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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

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PRESENTERS

Heather Jarvis,

Student Loan Expert

askheatherjarvis.com

John Garcia,

Director of Financial Aid,

Michigan State University

College of Law

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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

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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

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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

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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.

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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

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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?

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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

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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)!”

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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

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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.

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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

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MSU LAW APPROACH TO ADVISING PROSPECTIVE STUDENTS

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

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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

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Hypothetical Annual Salary$40,000/$2423

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

mo

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

% of monthly salary 24% 16% 13%

15-year Repayment Monthly Repayment $444 $444 $444

% of monthly salary 18% 13% 10%

25-year Repayment Monthly Repayment $347 $347 $347

% of monthly salary 14% 10% 8%

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

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Hypothetical Annual Salary$40,000/$2423

mo$60,000/$3508

mo$80,000/$4570

mo

10-year Repayment Monthly Repayment $1151 $1151 $1151

% of monthly salary 48% 33% 25%

15-year Repayment Monthly Repayment $888 $888 $888

% of monthly salary 37% 25% 19%

25-year Repayment Monthly Repayment $694 $694 $694

% of monthly salary 29% 20% 15%

SALARY AND LOAN REPAYMENT: $100,000 IN EDUCATIONAL DEBT

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Hypothetical Annual Salary$40,000/$2423

mo$60,000/$3508

mo$80,000/$4570

mo

10-year Repayment Monthly Repayment $1726 $1726 $1726

% of monthly salary 71% 49% 38%

15-year Repayment Monthly Repayment $1332 $1332 $1332

% of monthly salary 55% 38% 29%

25-year Repayment Monthly Repayment $1041 $1041 $1041

% of monthly salary 43% 30% 23%

SALARY AND LOAN REPAYMENT: $150,000 IN EDUCATIONAL DEBT

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MSU LAW APPROACH TO ADVISING PROSPECTIVE STUDENTS

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

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MSU LAW APPROACH TO ADVISING PROSPECTIVE STUDENTS

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

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CONSIDER COST AND SCHOLARSHIPS WHEN APPLYING TO LAW SCHOOL

Columbia University School of Law School

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INVESTIGATING SCHOLARSHIP AID

Duquesne Law School

Michigan State College of Law

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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

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Heather Jarvis,

Student Loan Expert

askheatherjarvis.com

John Garcia,

Director of Financial Aid,

Michigan State University

College of Law

YOUR QUESTIONS?

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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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