So you went to law school here in New Jersey because you always wanted to be a lawyer! The school told you that their graduates got jobs! But all that happened is that you got a degree, no job (or no high paying job), and over $100,000 in student loans that you can't afford to repay! Now what do you do?
Well, if the lion's share of those student loans were through federal programs like Stafford and Graduate PLUS, plenty! You probably did not opt for a specific repayment plan and got stuck in a standard, ten year fixed payment plan. At 7.9% interest on the law school loans, a $100,000 balance will set you back $1,208 per month! Ouch!
Pay What Your Income Will Allow!
But here is the good news. The Department of Education offers repayment plans that are income based! They go by your debt-to-income ratio and have a 25 year repayment plan. Yes, I know you do not want to be paying your loan for that long, but consider this.
A payment under Income Contingent Repayment (ICR) on that same balance, while earning a $35,000 annual salary, would be about $397.17!
Consider also that trying to pay $1,208 per month on $35,000 per year would be quite a financial hardship, so you would most likely qualify for Income Based Repayment (IBR). If approved for that plan, with the same salary and family size (just you), you would be paying about $228!
You Are Good Either Way!
These plans are not about paying off your loan; they are about surviving financially while making the payments. Should you make partner at a big firm and be able to pay $1,200 per month, then great! Your income based payment is capped at the ten year fixed rate, so you pay it off sooner!
On the other hand, if you struggle for 25 years and there is still a balance on the loan at the end? It gets wiped out! You might face a tax bill for the forgiveness income, depending what the tax laws are then, but you would have been able to pay every month and live your life (and the career you always wanted)!
So What Do I Do?
The examples given above are just that: examples. You need to find out how these repayment plans could help you afford your loans.
If you are a lawyer living in southern New Jersey and would like to consult with me on your loans to get a better repayment plan, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your options.
If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.