Educational Debt and the Financial Aspects of Planning for Law School The webinar will begin...

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Educational Debt and the Financial Aspects of Planning

for Law School

The webinar will begin promptly at 7:30 p.m., EST.

For audio, please use audio via your computer or dial 1-866-642-1665 followed by 334512

PRESENTERS

Heather Jarvis,

Student Loan Expert

askheatherjarvis.com

John Garcia,

Director of Financial Aid,

Michigan State University

College of Law

AGENDA

The complete costs of a earning a law degree

The impact of high levels of educational debt

Loan programs and repayment options Tools for making an informed borrowing

decision Suggestions for minimizing educational

debt Answering your questions

COSTS OF A EARNING A LAW DEGREE

• Tuition: Public: $18,472, Private: $35,743 • Indirect costs:

– Books, room, board, and health insurance– Range between $12,500 and $25,000 for the

academic year

• Total “cost of attendance” at select law schools approaches $75,000 annually

CAREER AND SALARY DATA

• Only a small % of graduates find employment in “big law” firms that pay top dollar

• Salaries at small/medium firms vary but typically are in the $40,000 to $60,000 range

• Government and public interest salaries are stagnant

• The reporting of recent graduate employment data is not uniform – some schools are much more transparent than others

STUDENT LOANS

Federal Student Loans

Stafford loans Unsubsidized

Grad PLUS loans Credit-based

Private Student Loans

Variable interest rates Limited repayment

options

Note: The cost of federal loans is increasing, effective July 2012, with the discontinuation of subsidized loans for graduate/professional students.

EXAMPLES: THE COST OF DEBT

• Average law school graduating debt:– Public: $68,827 – Private: $106,249

• Average undergraduate debt: – $24,500

• Various repayment plans are available:– Standard 10-year term– Income-based repayment– Loan repayment assistance and forgiveness programs

MAKING AN INFORMED DECISION

• Examine the full, three-year cost of a cross section of law schools – direct and indirect costs

• Examine current starting salaries for careers of interest to you and future earnings potential for the career(s) that interests you

• Calculate loan repayment scenarios factoring in all types of educational debt and reflect upon personal and professional goals -- what will you be postponing or giving up during the 10-, 20-, or 25-year repayment period?

MAKING AN INFORMED DECISION

• Consider the issue of timing: – Law school immediately after undergrad– Law school after undergraduate debt is paid– Law school on a part-time basis

• Give appropriate attention to “prestige” or “ranking,” in addition to total cost of attendance and other factors when evaluating among and between law schools

MSU LAW APPROACH TO ADVISING PROSPECTIVE STUDENTS

“If you live like a lawyer while in law school, you must live like a student once you are a lawyer (and repaying your loans)!”

UNDERGRADUATE VS. LAW SCHOOL FUNDING

Undergraduate • Federal need-based

grants• State need-based grants• Institutional need-based

grants• Institutional merit awards• Local, state, regional

scholarships• Federal need-based loans• Federal work study

Law School• Institutional need-

based aid (minimal)• Institutional merit or

non-need based aid• Federal loans• Private loans• Federal work study

STUDENT LOAN DETAILS

• Interest Rates– Stafford: 6.8% (fixed)– Grad PLUS: 7.9% (fixed)

• Maximum Available– Stafford: $138,500 (for most students)– Grad PLUS: annual limit is school’s cost of

attendance minus aid; no lifetime limit

Note: The cost of federal loans is increasing, effective July 2012, with the discontinuation of subsidized loans for graduate/professional students.

MSU COLLEGE OF LAW ALUMNI SURVEY

Survey of MSU Law Graduates: 1995-2009• 748 responses• Response Highlights

– Debt resulted in students delaying getting married, starting a family, purchasing a home

– Debt resulted in some graduates accepting positions that “pay the bills” but were less satisfying

– Expressions of surprise regarding the amount owed and regret about not giving more attention to impact of what was borrowed and potential repayment

Develop a three-year budget for law school – see your financial aid office for advice on building your budget

Calculate repayment scenarios based on below-average, average, and above-average starting salaries, and/or on the basis of the salary for your desired employment

Take every opportunity to minimize indirect costs and reliance on loans

Repayment Term (in Years)

Debt 10 15 20 25

$100,000.00 $1,150.80 $887.68 $763.44 $694.07

Total Cost of Loans (over 10, 15, 20 and 25 Years)

Debt 10 15 20 25

$100,000.00$138,096.5

7 $159,783.63 $183,201.36 $208,222.66

Student Loan Repayment LOAN REPAYMENT AND YOUR LEVEL OF COMFORT

Hypothetical Annual Salary$40,000/$2423

mo $60,000/$3508 mo$80,000/$4570

10-year Repayment Monthly Repayment $575 $575 $575

% of monthly salary 24% 16% 13%

SALARY AND LOAN REPAYMENT: $50,000 IN EDUCATIONAL DEBT

mo$60,000/$3508

mo$80,000/$4570

mo$60,000/$3508

mo$80,000/$4570

Challenge yourself to minimize living expenses and educational debt: share an apartment rely on public transportation prepare your own meals carefully evaluate study-abroad

options apply for outside grants/awards consider part-time employment

Be proactive and diligent with career-planning efforts

Recommendations if you plan to borrow funds to finance law school

Eliminate consumer debt Obtain a free copy of your credit report at

www.annualcreditreport.com Avoid or minimize high-dollar purchases Explore all types of “free aid” Investigate law school scholarship opportunities early on:

Criteria used by a variety of law schools Application timeline

CONSIDER COST AND SCHOLARSHIPS WHEN APPLYING TO LAW SCHOOL

Columbia University School of Law School

INVESTIGATING SCHOLARSHIP AID

Duquesne Law School

Michigan State College of Law

RESOURCES

American Bar Association: http://www.americanbar.org

Access Group: www.accessgroup.org

Ask Heather Jarvis: http://askheatherjarvis.com/

LSAC: http://lsac.org/jd/finance/financial-aid-overview.asp

MSU Law:

http://www.law.msu.edu/finaid/other-resources.html

http://www.law.msu.edu/admissions/scholarships.html

Heather Jarvis,

Student Loan Expert

askheatherjarvis.com

John Garcia,

Director of Financial Aid,

Michigan State University

College of Law

YOUR QUESTIONS?

Insider’s Guide to Law School Admissions

Tuesday, May 1

3:00 p.m., EST• Factors important to the admissions

committee when reviewing an application for admission

• Suggestions for crafting an effective personal statement

• How and when to provide a supplemental statement

• Advice on when to apply

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