Granting student loans for lawyers

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    Student loan issuance for lawyers

    Practicing law can be a fulfilling and lucrative career, but the price of a JD is constantly increasing. In 2021, the average law school graduate had $ 160,000 in student loan debt. That is more than twice as much as a prospective public defender earns in a year.

    Outside the public sector, lawyers tend to earn more (averaging $ 120,000). But with a six-figure debt load hanging over your head, that six-figure income may not feel like it’s going far enough.

    Fortunately, practicing attorneys can qualify for a variety of student loan forgiveness plans. Here are the four top lawyer lending programs and some considerations if you don’t qualify for the plans.

    The best option: public sector lending

    If you are a public sector attorney (public defender, for a qualified 501 (c) (3) organization, or in any other qualified public function) you may qualify for public sector lending.

    If you work full-time for a qualified employer, your federal student loan will be waived after 120 payments.

    For attorneys, this is great because you can work in any public service – as a trainee lawyer, administrative clerk, or anything (including a lawyer), as long as you work for a qualified employer – including local, state, federal, or nonprofit.

    Of course you’re an attorney, so you probably read the loan papers that explain the PSLF in detail. However, if you want a refresher on how to qualify for PSLF, you can check out this ultimate guide to public service lending.

    PSLF is an incredible offer for attorneys as the loan is truly forgiven. The waived amount is not taxable.

    Department of Justice: Lawyer Student Loan Repayment Program

    Any attorney working for the Department of Justice (DOJ) can apply to participate in the Attorney Student Loan Repayment Program (ASLRP). Under this program, the DOJ pays up to $ 6,000 per year in education loans on behalf of an attorney who works for the department.

    Attorneys who qualify for the program are automatically enrolled for three years as long as they continue to work full-time as an attorney for the DOJ.

    However, this is not really a lending program. All payments made by the DOJ on your loan are taxable income. Still, the program is worth considering, especially if your job does not allow you to qualify for any other lending program.

    Would you like to learn more? You can find out about the program and apply through the DOJ website (which is clearly designed for lawyers as it documents federal laws and has a discussion of their guidelines).

    Herbert S. Garten Loan Repayment Aid Program

    Each year Legal Services Corporation (a nonprofit that funds legal aid programs) selects 80 legal aid attorneys to help with their student loans. Under this program, the attorney will receive up to $ 5,600 per year to repay the loans. The lawyer receives this financial aid for up to three years.

    The 80 selected lawyers will be selected from suitable applicants by lottery.

    The loan repayment assistance program is designed as a forgivable loan. Therefore, the participating attorney should not have to pay any tax on the payments she receives from the program. Of course, you may want to do your own research to make sure you are compliant.

    To qualify for the program, you must have at least $ 75,000 in student loans, have a net worth of less than $ 35,000 (excluding the value of your home), and earn less than $ 62,500 (in the lower 48 states – Alaska and Hawaii have higher limits)). Here you can find out more about the program and apply.

    John R. Justice Student Loan Repayment Program

    In 2018, the John R. Justice Student Loan Repayment Program awarded $ 1.8 million to qualified public defenders and prosecutors employed by the state or the city. In exchange for help repaying student loans, these lawyers pledge to remain in a public capacity for three years.

    Technically, you could get up to $ 10,000 a year in repayment assistance ($ 60,000 total), but this program isn’t heavily funded. As a result, you can expect a few hundred or a few thousand dollars in help.

    You will need to work with your city or state to apply for the repayment program. Funds received under this program are generally non-taxable, although the IRS refuses to provide specific guidance under any circumstances as to whether they are non-taxable.

    Options to Consider If You Do Not Qualify for Lending

    If you’re a lawyer with six figure debt, figuring out how to pay it back can be difficult with any salary. But it can be especially difficult if you’re just starting out and aren’t making a high salary. So what should a lawyer do?

    Income-oriented repayment plan

    The first option should be to get an income-based repayment plan for all of your federal student loans. Payment for all income-based repayment plans is based on your disposable income.

    We call income repayment plans the “secret” student loan allocation program because most people are unaware that your loans under these programs will be waived after 20 or 25 years. Yeah, that’s a long time. But you should know that the option exists.

    Income-based repayment programs include: Income-Based Repayment (IBR), Pay-As-You-Earn (PAYE), Revised Pay-As-You-Earn (RePAYE), and Income-Based Repayment (ICR).

    Pay extra for your loans

    Once you have an income-based repayment plan, it’s time to ask yourself the question, “Should I pay extra for my student loans?”

    Even if you don’t qualify for loan waiver, your federal loans will be canceled after 30 years of repayment. The catch? The canceled amount is taxable. That means you will have to pay a hefty tax bill in the year the loans are canceled.

    So should you work on paying back that debt with additional payments or just start saving for the tax bill? The answer depends on how much you owe and how much you make. While the exact answer depends on a variety of factors, as a rule of thumb, if you owe more than 1.5 times your income, it is better to think about a loan termination rather than a loan repayment.

    That means a lawyer who makes $ 150,000 a year but owes more than $ 225,000 in student loans will likely have to start saving for a hefty tax bill rather than trying to aggressively pay off the loans. On the flip side, if this $ 150,000 attorney has the typical $ 125,000 debt, an aggressive repayment is likely the right decision.

    Refinancing

    If you are on your way to paying back your debt, consider refinancing your student loan into a private student loan with a lower interest rate. This is risky because you lose the option of loan cancellation and the flexibility of income-related repayment. However, you can save money while paying off the big debts. At the moment you get prices off 1.81% – 9.15% APR in places like Credible. When you have Grade PLUS loans, this can be a huge savings.

    You can find the best rates for student loan refinancing at Credible. Check out our complete guide to the best places to refinance student loans here.

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