Possibly the greatest source of financial aid is Stafford loans. If you're asking, "Man, does it take an act of Congress to get financial aid around here?" the answer is yes. Stafford loans are kissed with presidential and congressional seals of approval. Relatively low-interest loans for students that are guaranteed by the government, Staffords are around to make educational financing a little easier and a bit less expensive. At the very minimum, your award letter will probably include Stafford loans.
There are two types of Stafford loans: subsidized and unsubsidized. As a law student, you may borrow up to $8,500 per year in subsidized Stafford loans. A subsidized loan in this case means that the government will pay the interest while you are enrolled in school. Unsubsidized Stafford loans have an annual cap of $10,000. These loans are still low interest, but the government does not pay for the interest that accrues while you are enrolled in school. You didn't think that Congress would be that generous, did you?
You can get these loans from any lender that participates in the Stafford loan program. Look for nonprofit lending agencies, such as the Access Group, that specialize in low-interest Stafford loans. In addition, because the government guarantees these loans, you don't need to worry so much about shaky or bad credit. Unless you have some hideous financial skeleton in the closet, approval for these loans is rarely a problem.
Depending on the lender you choose, there are a variety of repayment plans. Usually, repayment starts anywhere from six to nine months after you have ceased full-time enrollment at school. Repayment terms vary from 10 years to 15 years to 20 years. Keep in mind that with a shorter plan, like 10 years, you will pay less over the long run than you would by paying over 15 years, despite the fact that on the 10-year plan, monthly payments will be higher than with a longer plan. The longer plans cost more overall because, while monthly payments for a 15- or 20-year plan will be lower, interest will accrue over a substantially longer period of time. Having a higher overall payment is not necessarily bad, however, especially if you need the extra cash on a monthly basis or think you can earn a decent return on that extra monthly cash. When the time comes after graduation, you can discuss repayment terms with your lender. Most lenders are flexible in suiting payment options to your needs. After all, they don't want a student debtor to fall behind in payments just because the monthly rate was too high.
Okay, so we've got over 18 grand tucked away. Hey! That doesn't even cover tuition! What gives? That's right, Stafford caps haven't been raised recently and thus have not kept up with the annual tuition hikes at most schools. So where do you turn? Before you take the last step to covering your financial needs, make sure you have checked all other sources: family, personal savings, scholarships, and so on. You'll want to check these last sources one more time because the final step is a painful one.
THE PRIVATE LOAN
When applying for private loans, you need two things: good credit and a strong stomach. Good credit to get approved for the loan. A strong stomach to stomach the high-interest rate. Now is a good time to discuss your credit history. If you haven't already ordered a credit report from Experian (formerly TRW), Trans Union, or Equifax, the three major credit-reporting services, you should do so immediately. Remember that final cable bill you never paid your freshman year in college when you moved for the summer? It's on the report. You've been consistently paying off your credit cards late? It's noted on the report. Don't underestimate the power of credit reports. Lenders will be looking at the very same report. A single unpaid cable bill or consistently late credit card payments are enough to deny approval for a loan. And if you ask any person who's been rejected for a private loan, it's a bad, bad, bad feeling.
Most lenders will tell you exactly what their limits are on credit glitches, so you can check beforehand to see whether you can be approved. Some of the nonprofit lenders, such as Nellie Mae or Access, don't require you to have a co-signer for a private loan, but most do. The co-signer is usually your parent or another "adult" figure in your life. The co-signer for your loan acts as a backup in the event that you default on your loan or fall behind in payments. Your co-signer is just as responsible as you are for the payment of the loan when it comes to liability.
Check with your financial aid office to see whether there are any state-localized loan programs. Some states have a private loan program designed specifically for schools in their state. The Massachusetts Educational Funding Authority, for example, offers low-interest fixed-rate loans to students who are attending colleges in Massachusetts. Credit is still important, but the interest rate with these types of private loans is significantly lower than it would be with private banks.
Private loans are a huge financial responsibility, and you should consider whether you are willing to take on that burden. How much will you be borrowing over your entire three years? How much do you realistically plan on earning when you graduate? These are a couple of the many questions you need to consider when you are looking at the possibility of private loans.
A final word on private loans: If you are going to seek out a private loan, try to have a backup plan. Not infrequently, students apply for a private loan and fail to get approval for that loan in the middle of the semester. How will the student pay for the remainder of tuition and living expenses? If you are going the private loan route, try to get it done as early as possible, so you are sure that you actually do have the loan by the beginning of the semester.
