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Refinance Your Law School Loans and Put Them Away for Life

If you took out student loans for law school prior to 2013, chances are you got the short end of the interest rate stick. But you can still loosen the grip of law school loans...

By SoFi  
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scale If you took out student loans for law school prior to 2013, chances are you got the short end of the interest rate stick.

For starters, most law school borrowers use a combination of federal unsubsidized Stafford and Graduate PLUS loans to pay for school – both of which charge substantially higher interest rates than their federal subsidized loan counterparts, which are only available to undergrads. You may have even dipped into (often high interest rate) private loans, as well.

But the fact that law school loans tend to have higher interest rates isn’t the end of the story. Before the Student Loan Certainty Act was passed in 2013, unsubsidized and PLUS loan rates had remained flat at 6.8% and 7.9%, respectively, for seven years. Meanwhile subsidized undergrad loans – and prevailing interest rates – dropped to rock bottom (see below).

FEDERAL STUDENT LOAN INTEREST RATES VS. OTHER DEBT
ATL_Rate_chart

The upshot? Law school borrowers who took out loans between 2008 and 2013 didn’t benefit from one of the few upsides of the financial crisis – the low interest rate environment. Which is ironic, because it was the crisis – and the resulting dismal job market – that drove a lot of people back to school for a J.D., LL.B. or other graduate degree during that timeframe.

What many law school borrowers don’t realize is that they might not be stuck with that high interest rate forever. In recent years, the option of refinancing education debt has become available for both federal and private loans. If you qualify to refinance your loans at a lower interest rate, you can potentially lower your monthly payments or pay off loans more quickly, all while consolidating multiple loans and saving money on total interest. For example, with SoFi (the largest provider of student loan refinancing) the average law school refinance borrower can save $15,027 [1] .

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Want to loosen the grip of law school loans? Check out SoFi to see if refinancing can improve your outdated loan rates.

[1] Savings calculations are based on SoFi J.D. borrowers who refinanced between 5/21/14 and 7/11/14.   Prior to refinancing, these borrowers had on average a $89,289 loan balance, a rate of 7.02%, and a lifetime payment of $124,878, assuming the Standard Direct Loan term. After refinancing with SoFi, these borrowers have an average lifetime payment of $109,850 based on an average received fixed rate of 5.00% and all terms offered by SoFi with AutoPay. Savings calculations are projected assuming borrowers make all scheduled payments in a timely manner.

Sources: US Department of the Treasury (Daily Treasury Yield Curve Rates); US Department of Education; Freddie Mac

Loans made by SoFi Lending Corp. California Finance Lender #6054612. NMLS #1121636

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