Law school is expensive, but the silver lining is you can expect a strong return on investment. Most lawyers earn six-figure salaries, even when they’re getting started.
High salaries make lawyers fantastic candidates for student loan refinancing. Because many lawyers have a low debt-to-income (DTI) ratio—the ratio lenders use to measure your monthly debt relative to your monthly gross income—it’s easy to qualify for low interest rates when refinancing. Cutting back the interest on your loans by refinancing is a great way to reduce the total amount you’ll pay, especially if you have a large amount of student loan debt.
Understanding Average Law School Debt
The legal industry continues to enjoy steady growth, according to the U.S. Bureau of Labor Statistics (BLS). It has an expected growth rate of 5% per year from 2023 to 2033, which is on par with other careers nationwide.
While lawyers make high starting salaries, they often pay even higher tuition while attending school. Most lawyers are in a stable financial place after graduation, but it’s hard to reap the benefits of your hard work when you’re still burdened with student loans.
Below are statistics from the Education Data Initiative on law school debt and expected earnings, as of October 2024:
- Average law school debt: $130,000
- Average starting salary for public sector: $57,500
- Average starting salary for private sector: $200,000
With a high expected salary and steady industry growth, most lawyers can expect to lower their interest rates with student loan refinancing.
Average Time Paying Off Law School Loans
The average time it takes to repay law school loans can vary depending on whether the borrower has federal loans, private loans, or a combination of both.
According to the Education Data Initiative, it takes lawyers in the public sector an average of 19.1 years to repay their federal student loans if their monthly payments are equivalent to 25% of their income. That average decreases to 9.9 years for those in the private sector. That said, you could qualify public service loan forgiveness (PSLF) if you work in an eligible nonprofit or government role and make 120 consecutive monthly payments.
Learn More: Student Loan Refinancing vs. Public Service Loan Forgiveness
When Should You Refinance Law School Debt?
Refinancing your law school debt could help you pay it off sooner, and it might make sense to refinance if:
- You can access a lower interest rate
- It can make your monthly payments more manageable
- You don’t qualify for PSLF
Benefits of Refinancing Law School Debt
Refinancing your law school student loans may result in certain benefits, including:
Ability to lower your interest rate: When you refinance your debt, you could qualify for a lower interest rate and save money over the life of your loan.
Option to change your law school loan repayment term: Refinancing might shorten your student loan repayment term to decrease the amount of interest you’ll pay over the life of the loan. You could also increase your repayment term to reduce your monthly student loan payment expenses.
Option to refinance again if your financial situation improves: Even if you’ve refinanced once, you can do so again if your credit score or DTI ratio improves. You can also keep an eye on interest rates and refinance again if they drop.
Consolidation can simplify your payments: When you refinance, you consolidate multiple federal and private loans into a single payment. Consolidating your law school loans makes your payments easier to manage.
Ability to lower your law school loan payment if you aren’t eligible for student loan forgiveness: Lawyers who work in private practice or have loans from private student loan lenders don’t qualify for PSLF. In that case, refinancing can make good financial sense.
Ability to lower your payment if you aren’t enrolled in any federal student loan benefits: While student loan refinancing can be an effective tool for managing debt, one of its biggest drawbacks is that you lose out on federal benefits when you refinance federal student loans. But if you aren’t currently relying on any federal student loan benefits, you won’t need to worry about losing them.
How Much Could You Save by Refinancing Law School Loans?
The amount you can save by refinancing your law school loans depends on a few factors.
First, if you have a strong credit score, you’ll be more likely to receive a low interest rate estimate from refinancing lenders. Lenders also take your DTI ratio into account. If you’re earning a steady income and can afford your monthly payments without a problem, then you’ll likely receive a better rate, as well.
If you have a high interest loan, refinancing could be a wise move. For example, let’s say you have a 10-year repayment term with law school debt of $134,600 at a 6% fixed interest rate. If you made all payments on time, your monthly payment would be $1,494.34, and you would pay $179,320.31 over your loan term, with $44,720.31 of that total being interest alone.
If you refinanced to a 10-year term with a 4% interest rate, your monthly payment would fall to $1,362.76 per month, and you would pay $163,531.15 over your loan term, with just $28,931.15 of that being interest. You would save $131.58 per month and $15,789.16 in interest costs over your loan term.
To input your own numbers with ELFI’s current rates, try our Student Loan Refinance Calculator.
Refinance Your Law School Student Loans with ELFI
As a lawyer, you may have accumulated a significant amount of student loans. While your loan balance can be a burden, student loan refinancing could help you save money and lower your monthly payments.
Different lenders have different eligibility requirements for refinancing your law school loans, so it’s important to do your research before a refinance. Learn more about the benefits of student loan refinancing with ELFI to see if we’re the right fit.
