Law school loan repayments

I know this is everyone’s favorite topic so I won’t beat around the bush. Government loans were a breeze to consolidate, and I’ve also been able to “consolidate” my private loans and lower my interest rate to 5.99%. Here’s how I did it.

I consolidated my federal law school loans while in law school and locked in a low interest rate of 3.25%. I also set up direct debit so I would get the 0.25% discount on my interest rate, bringing my interest down to 3%. Even better, direct debit guarantees that repayments are made on time so after I’ve made 36 consecutive scheduled payments on time, another interest discount of 1% applies which will bring my interest down to 2%. It’s kind of nice to have direct debit set up and then forget about those repayments, especially since the payment amounts are only around $250 a month for me under the Income Contingent repayment plan.

Private loans are another story, however. I took out 3 private loans from Access Group over the course of law school. I came to law school with absolutely no money so I had to borrow money for all my expenses. I never borrowed the full amount of attendance costs at my law school, but I borrowed enough to get by. As frugal as I tried to be during law school, I still ended up with a sizable amount of debt. When I received my Access Group repayment statements after law school graduation, I was staggered by how high my interest rates were on those 3 private loans. It actually brought me to tears. I knew they had raised the interest rates, but to almost 12%??? Adding insult to injury, I could not find any loan providers that would consolidate my private loans. When I calculated how much I would pay in interest every year on the Access loans, I was shocked to discover that it would be in the neighborhood of approximately $2,000 a year. I tried to make large payments to Access each month, but it seemed like I was always paying off interest without being able to touch the principal. I felt like Access Group and other private lenders had it set up so that people would never be able to pay off their loans.

Through research, I found a personal loan that would pay off my private loans and lower my interest to 8.9% (and on only one big loan instead of 3 separate loans too!). I was nervous about using personal loans because I hoped to find an employment position with a loan repayment assistance program (LRAP). However I learned that even if I secured employment with LRAP benefits, they would only make payments on the government loans, not the private loans. So I took out the personal loan from Capital One, and I can’t tell you how good it felt to pay my private loans in full and bid Access Group and its exorbitant interest rates sayonara!

A month or so later, I learned that my federal credit union was offering balance transfers at 5.99% interest. I was all over this offer!!! I transferred my balance from the Capital One loan to the federal credit union, and the interest rate on my private loans is now 5.99%, half what it was with Access Group! Even better, I now have a fixed payment schedule that ensures that my private loans will be paid off within 5 years. I feel SO much better and more positive now that I’ve gotten my private loans away from the evil grip of Access Group and can see the light at the end of the tunnel. Once the private loans are paid off, I’ll be able to increase the payments on my government loans to pay those off more quickly. I’m hoping I’ll have all my law school loans completely paid off within 10 years.

If you have private loans with high interest rates you may want to consider the strategy I used. There are so many banks and financial institutions out there offering personal loans at much lower rates than law school loan providers that it would be worth a look. If you happen to be a member of a credit union, even better. It’s also worth setting up direct debit on your government loans to cut up to 1.5% off your current interest rate. 1.5% doesn’t sound like much but it goes a long way if you have $50,000.00 in government loans, of which 1.5% is $750.

I’ll get off my soapbox now. Sorry to preach but I am notoriously cheap and have been known to argue with the cashier over 50 cents, so obviously I had a big problem with throwing away $2,000 a year in interest for nothing.


2 thoughts on “Law school loan repayments

  1. Congratulations! Bar loans are currently the biggest thorn in my side of them all. I hadn’t thought to look to Capital One for my consolidation efforts, but now I may check it out!

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