Financial Aid Glossary

BORROWER
A law student is considered a “borrower” of a student loan when he or she agrees to the terms of the loan and signs the loan agreement, becoming responsible for repaying that loan.

COST OF ATTENDANCE
This is the total amount it costs you to attend law school, including tuition, living expenses, books, and any other related expenses. AdmissionsDean has a COA calculator, and many law school websites and other finance websites also contain various COA calculators. The COA can be expressed both as an annual cost and as a total cost for completing your JD.

DEFAULT
This occurs when you fail to repay your law school (and/or college loans). Defaulting on these loans can have severe consequences, some of which all folks experience when they fail to pay off their loans (e.g., reports to credit ratings agencies that will hurt your credit score, and actions that your lenders may take against you in court proceedings) and others which specifically affect law school graduates (e.g., reports to your bar association about your failure to pay your debts, which can result in sanctions against you as a lawyer that may affect your ability to practice law).

DIRECT LOANS
These are loans that you borrow directly from the US Department of Education through its William D. Ford Federal Direct Loan Program. Direct Loans can be both subsidized and unsubsidized. In either case, you repay them directly to the US Department of Education.

FEDERAL GRADUATE PLUS LOANS
The US federal government also offers PLUS loans to law students through either the Direct Loan or the FFEL Loan programs. The maximum loan amount is based on a student’s cost of attendance minus other student aid received, and student borrowers must not have a negative credit history. Although interest accrues during law school, borrowers benefit from a relatively low, fixed interest rate for the life of the PLUS loan.

FEDERAL PERKINS LOANS
The US federal government also offers subsidized, low-interest loans through participating law schools to students who can demonstrate a financial need for the loan. If you demonstrate financial need, the Department of Education will subsidize the interest that accrues on these loans until 9 months after you graduate, withdraw, or drop out of law school. You may obtain a Perkins loan from participating law schools, and you repay the law school (or its agent) after the 9-month grace and deferment periods end.

To apply for a Perkins Loan, you must complete the FAFSA and if you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions

FEDERAL SUBSIDIZED LOANS (STAFFORD)
The US federal government offers subsidized Stafford Loans to law students who can demonstrate a financial need for the loan. If you qualify based on financial need, the US Department of Education will subsidize (i.e., pay) the interest that accrues while you’re in school until 6 months after you graduate, withdraw, or drop out. You may obtain a subsidized Stafford loan through 1 of 2 programs: (1) the William D. Ford Direct Loan Program (“Direct Loan”); or (2) the Federal Family Education Loan Program (“FFEL Loan”). With Direct Loans, you borrow money directly from the Department of Education at participating law schools, and the US government subsidizes the loan. Then, when you finish law school, you repay the money directly to the Department of Education. With FFEL Loans, you borrow money from a private lender that participates in this federal program, and the federal government subsidizes the loan with a guaranteed rate of interest and by paying the interest that accrues until 6 months after you graduate, withdraw, or drop out of law school. Then, when you finish law school, you repay the loans directly to the private lender.

To apply for a subsidized Stafford Loan, you must complete the FAFSA and if you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions.

FEDERAL UNSUBSIDIZED LOANS (STAFFORD)
The US federal government also offers unsubsidized Stafford Loans to law students that are not based on financial need. You may obtain an unsubsidized Stafford loan through either the Direct Loan or the FFEL Loan programs. Again, with Direct Loans, you borrow money directly from the Department of Education at participating law law schools and repay the loans directly to the Department of Education. Likewise, with FFEL Loans, you borrow money from a private lender that participates in this federal program and then repay the loans directly to that lender.

For these unsubsidized loans, your law school will determine your eligibility by subtracting other financial aid you already are receiving from the cost of attending that law school. With unsubsidized Stafford Loans, you pay the interest from the time the loan is disbursed to you until the time you have paid off the loan in full. So, you may choose to either pay the interest as it accrues, or defer any interest payments and allow it to be added to the principal amount of your loan that you will begin repaying after graduation. Obviously, if you choose the latter option, you will have to repay a bigger loan amount. The total amount of Stafford Loans you may accumulate in college and law school combined is $138,500, and only up to $65,500 of this amount may be in the form of subsidized Stafford Loans.

To apply for a subsidized Stafford Loan, you must complete the FAFSA and if you obtain a loan, then you also must sign a promissory note that says you agree to repay the loan according to its terms and conditions.

FINANCIAL AID
In general, law schools offer scholarships/grants-in-aid (need-based scholarships, merit-based scholarships, and criteria-based scholarships) and loans (federal subsidized loans, federal unsubsidized loans, federal Perkins Loans, federal Graduate PLUS Loans). Students also can obtain loans from private lenders. Some law schools offer loan repayment/forgiveness programs, typically in return for agreeing to perform public service law upon graduation for a period of time. Finally, financial aid can consist of federal, state, and private-employer loan repayment/forgiveness programs.

FINANCIAL AID ADMINISTRATOR (FAA)
The person at your law school who helps law students understand and apply for various forms of financial aid. The FAA and his or her staff are great resources for determining your likely cost of attending law school and any debt obligations you will have repay upon graduation.

FREE APPLICATION FOR FEDERAL STUDENT AID (FAFSA)
The FAFSA is the US Department of Education form you fill out to determine your expected contribution to your legal education and your “need” for financial aid from, variously, federal, state, and law school sources. The analysis considers, among other factors, your income and assets. For more information, go to www.fafsa.ed.gov.

GRACE PERIOD
Once law students graduate, withdraw or drop out (or go below 1/2 time enrollment), loans payments that were deferred while studying continue to be deferred for a period of months, or grace period. With subsidized loans, no interest accrues during the grace period. With unsubsidized loans, interest accrues during the grace period and is capitalized.

LOAN CONSOLIDATION
Students and/or parents may consolidate multiple loans into a single, bigger loan under certain eligibility and other criteria requirements. The federal Higher Education Act provides for consolidation of loans under both the Federal Family Education Loan and Direct Loan programs. When you consolidate loans, you pay them off and pool the principal into a new, larger loan with a new interest rate and other new repayment terms. Typically, the payment you make each month under the consolidated loan is lower than the aggregate total you were paying for the individual loans. In addition, many borrowers elect to extent the repayment schedule to lower the monthly payments. The federal government provides for consolidated loans principally to lower loan default rates. For more information, visit www.loanconsolidation.ed.gov.

LOAN FORGIVENESS OR LOAN REPAYMENT ASSISTANCE PROGRAMS (LRAPS)
Law School LRAPs provide financial aid to law students after they graduate and take qualifying, low-paying jobs, typically in public interest or government positions. The way these programs usually work is that the law school essentially loans its graduates money that they use to pay back their student loans and after a set period of time (usually 5-10 years), the law school then forgives the student’s debt.

MERIT-BASED SCHOLARSHIPS
Many law schools also award merit scholarships which, as their names suggest, are given on the basis of prior academic achievement. This usually translates into two things: a high UGPA or, more often, a high LSAT score. Some schools, primarily those outside the top tier, use merit-based scholarships as a way to woo students who have UGPAs or LSAT scores far above their median since those two data points represent significant factors in USNEWS’s ranking formula.

NEED-BASED SCHOLARSHIPS
Law schools award need-based scholarships based on a student’s demonstrated financial need. Law schools are solely responsible for determining a student’s financial need, and they typically require students applying for such scholarships to complete at least 2 forms: (1) FAFSA ; and (2) a law school-authored financial aid assessment form. It is generally true (but not always) true that the most prestigious law schools and the oldest law schools offer the most need-based scholarships because they tend to have the largest endowments that permit need-based aid.

PAYMENT PLAN OPTIONS
Thanks in part to the Great Recession, some students have experienced increased difficulty obtaining private loans. As a result, some law schools and universities have begun offering payment plan programs that allow students to pay their tuition in installments. Students typically pay a modest administrative/processing fee to take advantage of the payment plan option, and a student’s failure to make timely payments often results in late fees and/or their inability to take classes or graduate.

PRINCIPAL
The original amount of money a student borrows from a lender.

PRIVATE LOANS
Many private lenders (including private lenders who participate in federal loan programs) also offer purely private loans. These loans are available based on your credit score/history and ability to repay, and they usually do not require that you fill out a FAFSA form. They come in varying sizes with varying repayment terms and conditions–you can obtain information on these loans by visiting the websites of these private lenders (banks, credit unions, and other private lending institutions), including those listed below. In addition, many lenders offer loan consolidation programs, whereby you can consolidate all your loans with 1 lender and make 1 payment to that lender to cover all the loans.

UNSUBSIDIZED LOAN