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What You Need to Know About Refinancing a Law School Loan

How to Refinance Law School Loans Step by Step
Jennifer Calonia
Jennifer CaloniaUpdated August 3, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Student loan refinancing can be a useful repayment tool, particularly for law school students who’ve amassed six-figure student debt.According to a 2021 American Bar Association (ABA) student loan survey, law graduates left school with an average of $130,000 in undergraduate and law school loans, combined. This figure doesn’t include bar exam loans that students take on after law school that account for an average additional $8,785 in student debt.For some borrowers, a law school loan refinance can be a way to secure lower interest rates and reduce the total amount spent toward education debt.Additionally, if you have federal student loans, you may see up to $10,000 to $20,000 of that debt canceled, thanks to the new federal student loan forgiveness plan that was recently announced. But can you take part in this federal program and still refinance law school loans? There is a way. Here’s what you need to know.

How the New Federal Student Loan Forgiveness Plan Affects Refinancing

According to the Biden administration’s new program, if you earn less than $125,000 a year ($250,000 for married couples) you may qualify for up to $10,000 in forgiveness on your federal student loans. If you are a Pell Grant recipient who meets those income qualifications, you may be eligible for up to $20,000 in forgiveness. In more good news, the federal student loan payment pause has been extended until December 31, 2022.So what does this mean for refinancing? If you refinance a federal student loan with a private lender, it no longer qualifies for federal forgiveness—and that includes the new plan as well as other government forgiveness programs. In addition, you cannot take advantage of the payment pause. What you can do, though, if you’d like to refinance your student loans before interest rates rise even more, is to refinance what you owe on your federal loans after forgiveness.

Should You Refinance a Law School Loan? 

Refinancing law school loans is one of many strategies for law graduates to manage their student loans. When you refinance law school loans, the refinancing lender pays off your original loans in one lump sum, and a new, larger refinanced law school loan is created for the combined amount.You can refinance all or some of your student debt, and include a mix of federal and private student loans, if you choose. You can refinance undergraduate and law school loans and make payments toward the law school loan refinance at a new fixed or variable interest rate. And, if it makes sense for you, you can refinance what’s left of your federal student loans after the new federal student loan forgiveness plan wipes out up to $10,000 to $20,000 of your debt.If your goal is to get out of student debt faster, you can choose a shorter term loan with a higher monthly payment. Similarly, you can extend your repayment term if you’d like a lower monthly payment. Doing so, however, often incurs more interest charges.

Downsides to Refinancing Law School Student Loans 

Although refinancing offers borrowers a handful of benefits, there are disadvantages associated with refinancing law school loans, too.

Paying More Over the Life of Your Loan 

As previously mentioned, if you decide to prolong your repayment term, you’ll pay more toward your education debt overall. An extended term divides your total principal balance across a longer period, resulting in a lower monthly payment and interest charges apply for the entire term. To avoid paying more in interest due to a longer term, consider choosing a term that’s similar to that of your original loans before you refinanced. 

Affects Credit Score 

A law school loan refinance is provided by a private lender. If you decide to move forward with your refinance application, the lender will conduct a hard inquiry into your credit record and pull your credit score. This type of credit check can result in a lower credit score, temporarily. Making on-time, monthly payments toward your refinance loan can help your credit score over time.

Loss of Borrower Benefits

One of the biggest drawbacks occurs when refinancing federal student loans. As mentioned earlier. during a refinance, the federal loans you convert into a law school loan refinance become a private loan which aren’t eligible for federal benefits and programs.The same ABA survey found that nearly 20 percent of law school graduates were working toward Public Service Loan Forgiveness (PSLF). PSLF is a federal program that forgives a portion of your law school debt, after you’ve successfully met certain requirements. However, if you refinance your federal loans that debt won’t qualify for PSLF.Additionally, you’ll lose access to other federal benefits like income-driven repayment plans, and generous deferment and forbearance options. Refinanced loans also are ineligible for emergency relief, like the automatic administrative forbearance on payments and interest charges due to the Coronavirus pandemic. Related: Pros and Cons of Refinancing Student Loans

When Should You Refinance a Law School Loan? 

If you want to pay off your student loans quickly, refinancing is one way to do so. However, it’s not the best option for everyone. A refinancing strategy might make sense for you if you don’t anticipate working in public service or benefiting from federal protections in the future. Once you’re refinanced to a private lender, you’re ineligible for federal forgiveness programs.If you can confidently say that you won’t need federal repayment relief options as you pay back your educational debt, refinancing your law school loans might be an option.

How to Refinance Law School Loans and Get the Best Deal 

There are a handful of basic steps:
  • 1. Assess Your Circumstances: Evaluate your job security and existing savings to determine whether you could reasonably make your monthly student loan payments if your income suddenly decreases. This is critical, because private lenders have different relief options compared to federal loans. You’ll want to make sure you can keep up with your refinance loan payments before proceeding.
  • 2. Manage Your Credit: It’s also a good idea to request your credit report from each credit bureau. Since your refinancing rates are partly based on your credit, you’ll want to ensure that your credit record has no errors that might be lowering your score.
  • 3. Consider a Cosigner: Some refinance lenders let you add a cosigner with strong credit to your loan agreement, if your credit doesn’t meet its minimum requirements. A cosigner is legally liable for making payments on the loan if you’re unable to pay. If you fail to make on-time payments, their credit is also affected. Before proceeding, talk with your potential cosigner about their repayment expectations as this is a major responsibility they’re accepting.
  • 4. Compare Offers: When you’re ready to browse law school loan refinance offers, see what rate and terms you qualify for across a handful of lenders. Comparing student loan refinance offers can help you find a competitive refinance option.
  • 5. Choose the Best Loan for Your Payoff Goals: Consider the goal you’re ultimately trying to achieve by refinancing your student loans. The loan you choose should take your personal situation into consideration and be based on your payoff objective. For example, if you’re refinancing to get out of student debt ASAP, you might decide on a shorter repayment term in addition to choosing an offer with the lowest interest rate.
Depending on your lender and your unique situation, you might be asked for additional information or paperwork to complete the process.

Check Out Lantern's Law School Student Loan Refinance Rates

Remember that refinancing law school loans is just one option to managing your education debt, and refinancing federal loans results in losing access to key benefits. For example, if you have Direct Loans and might be interested in serving in the public sector, refinancing your federal loans makes your refinanced federal loans ineligible for loan forgiveness through the Public Service Loan Forgiveness program.If you’re confident about not needing access to loan forgiveness and other federal protections, a student loan refinance can be a strategic repayment option. Find a law school loan refinance lender today.

Frequently Asked Questions

How much can you save by refinancing law school loans?
What is the average student loan debt for law school graduates?
How can I pay off my law school student loans faster?
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About the Author

Jennifer Calonia

Jennifer Calonia

Jennifer Calonia is a Los Angeles-based finance writer who has covered the gamut, including student loans, credit card rewards, consumer loans, and debt. Her work has been featured in outlets like Bankrate, NerdWallet, Business Insider, Yahoo Finance, and U.S. News.
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