Over ten years ago, only about a third of students borrowed money to pay for tuition. Currently, about two-thirds of students are racking up loan debt. Law school students have an average of more than $45,000 in student loan debt. The economic crisis and the increase in college tuition have resulted in an escalating reliance on student loans. As a result, a student loan debt epidemic occurred.
Stripping and Dumpster Diving JD’s!
The student loan debt epidemic has left many students in a worse position than before they entered law school. Many would agree that working at Starbucks for three years is better than obtaining a JD, racking up $100k in student loans, and then having to work at Starbucks. How about having to work as a stripper? A dumpster diver? A firefighter? Those are the lives of Carla, Todd, and Jadiem, respectively. Read their story. These are extreme cases of what can happen if you take out too much in loans. This article is meant to 1) lend advice to law graduates that are in debt up to their eyeballs; 2) illustrate what can happen if you are irresponsible when taking out student loans; 3) encourage law students to attend law school during the most optimal time for “them”.
For law graduates who are trying to pay off accumulated debt take a look at Paying Off Your Student Loans also Project On Student Debt. The economy is terrible. Now is not the time to turn down a job offer because it’s not big law, it’s not in your field, or it’s not in the location you wanted. Yes, you could eventually land your ideal job, but you risk putting yourself behind. While you are waiting around for that perfect position, your colleagues and competitors’ are getting experience. Where are they getting legal experience? Doesn’t really matter if your experience is non-existent.
Cap on Student Loan Payments
On a good note (or partially good note), President Obama has proposed to cap student loan payments at 10% of discretionary income. WARNING: Try not to get too excited. If this plan is implemented, I advise you to put more than 10% of your income towards your students loans, if feasible. Paying 10% or less can and most likely will hurt you in the long run because the interest increases the amount of time you are paying on the loan. This means that you will be taking more money out of your pocket anyways, but over a longer period of time!
Paying Off Your Student Loan As Quick As Possible
After law school, continue living like a student. Like Kerry said, “You’ve been living the life of a student up till now, so keep doing it!” She did it and paid off $17,000 of student debt in six months. Read her article. How I Paid Off My Student Debt in Six Months
You can make 120 payments towards your student loan for 10 years, or you can put a little more money towards the principal each month and pay off your student debt much faster. Paying off your student loans faster essentially saves you from having to pay such a monstrous amount of interest. Make sure your lender knows that any payments in excess of the minimum payment and interest goes towards reducing the principle! If you forget, most lenders will just advance your monthly payments by allowing you to skip next month’s payment. Also, ask your lender if there are any penalties for paying off your debt early.
Below, is an example of the benefit of paying a little more towards your loan each month:
Loan- $20,000 @ 6.8%
A minimum payment of $287.70
After 120 payments for 10 years, your loan will be paid off in 2021.
Loan – $20,000 @ 6.8%
A minimum payment of $287.70 plus $100.00 extra dollars towards the principal
If this payment plan is implemented, the same loan would be paid off in 2018 (three years earlier than if you were to just make the minimum payment)