Debt Management & Repayment

The majority of students on financial aid receive assistance in the form of loans. While many students graduate with significant debt levels, starting salaries are often substantial enough to support repayment of these debts. Graduates with relatively low incomes, or graduates at moderate incomes with very high levels of educational debt, can receive assistance through our Low Income Protection Plan (LIPP) program to help with the repayment of their loans. Graduates who do not qualify for LIPP should investigate consolidation and other repayment options. Please refer to the LIPP section of our website for more information.

If you carefully plan your expenses for the three years of law school, you can reduce your need for loans and your overall total borrowing. If you choose to spend more now, you may find yourself with possibly as much as $10,000 more in debt by the time you graduate. An additional $10,000 in debt will cost you a total of $16,000 in principal and interest payments over a ten-year repayment period. The following suggestions are offered to help you reduce your overall debt.

  • Living in a dorm may be the most economical choice. Carefully check the cost of each dorm. Some are more expensive than others.
  • Try to avoid a single apartment unless you are married or have dependents. To stay within the living expense budget, students with apartments should try to have a roommate.
  • Plan to eat out infrequently unless you are living in a dormitory. If you must eat your meals out, choose carefully and keep track of your monthly expenditures.
  • Do not use credit cards. Pay off all consumer debt before the academic year begins.
  • Do not bring a car to Cambridge unless you are married and your spouse is working and needs the car to commute to work, or unless you have a family. It is far cheaper to rent a car for occasional excursions beyond the Cambridge/Boston area than it is to pay for insurance and parking.
  • Seek alternate funding sources; e.g., outside scholarships/fellowships, teaching assistant jobs. These sources can significantly reduce your total borrowing. For additional information on how we handle these resources and possible sources see the Outside Scholarships and Academic Year Employment sections of our website.

Projecting your cumulative educational loan indebtedness should be a part of your decision to attend any graduate program. Although it is difficult to reduce your educational investment to a dollar figure, this is an important part of your future planning. Fortunately, our Low Income Protection Plan, which has been in existence since 1979, ensures that any graduate wishing to pursue a law-related career need not be limited by salary considerations. Before you can appreciate the effect of our LIPP program, however, you need to be able to project your loan repayment. We have included a few borrowing examples, as well as a table of conversion factors (see below) that you can use to begin this planning now.

The loan debt examples below illustrate projected payment amounts at various levels of debt and median interest rates for three years.

Example #1—$20,500 Unsubsidized Direct Loan (assumes 6.0% interest rate, 10 year repayment)

Total Borrowing  $61,500
Monthly Payment  $683
Yearly Payment  $8,196
Total Payments (10yrs)  $81,960
Total Interest Paid  $20,460

Example #2— $44,300 Base Loan for 14-15 (assumes 7.0% interest rate, 10 year repayment)

Total Borrowing  $132,900
Monthly Payment  $1,543
Yearly Payment  $18,516
Total Payments (10yrs)  $185,160
Total Interest Paid  $52,260

Example #3—$79,540 Full Year Budget of for 14-15 (assumes 7.0% interest rate, 10 year repayment)

Total Borrowing  $238,620
Monthly Payments  $2,771
Yearly Payments  $33,252 
Total Payments  $332,520
Total Interest Paid  $93,900

In addition, the loan interest rate conversion table is listed below. Simply refer to the appropriate interest rate to find the factor by which you should multiply the number of thousands of dollars you project borrowing. This will help you determine your monthly payment for the ten-year period following graduation.

General Loan Repayment Estimates Interest Conversion Factor Table
(Assumes 10-year repayment schedule)

per $1,000

3.0 9.66
4.0 10.12
5.0 10.61
6.0 11.10
7.0 11.611
8.0 12.133
9.0 12.668
10.0 13.215
11.0 13.775
12.0 14.347

Example: Total loan debt of $80,000 at 8% interest rate: 80 x 12.133 = $970.64/mo. loan payments.

Once you calculate your annual repayment obligation you can work from there to project your debt-to-income ratio as you consider your starting salary. Elsewhere on our website, we have a number of Planning Tools to help you with this thought process.

Although manageable debt burdens vary greatly with individual lifestyle, you should probably consider annual loan payments in excess of 20% of your gross income to be excessive, although at private law firm income levels a more substantial loan payment may be manageable.  At lower salary levels, our Low Income Protection Plan should be incorporated into debt-to-income ratio projections.

It is possible to borrow up to the full cost of education at the graduate level. Many students are accustomed to borrowing a maximum of $5,000 to $6,000 annually as undergraduates. This distinct shift in the balance of loans and grants from undergraduate to graduate aid is often startling to incoming students. We hope that the information on loan repayment and our Low Income Protection Plan serve to reassure you that carefully planned borrowing can be quite manageable.

Last modified: July 28, 2014