cost of attending three years of law school can be a significant financial commitment, and crushing student loan debt is often an unfortunate byproduct. From 1985 to 2019—after adjusting for inflation—the cost of attending a private law school increased 276%, and the cost of going to a public school was 592% higher. Law School Transparency. (n.d.). Law School Costs. https://www.lawschooltransparency.com/trends/costs/tuition. As of November 2021, the average total cost of attending law school for three years was $205,744, or $68,581 per year. Hanson, M. (2021, November 30). Average Cost of Law School. Education Data Initiative.

Sure, working at a top law firm in a large city likely will provide the salary needed to pay back—maybe even quickly—your student loans and any accumulated interest. However, if you don’t land that top-paying job and don’t want to be straddled with potentially decades of loan payments, you need to have a plan that addresses your current financial standing, future borrowing, and how you will repay what you’ve borrowed.

Follow these guidelines in order to best manage and limit how much student loan debt you have.

Before Beginning Law School

1. First and foremost, try to find a law school that balances ranking with what is most economically feasible for you. Consider in-state public institutions, lower-priced law schools with solid records of job placement, and schools more likely to provide scholarship funds.
2. Bank with a financial institution that has the most favorable features, such as user-friendly online services and limited fees. There’s no need to work with a bank that charges you money to manage your money.
3. Borrow wisely and take advantage of federal loan programs when possible. Students may borrow up to $20,500 a year in Direct Unsubsidized Loans, and Direct PLUS Loans also allow students to borrow from the government at a lower, fixed interest rate. If you must go the private loan route, select the lender with the lowest interest rate and best features, including what repayment options are available, what happens should you default, etc.
4. Pursue law school grants and scholarships. Check with your school’s financial aid office for money that you don’t have to pay back!
5. Apply for external scholarships and other free-money options, including those posted at Law Scholarships and Scholarship Finder.
6. Look into cost-saving measures, such as eliminating credit card debt and getting a roommate to reduce housing expenses.

During Law School

1. Live modestly. Premium, national chain coffee and restaurant dining may have a certain cachet, but less expensive options exist. Save these “luxuries” for when you can afford them.
2. Establish and stick with a monthly or semester-long budget for your spending, including rent, insurance, transportation, food, and entertainment expenses. Online services like Budget Simple and Budget Pulse can help get you started. If you’re not ready for such long-term planning, consider starting with a weekly budget and building from there.
3. Use a credit card sparingly, and make sure the one you have is free from annual fees and has the lowest possible interest rate. These are easy to research through organizations like Bankrate, Forbes, and U.S. News.
4. When school begins, if you find that you borrowed more than you need, return any unused or unneeded loan funds to your lender. With federal loans, you must do so generally with 30-120 days. This will reduce what you owe in repayment after graduation—and without incurring any associated fees or student loan interest. (“Can You Return Unused Student Loan Money?,” 2021).
5. Utilize free resources provided by AccessLex, a nonprofit organization dedicated to law students that offers online financial education programming and resources. AccessLex has almost 200 member law schools.
6. If you work during the school year or land a good-paying summer associate position, use this money to pay for school. Either set it aside to pay for the next year, or try to make extra or early payments on loans you’ve already taken out.

As You Approach Graduation

1. If you plan to engage in government or public interest work after graduation, check out the Public Service Loan Forgiveness program. If you end up in a lower-paying job, look into Income-Drive Repayment Plans. It’s worth investigating whether you qualify to have your student loans partly or fully covered!
2. Similarly, your law school or state may have a Loan Repayment Assistance Program. More than 100 law schools and 24 states offer LRAPs to help with paying back student loans.
3. Be mindful of your credit history. Creditors use this information to determine whether and how much credit they will extend to you as a predictor of your ability to repay student loans. Credit cards (including timely bill payment, number of credit cards, total credit limit, and amount owed on accounts), consumer loans (e.g., automobile), and prior student loans may affect your future borrowing. Having such debt, including for past education, does not necessarily mean you will have a poor credit score, so long as you have managed your credit well in the past. You can get a free credit report from the FTC.

Law school and practicing law can be immensely rewarding experiences. By following these guidelines, students can limit the amount of student loan debt they have to manage.