Updated on January 7, 2020
A hefty student debt load at the end of law school probably didn't sound like a big deal when you were a 1L.
But now that you're putting in extra hours at the office and still staring down 20 years of loan payments, those monthly bills probably look like a much bigger deal. You want that weight off your shoulders — now.
You could institute an austerity regime at home, but really … who wants to live like that?
Fortunately, you don't have to put shackles on your wallet to pay off your law school loans faster.
We've created a mix-and-match list of some of the best strategies to more-effectively handle your law school debt. Use these to chip away at your law school loan balance — without decimating your monthly cash flow.
Don't have time to read the whole list? Just read #1 and #13 and skip the rest.
Refinancing your student loans is one of the most efficient ways to shave years off your repayment. In fact, you could save up to $50,000 or more over the life of your loan.
That's like having your bar study loan forgiven, plus a little extra.
Bonus: if you combine refinancing with our next tried-and-true strategy, you can make even faster progress at hacking away at your balance.
Read on, counselor.
Have you ever looked at the way light reflects off a prism and thought, "Wow, is that magic?"
Of course, you know it's not. It's just math. And the same goes for paying extra on your loans.
It's one of the only times where 2 + 2 could actually equal 50. Let us explain.
Because lenders are calculating your interest each day over the life of a loan — potentially many years — paying just a few extra dollars each month can make a big difference in your interest payments over time.
Each extra dollar you pay toward principal is one less dollar you'll be charged interest on during the following month. One dollar may not sound like much, but let's do the math.
Say you set your
Imagine the savings if you paid $30 extra or $40 extra. The great thing about this strategy is that you don't have to do it every month. If things are tight, stick to your minimum. If you're flush with cash, add an extra $100.
Reminder: if you want to knock this strategy out of the park, combine it with Strategy #1.
Lower monthly minimum payments + over-paying when you can = faster progress.
It IS magic — the magic of math.
When you're talking about your monthly loan bills, less is more — but not in a good way. That is, paying less each month means you'll be paying much more overall during the life of your loan.
If you're trying to pay off your loans faster and you're on an income-driven repayment plan, it's time to make a change.
The purpose of income-driven repayment plans is to help you pay less each month and spread the payments out over the longest period possible. The downside of that is you'll be accruing interest on a higher balance for more time.
Yes, your loan balance may be forgiven after 20 or 25 years on an income-driven plan, but keep in mind that you'll have to pay taxes on the remainder. Depending on how little you've been paying, that could be a hefty tax bill.
Making money while spending money sounds too good to be true, but in this case, it's not — as long as you can count on having a bit of self-discipline.
Plenty of credit cards offer a percentage of cash back on your purchases. Sign up for one and use that credit card to pay a monthly bill or two. Most cash-back cards offer between 1% and 6% back, depending on the type of purchase.
You could even use a cash-back credit card for all your expenses, and then pay the full balance each month. But be honest with yourself about whether you'll be able to keep your spending in check: studies show that people spend more money with plastic than with cash.
Remember: whether you spend $100 or $1000 a month on that card, you must reimburse your credit card account or else you'll be paying interest on that money. That's not a good result if the whole purpose of getting the card was to make extra cash.
If you need extra help, consider setting up a direct payment through your bank or credit card company.
Then comes the fun part: every few months, you can go in and put that free cash directly toward your student loans and watch your balance drop.
If you're working to pay off federal student loans, you may be able to take advantage of government programs that can help you pay down your loans faster.
You could probably tick off on your fingers how many of your law school friends are using the Public Service Loan Forgiveness (PSLF) program and how many aren't.
If you need a refresher on the program: federal borrowers who work in the public service sector or for non-profit organizations may be eligible to have their federal student loans forgiven after making 120 on-time payments.
These forgiveness programs often have very specific eligibility requirements, so talk to your loan servicer to make sure you're eligible. You can get more information by visiting studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.
One important note: if you're expecting to take advantage of PSLF, you'll probably want to ignore strategies that involve paying extra on your debt. With this program, you will not owe taxes on your forgiven loan balance. That means paying more now is wasting money.
Instead, put that extra cash toward any private loans you have, your retirement accounts, or even a home purchase.
As the student debt crisis gets more media attention, some employers are stepping up to take the heat off their employees.
A number of law firms are offering help to their young lawyers — either by developing relationships with lenders that can support their refinancing efforts or by offering actual cash that's deposited directly into your loan account on a monthly basis.
Beware: any contributions from your employer will be taxed as earnings, so be prepared on April 15.
Seems like a no-brainer, but sometimes figuring out how to put those extra dollars toward your monthly loan bill can be challenging — even if you're working a BigLaw job. Those hard-earned dollars can be quickly allocated to all the expenses that make working 80-hour weeks possible. (Who has time to clean their own house or walk their own dog with that schedule?)
Since paying just a few extra dollars a month can have a big long-term impact on your loan, making a few small changes in your expenses could create a lasting impact on your finances. Think of canceling your cable subscription, eating one less lunch out a week, or grabbing coffee at the office instead of from a coffee shop.
Within no time, you'll have forgotten that you used to spend that money, and your loan balance will thank you.
Millennials are leading the way in the freelance economy.
If you're working BigLaw hours, you probably don't have time for a side gig.
But if you're at a smaller firm or in a lower-paying position that's not eligible for forgiveness, you may have a little extra time on your hands that could result in cash in your pocket.
Lots of law school graduates have backgrounds in other fields. Started out as a graphic designer? Awesome. Making a few logos each weekend could help you put a couple extra hundred a month toward your loans.
Teach the LSAT, sell your homemade lip balm, dogsit, sign up for
Use your skills and put those earnings straight toward your law school loans.
Consider this: the average American receives $4,000 each year as a tax refund.
You may be tempted to spend that windfall on a European vacation or a new car, but paying $4,000 on your student loans now means that's $4,000 you're not going to be charged interest on later.
Just making that single payment once on a 20-year loan at 4.25% interest would save you almost $2,000 over the life of the loan. Imagine if you did that every year.
Of course, not everyone is in a position to funnel their entire tax refund toward their student loan payments.
That's okay. Don't throw out the idea entirely.
If you siphon off just 10% from your tax return, that's an easy $400 per year. And remember, small amounts of money toward your loans pay off big in the long-term.
Here's the real kicker: the federal government will pay you back for some of the interest you paid last year on your student loans — up to $625 each year. So check your previous tax returns and make sure you properly accounted for all of your student loan interest. If you didn't, file an amended return to claim that cash.
Too much of a hassle? Just chant "625 dollars, 625 dollars" to yourself while you fill out the paperwork.
If you get a bonus or a raise, pat yourself on the back. Then point that cash directly toward your student loan payments.
Just like with Strategy #9, you weren't counting on that cash, so you won't miss it. And even if you were, try to funnel at least 10% toward your loans.
Whenever you're trying to motivate yourself to put more money toward your law school loans, remember this mantra: every little bit helps.
We have more math for you, but this calculation is easy.
If there are four weeks in a month and 12 months in a year, then there are 48 weeks in a year.
Hmm … not quite right, is it? Those "extra" four weeks to get to 52 weeks a year can be a critical element of paying down your student loans.
Why? Because if you make biweekly payments, you'll end up paying one extra payment each year. And over 10 or 20 years, those extra payments add up. (Remember the mantra: every little bit helps.)
Consider splitting your monthly loan payment in half and then setting up an auto payment for every two weeks. Make sure both payments get to the lender before your due date, and you won't even notice the change.
If you're pulling 80-hour weeks and you can't find time to do a single thing on this list (you're not even sure how you found time to read it), this is the absolute easiest strategy.
Many lenders, including the federal government, offer a 0.25% discount for setting up automatic monthly payments. Take two and a half minutes to sign up on your loan account page, then forget about it and get back to that brief.
If you have $50,000 in loans at a 4.5% interest rate, just that single action will knock a year off your payments.
You probably know better than most: everything is up for negotiation.
Call your cable, cell phone, or credit card company and put those negotiating skills to work for yourself instead of a client. Ask for a lower fee, a better package, or a reduced interest rate.
And then — you guessed it — funnel those savings right into your student loan account.
All you overachievers have probably already created a 13 Strategies outline that rivals your 1L study guides. Give us a high five. You'll be knocking years off your payments by next week.
If you're looking for a plan that looks a bit more like your 3L study guides, we get it. You can still make a serious dent in your law school loans without spending too much time. Just implement one or two of these strategies and you'll thank yourself when you make that last loan payment a few years ahead of schedule.
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