Post-college life

Member Spotlight: 3 Simple Ways to Tackle Your Law School Student Loans

If you're a law school grad staring at six figures in student debt, looking at your balance every month can start to feel pretty daunting—but don't lose hope just yet. Even a mountain of student debt can be conquered with an empowered mindset and the right action.

Eric Chisholm has spent the past few years discovering just that. Eric is an associate general counsel with the American Bar Association and marathon runner living in Chicago—he also happens to be a CommonBond member. After finishing three degrees at the University of Michigan, including a dual-degree graduate program in law and social work, Eric thought he would go the Public Service Loan Forgiveness route by making 120 payments over ten years, then have the loans forgiven.

When he realized his $320,000 student loan balance wasn't budging, Eric sat down and took a hard look at his debt. The math made it clear. Even with PSLF, Eric's interest rate of around 7.5 percent meant he would still be paying a painful amount of interest over the life of the loan. Eric realized he may actually save more money in the long run by refinancing his loans for a lower rate instead of waiting to qualify for PSLF. This "a-ha" moment triggered Eric to rethink his approach to student debt and create a new strategy that would help him get rid of his student loans as quickly as possible. Here's how Eric is carving out a solid path to a zero balance on his student loans.

1. Get strategic

High student loan balances after law school are the new reality, with the average graduate borrowing $112,776 to fund their education. While a small percentage of people will be able to pay off their balances quickly, the vast majority of grads will take a more measured approach. For Eric, that meant getting serious about his payments and creating a strategy to move toward being debt free.

Eric started to pay $4,000 a month consistently on his loans for about a year. Around the same time he also received a substantial pay raise at work. The combination of these two factors improved Eric's credit and finances and prompted him to consider refinancing.

Since lenders look at a combination of factors including employment, income, debt-to-income ratio, and payment history, consider taking a strategic approach like Eric's to strengthen your overall financial situation. If you've recently improved your credit score or received a raise at work, it's an ideal time to apply for refinancing, since you may receive a lower interest rate.

2. Do the research and educate yourself

Eric started reading lender reviews while researching ways to improve his personal finances overall. He found online community forums to be one of the most helpful sources of information as he began to apply for refinancing with multiple lenders. Some of Eric's go-to-resources included Mr. Money Mustache, Bogelheads, and White Coat Investor. These communities provided Eric with inspiration and practical how-to's on everything from building wealth to overcoming high student loan balances.

3. Find a lender that works for you

Eric's initial estimate rates from different lenders were comparable. However, by doing his research and outlining the loan terms he wanted, Eric was able to narrow down his selection. Ultimately, CommonBond's competitive rates and solid customer service reviews stood out to Eric.

Looking back with some perspective

Eric said he's glad the refinancing process was a smooth experience, but it also revealed missed opportunities where he could have lowered his student loan balance while still in law school. Eric offers this advice for students still working on their degrees:

  • Set a budget - Structure a sound budget and look for ways to buckle down on expenses while you are in school. The less you have to take out in student loans, the better.
  • Pay your interest early - Eric saw the full impact of interest when he ran the numbers on his student loans. Now he knows that setting up small payments to cover the interest on his unsubsidized loans would have prevented his balance from going up while he was still in law school and during the deferment period. He recommends other law students try to at least cover the interest accruing each month. It will make an impact later.
  • Stay open to new career opportunities - While Eric initially planned to work in child advocacy law and utilize the Public Service Loan Forgiveness program, he's glad he remains flexible about his career path. Having an open mind led to job opportunities in both the private and public sectors, and also opened the door for Eric to serve as the president of the Board of Directors for the Center for Law and Social Work. In addition, refinancing gives him the chance to save money over the life of his loans without the uncertainty many borrowers are facing with the Public Service Loan Forgiveness program.

Today, Eric is making big progress on paying off his student loans by paying a little extra each month and using his personal financial knowledge to live a more frugal lifestyle. This  will help ensure a debt-free future, but until then, Eric says, "Seeing that loan balance go down every month feels good."

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