Student Loans for Law School

If you are considering becoming a lawyer, but will need student loans for law school, there are 3 options to consider. Each of the options described below has certain advantages and restrictions that you should understand and consider when you are trying to figure out how to pay for school. For most students, a blend of two or three of these options is most appropriate, o required, because of the restrictions that exist. Understanding your options is the first step to planning for law school.

Subsidized Graduate Stafford Loans

A subsidized graduate Stafford loan is awarded based on your financial need. With this type of loan, you do not have to pay any interest while you are in school or during the deferment period. The deferment period typical extends for six months after graduation. During this period, the federal government subsidizes the loan by paying the interest for you. Once you enter the repayment period, interest begins to accrue to you as the borrower, but before this, the loan is interest free. All Stafford loans have principal guarantees provided by the federal government and carry maximum interest rates that vary based on the date the funds are dispersed.

There are restrictions on the maximum amount that a law student can borrow as a subsidized Stafford loan. You can borrow no more than $8500 per year, and no more than $65,500 total. The maximum debt amount for law students includes any subsidized Stafford loans that you took as an undergraduate as well.

Unsubsidized Graduate Stafford Loans

Unsubsidized graduate Stafford loans are not based on need. Any eligible student currently enrolled in school may apply for this type of loan. In this case, you take the loan and the interest begins to accrue immediately. It is still deferred until you graduate, but the additional amount is capitalized. This means that the interest balance that goes unpaid while you are in school is added to the principal balance upon graduation.

There are restrictions on the maximum amount that a law student can borrow on an unsubsidized loan as well. You can borrow up to $20,500 in any given year, including the $8500 than may be subsidized. The maximum debt amount for a law student is $138,500, which includes the $65,500 maximum of subsidized Stafford loans and any Stafford loans that were taken out while you were an undergraduate.

Private Loans

In addition to Stafford loans, as a law student, you may be eligible for private loans. This is usually the type of loan that students take to cover cost of living, as well as any shortfalls created by other loans. You should contact your school and determine the annual cost that they estimate for attending. This number will include tuition, books, and cost of living. This number is published as is usually the maximum a lender will approve you for without special dispensation from the school financial aid office. This is a universal number determined for all students and is meant to help you budget to a standardized and reasonable figure. Most students use a blend of all three types to meet all of their financial needs.

Why Are Suprime Car Loan Interest Rates So High?

Getting a subprime car loan could be an option for you if you have been turned down by a traditional car lender. Subprime car loans provide loans to those that have less-than-perfect credit at a higher interest rate. Here are the basics of why subprime car loans have a higher interest rate than other loans.

Subprime Car Loans

In order to fully understand why subprime car loans have such high interest rates, you first need to understand what these types of loans are. A subprime loan means that the lender is dealing in the riskiest part of the market and makes the loans separate from traditional loans. Those with a 640 FICO score or lower will be potential clients for this market.

Increased Risk

The lenders are going to charge more for the interest rate on these types of loans because of the increased risk. When you are dealing with people that have a credit score of less than 660, this means that you are taking on a great risk. Those with low credit scores got those scores because of their disregard to paying their debts. Regardless of what happened to cause them to not pay their bills on time, the fact remains that they are a bigger credit risk than those with higher credit scores.

Lending money to someone for a car loan is an investment for the lender. They do it so that they can make a return on their investment. One of the first rules of investment is that when you take on higher risk, you should be able to get a higher reward. Therefore, when the lender works with someone that falls into a high risk category, they are going to be asking for a higher return on their investment.

Lack of Options

Another reason that these lenders charge so much is because they know that they can and still have plenty of business. There are quite a few people that fall into the category of not having a good credit history. These people can not get a normal car loan and therefore, they have to deal in the subprime market. When the lenders know this, they can charge a higher rate of interest and still have a steady stream of applicants that have been turned down elsewhere. Almost everyone needs a car these days and therefore, they will be willing to take any interest rate that they can get in many cases.

Risk of Default

Another factor that goes into the high interest rate is the risk of default. Many borrowers that fit into the subprime market have a high debt-to-income ratio. This combined with a bad credit score means that they are a high risk of default. As a subprime lender writes loans, they know that there is a certain amount of loans that will go into default. With this information, they have to charge the group as a whole enough money in interest so that they can still make money even with the defaults.