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Financial Aid

How will I ever pay for law school?

That's a good question to ask yourself. Law School is expensive! Private school tuitions are topping $40k, and with a year's living expenses, $60,000 is not unusual. Even public schools are getting expensive. UCLA is charging over 30 grand for residents!

For a lot of people, especially those of the impoverished persuasion, being kept seems very attractive. Since most of us don't have an inamorata of extensive means (i.e. rich), we look to the law schools for financial assistance.

That's where our problems begin. In the not-stock-market-crash that left the country in a not-Depression last year, many law schools had to tighten their money belts. Big-name, old, respected schools with big-name, old, respected endowments weathered the storm and handed out money pretty much as they always did. (Perhaps that's why they're Big-Name and Respected.) Most other schools had fewer and smaller scholarships.

Now let me start by saying I know NOTHING about economics or finance. Virtually every word I know is printed here and recently acquired. If it doesn't make sense, don't blame me; I've scrambled to read just enough to figure out what on earth is going on, and I report it here.

I don't know where or when the Money Problem started. Some take it all the way back to the gold standard. The problem apparently was compounded by a recent regulation, and I quote:

"...one of the few uncontested causes of the current crisis is the 2004 decision by the Securities and Exchange Commission to let the largest investment banks increase their leverage ratio from about 12-to-1 to 30-to-1, or even higher.

"...clients get tempted by funds that deliver outsize returns by assuming a lot of hidden risk."

What Would Warren Do?, by Megan McArdle, The Atlantic, September 2009.

Buying on a margin of 30 to 1 assumes a lot of risk; I'll take their word for the "hidden" part. This is what led to the failure of the Money Industry. Banks were having a field day, giving "no down payment" mortgages and other things that looked cool at the time, and look like malfeasance now. Then the food chain began:

  • Small banks bit off more than they could chew; when the housing market soured, banks with too many high-risk mortgages went bankrupt.
  • Mid-sized banks decided that they could make a killing by buying out the small fry and sitting out the recession.
    • They were wrong; the recession lasted longer than their own assets, and they too went belly-up.
  • Large banks bought out the medium-sized ones, then started scrambling to keep themselves from suffering the same fate.

And it's that scrambling that I've come to tell you about.

  • If you miss a single credit card payment, you may become ineligible for a student loan. In the meantime, your interest rates will skyrocket.
  • If you pay off a credit card to save the interest payments, they may close out the card, or at least lower your line of credit, and you won't have money OR credit when school starts.
  • If they offer you a fixed-rate payment plan, they intend to close out your card, no matter what the letter, email, or person on the phone says.

It's really a very simple formula: if you count your credit card as an asset (a benefit to you), the bank counts it as a liability (a problem for them). The easiest way to shift their asset to liability ratio is to increase assets (like your interest rate, late fees, etc.) or decrease liabilities by taking away your credit.

So no matter what you do, DON'T pay off your credit card debt
to clear up assets for law school!

So how do you get money for law school?

The best way is by "buying down" -- going to a school with a slightly lower reputation that's willing to pay for your LSAT score.

How low should you go?

That's the $64,000 question -- literally! You need to compare the average starting salary differences (which you find on the paid version of US News under "Careers") and the number of recruiters (which you find on NALP) with the amount of money they're offering you. Where's the trade-off? I don't know; it's a very individual call. But if attrition rates are high or bar passage rates are low, it's probably not worth it.

And Where should you go?

If I've said it once, I've said it a thousand times: the best deals are in the Midwest, Great Lakes, and Great Plains regions. That's doubly true if you're any kind of racial or ethnic minority. Wisconsin, Iowa, Nebraska, and Ohio State have money that DC either doesn't have or doesn't need to spend to get whom they want.

Don't they pay for anything else?

Not that I know of as of this writing.

Not Enough Money, or Not Enough Courage?

A number of schools reported losing students at the last minute, not because the students couldn't get loans (which is what I had anticipated), but because the horror stories in the news and on the internet about the poor outlooks for legal jobs in the next year or two frightened enrollees away. There's no hard data on the matter, but my suspicion is that once again disadvantaged people were the most likely to bail out (assuming that they wouldn't get jobs and thus fearing to assume the debt load that was facing them), while the more privileged kids with high LSAT scores got the grants. [Yes, I know those are two very long sentences. They are grammatically correct and not run-ons. If you can't struggle through them, you can't be a lawyer. If you don't want to struggle through them, you shouldn't be a lawyer. This is a test.]

 

Interested in the Public Interest?

You needn't avoid more expensive schools just because you want to take a lower-paying public interest job when you graduate.  Many schools provide Loan Repayment Assistance for students who take lower-paying public interest jobs after law school.  NYU's program is reportedly the best, but many schools have similar programs. The Public Interest Law Foundation is a student-run organization with groups on many campuses.  The group raises funds each year to provide stipends for students who want to take public interest jobs in the summer.

I can't take out $150,000 in loans!!!!

And you may not have to. Scholarships and grants both refer to money that you will not have to pay back later. "Scholarships" are awards, merited by your grades, LSAT score, extracurricular activities or plans to engage in a specific field, such as poverty law or child advocacy. "Grants" are awards made by the school based at least partly on your financial status. They come from the school's operating budget, and are usually (but not always) given to offset the difference between your ability to pay and your loan availability. The balance of grants and loans in these "packages" varies with a school's resources and its interest in the student.

Who Gets Grants?

Traditionally, schools had money for geographic diversity. Duke, for instance, had been known to offer very generous grants to northerners, to lure them away from schools like Penn and NYU (schools which are ranked very similarly to Duke and accept many of the same students).

The second common diversity factor is ethnicity. Schools will often use grants to reduce the cost for a minority student, whether that person is of a racial minority or another group that will add to the school's mix of students, such as people who grew up in the former Soviet Union or the People's Republic of China.

In general, a school is more likely to use grant money to attract students whose ethnicity would otherwise be underrepresented. This can be a matter of local population, or of desirability of location. For instance, California has a very low resident population of African Americans as compared to the east coast. They may offer larger grants to African-Americans to encourage them to attend their schools. These same schools are less likely to offer diversity grants to Chinese and Japanese, since both groups have high populations in California. Schools in the midwest, on the other hand, may offer more diversity money to Asians and less to African Americans.

At least since 2005, grant money went to people with high LSATs, as response to the USNWR inflicted yet another change on the admissions game.  Even two points above a school's median can get you merit money.  So if you need dollars, retake the LSAT!

What Controls the Grant Amount?

In addition to the desire for diversity and a student's grades and LSAT score, a school's use of grants may reflect the time of year, or the size of the school's endowment. Schools may offer less grant money and larger loan packages to applicants whose grades or LSAT scores are far below the medians (in effect a "negative" merit scholarship). Students offered admission late in the year (especially those called from the wait list) may be offered less money simply because the school has exhausted its resources. And schools with smaller endowments, especially state schools, may have less money to offer in the first place. The size of a grant award reflects all these factors, and thus varies widely from school to school.

My Parents Have Money...

Then most private schools will take this into account in awarding grants.  Public schools tend to  consider only the applicant's income for graduate schools, just as FAFSA does, as long as your parents have not claimed you on their income taxes.  Any school using the Needs software for financial aid, and most that have their own supplemental forms, will base grant awards on your parents' income as well as yours.

... But I'm a Grown-Up!

Can you prove it?  If you're under 30, have been to graduate school, or have less than 3 years full-time work experience after graduation, you may have trouble getting them to count you as completely independent.  If you're over 30 and have worked a while, try submitting a notarized letter stating that your parents haven't contributed to your upkeep since 20XX, show your own income tax returns for 3 or 4 years, and ask their advice.  You can also try enclosing a notarized letter from your parents saying that they refuse to contribute to your education, but I warn you that I personally know of only two people who succeeded in applying without parental information.  One was an orphan, and the other claimed her parents on her income tax returns!

On the other hand, parental income may not be as important as you think.  If you're clearly independent, many law schools won't require your parents to contribute unless they're pretty affluent.  

So What Should I Do?

Don't limit your choices from the outset to the schools you think will give you money. Apply to a number of schools and see what kinds of financial aid offers you receive. Private schools may have much more money to offer than state schools; you may be just the kind of student a school is seeking. Let the schools see your file and make a decision before removing them from your list.  And start now learning about the complexities of financial aid. There are a number of helpful sites on the web:

The Financial Aid Web Page has a wealth of scholarship and grant information.

The U.S. New & World Report Financial Aid Page gives grant and loan information, along with a number of other useful web sites.

Sallie Mae, a federal lending and loan consolidation organization, has calculators that will show you how much you have to repay each month on various loan amounts.

Each of these sites may refer you to many other helpful places. Before you go crawling off, make sure you've placed a bookmark here so you can return later.

Bad and Good Advice

If your prelaw advisor implies that you can't afford an expensive private school without referring to grant amounts, you're getting bad advice.  If the advisor doesn't consider cost of living in evaluating programs, you're getting bad advice.  If (s)he doesn't consider the return on your investment, you're getting bad advice.

When I advise a client about costs, we discuss the client's current financial status to see whether there's any chance of getting grant money in addition to loans before ruling out "expensive" schools.  When considering expenses, we factor in cost of living as well as tuition.  I had a client looking at BU, Georgetown, Hastings and USC.  Tuitions varied by several thousand dollars, but so did cost of living -- in inverse relation to the tuition, so that all four schools ended at the same cost.  We also looked at average starting salary at all four, and again found negligible differences. So this client knew that cost and return on investment was not going to be a decider for her.

When evaluating costs, I also work with disadvantaged students to help them understand the importance of taking out student loans, the relative return on their investment, and the value of attending the best school instead of the cheapest.  I know how frightening loans can be, and help the applicant get beyond those fears to see the best choice for their future.

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