Three years, two summers, and one graduation cap later, you're done with law school! Congratulations on making it through 3L and into the real world. The many distractions of summer—and the demands of a bar prep course—can make it easy to forget about your law school loans as they quietly accrue interest. Don't be tempted, though: You could save a fair amount of cash by taking care of your loans today instead of at the end of your six-month grace period. Here are three ways to take control of your finances this summer, including the merits of refinancing and consolidation:
1. Learn what you owe, and have a repayment plan ready for the fall.
According to the American Bar Association, the average graduate has borrowed $84,600 to pay for a degree at a public law school, and the average private law school graduate has borrowed $122,158. Putting the average law school debt, then, at approximately $103,379 across the board, let's simplify and say you have a 10-year loan for that amount at a fixed rate of 6.21%. This will translate into monthly payments of about $1,159—keep this monthly commitment in mind when you're choosing your new apartment, researching your next car purchase, and planning ahead for your financial goals.
If you have federal student loans and you're entering the public sector, you might be eligible for a specialized Income-Based Repayment program or even a student loan forgiveness program. These can be great options to help adjust your monthly payment or ultimately lower your debt load after a period of time. Meanwhile, if you have private student loans, or you want to optimize for savings over any other potential benefits, you should consider whether refinancing your student loans into one, new loan at a lower rate is right for you.
2. If you can get a better deal by refinancing and consolidation, do it now instead of later to save money.
Interest still accrues on many student loans during your grace period, meaning that extra interest is building up during the summer. When your grace period ends, the interest will capitalize, meaning that accrued interest amount will be added to your existing loan balance and bump up your costs during repayment.
Let's go back to that 10-year loan for $103,379 at a fixed rate of 6.21%. In the first six months, more than $3,000 in interest accrues on that loan. If you refinanced that same amount of debt, with the same 10-year term, down to a fixed rate of 4.74%, you'd save $751 in interest during your loan's first six months. Not a bad deal for taking the exact same steps now instead of later this fall.
Also, some lenders will still honor your grace period even if you refinance early, including us here at CommonBond. Just ask a member of our Care Team and we'll be happy to honor your grace period—your new loan will accrue interest at a lower rate with no payments due until your grace period ends.
3. Map out your personal plan to meet your financial goals.
When you've picked the best loan type for your personal situation, you'll be in great shape to start in on your broader financial goals. If you're looking for perspective on which priorities to tackle first, you may want to read this post on how one graduate is planning to repay his law school loans. Planning to own a home in the next few years? Here's a mortgage and purchasing guide. Want to start investing? Here's how to get started on the right foot.
Best of luck on the bar, and good luck managing your loans! If you have any questions at all on refinancing or consolidation, get in touch with us at firstname.lastname@example.org —we'd love to hear from you!