Wall Street is in a frenzy over the recent credit crisis, but law students shouldn’t panic just yet.
Experts say that the economic upheaval won’t dry up the type of government-backed loans on which many laws students rely to finance their educations.
But there is cause for concern — particularly among law students nearing graduation.
Many law school graduates rely on private loans to pay their living costs while they study for the bar exam. But because banks are doling out less money to lenders, private loans are getting harder to come by, said New York Law School Dean Richard Matasar, who is also chairman of the board of directors of education lender Access Group.
That means it will be more difficult for law school graduates to secure private loans, and graduates will likely pay higher interest rates if they do get a private loan to bridge the gap between graduation and the bar.
Recent law graduates also will be entering the work force during a slow economy, which means they may spend more time in the job search process.
Consequently, they potentially could have a tougher time repaying money they borrowed to go to school, Matasar said.
“It’s a time for caution. It’s a time for students to plan well for how much debt they are taking on and how they will pay for it,” he said.
Undergraduates who soon will enter law schools may also take more of an economic hit than current law students. That’s because undergraduates use private loans to pay for college far more often than law students, and the interest rates on those undergraduate private loans is on the rise.
“The students in the law classes coming in are likely to have greater debt, and it’s likely to be more expensive debt,” Matasar said.
The availability of the Graduate PLUS loans that most law students take out shouldn’t have any major impact from the current crisis on Wall Street. Those fixed-rate loans are backed by the government, and lenders are more willing to give them out than private loans.
If law schools experience any major fallout from the economic situation, it probably won’t come until next academic year, said Wendi Owens, associate director of financial aid at the University of Miami School of Law.
Current students already have their loans for the year locked in. “Right now, we’re just not feeling it,” Owens said. “We’ll keep our fingers crossed.”