Finding student loan refinancing and consolidation options is extremely complicated for a very simple reason.
Bar study loans are not student loans. They are personal loans.
As a result, borrowers need to adopt a different student loan elimination strategy. While traditional tactics may not work, there are options that only apply to student loans.
Why are student cash loans different from other student loans?
It seems silly that someone who borrows money to study for the bar exam can get interest rates well in excess of 10% while the average freshman can easily find a student loan with an interest rate below 5%.
The difference goes back to bankruptcy law. Congress passed special provisions that make it nearly impossible to pay off student loans in bankruptcy. This is why so many lenders are out to offer student loans at low interest rates. There is less risk to the lender.
A student cash loan is different. Although it was used for studying, lenders have much less protection. Since there is a higher risk associated with the loan, the interest rate is higher. Borrowing funds to unemployed, unlicensed lawyers is risky. Hence, lenders raise interest rates to ensure profits.
Don’t think of your lawyer student loan as a student loan, but as a personal loan. Although it cannot be consolidated or refinanced like other student loans, there are other ways to lower the interest rate.
Find a better personal loan
Perhaps the best way to refinance a lawyer student loan is to get another loan and use the funds to pay off the old loan.
Peer-to-peer lenders like Lending Club and Prosper are common choices. The disadvantage of these options is that the interest rates can vary widely. On the lower end of the spectrum, some of the rates are reasonable. However, the interest rates on these loans can often exceed the interest rates offered by some credit card issuers. The other disadvantage is that there is an origination fee.
For most, the best option may be to work with a local bank and inquire about a personal loan.
Occasionally, student loan consolidation companies like SoFi also offer personal loans. These loans typically have shorter repayment terms than most student loan refinances. With interest rates in the 5 to 7% range, they can improve the interest rate on student cash loans significantly. They are also free of origination fees, which should always be avoided.
|5.99% – 20.69%||$ 5,000- $ 100,000|
|Sherpa thoughts: The SoFi personal loan has interest rates that are very competitive when compared to lawyer study lenders. SoFi is one of many lenders that offer personal loans, but SoFi interest rates are some of the best which is why they are included here.|
|6.99% – 24.99%||$ 2,500- $ 35,000|
|Sherpa thoughts: When you look at the Discover Personal Loan versus their student cash loan, a few things stand out. First, the interest rates are pretty close on the low end, but can get much higher for the student cash loan. Second, lawyer study borrowers have a longer time to repay their loans.|
Borrowers with a good job may even want to consider a 0% introductory credit card. The savings can be substantial if you are able to pay off all debts before the credit card interest rate kicks in. However, this is a risky option as the full credit card interest rate can exceed the student cash loan interest rate.
Play hardball with your lender
Some lawyers don’t pass the bar on the first try. Others struggle to find a job.
While federal loans offer high levels of protection such as income-based repayment and student loan forgiveness, student loans are less generous.
Lawyer study borrowers can take advantage of the profitability of bankruptcy. Some lenders have temporary rate cut programs to get borrowers into trouble. Although student cash loans aren’t student loans, they are excellent candidates for temporary relief.
Most lenders are big bureaucracies and customer service agents are rarely empowered to make rate changes. However, an accomplished law school graduate may be able to locate someone who can help them and convince them that interest rate subsidies are better than bankruptcy.
Refinancing and consolidation options for bar study loans
The key here is to understand what you are buying.
Student loan consolidation and refinancing is not an option for debt that is not actually a student loan. Once you have targeted personal loans instead of student loans, you may find better options.
Even in the best of circumstances, the interest rates on these loans are still higher than those on student loans. Because of this, even if you can get the interest rate down slightly, this is probably still the loan you want to repay first.
Because of the high interest rates on personal loans and student loans, borrowers should give priority to eliminating this debt first.