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Seattle University School of Law

Loan Repayment

May Graduates

If you borrowed Federal Stafford loans, you are required to complete an exit interview. It is a federal financial aid requirement that you do so before you graduate. You will learn about the loan repayment process, schedules, federal loan consolidation options, deferments, grace periods and more.

At this time you have a choice of two exit counseling options (the in-person sessions are over):

  1. To exit on-line, please see www.dl.ed.gov. Click on Exit Counseling.
  2. Or, if you prefer to watch a video (to be viewed in our law library), you may do so during regular office hours.

Please bring your address book in order to provide reference information (references are only used to locate you if you move).

Bar loan application (credit check required) deadline is May 7. Bar loans are available to help cover bar exam costs, prep course fees and some living expenses while studying for the bar.  You may borrow from any private lender you wish that may offer a bar loan, but please review the terms and conditions of the loan carefully. This is a list of lenders our law students have used in the past who offer bar loans (availability of private loans by these lenders is subject to change):

Repayment Information

You will learn about the various loan repayment options during exit counseling. You are welcome to meet with us with any questions. These are the basic repayment plans (please see www.dl.ed.gov for more detailed information):

  • Standard
    • 10 year fixed payment. Highest monthly payment but lowest total interest over the life of the loan. If you do not select a different payment plan you will be automatically enrolled in this plan.
  • Extended
    • Up to 25 years of a fixed payment depending on loan debt volume.
  • Graduated
    • Up to 25 years. The payments start out lower but then increase every two years. Total interest paid may be greater than plans with similar terms and fixed payments.
  • Income Contingent
    • Based on your adjusted gross income, family size, and loan debt. As your income increases or decreases, so do your payments. After 25 years, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.
  • Income-Based
    • Similar to Income Contingent but offers lower payments and public service loan forgiveness. Based on loan debt, adjusted gross income and family size. You must be eligible for a partial financial hardship. Provides the lowest monthly payment available and balance plus interest may be forgiven after 300 eligible payments (forgiven amount may be taxable) or 120 eligible payments if working in the public service (forgiven amount not taxable).

Consolidation Information

As of July 1, 2007, the in school option to consolidate was eliminated. You must wait until your grace period or repayment to consolidate.

There are some complex issues to think about regarding federal student loan consolidation.

If you received a 2006 summer disbursement prior to July 1, 2006, your 2006-07 Stafford loan has a variable rate, unless you consolidated it prior to July 1, 2007. For loans disbursed prior to July 1, 2006, the interest rate is variable, adjusted annually on July 1. The variable rate is based on the 91 Day Treasury Bill (as of the last auction prior to June 1) plus 1.7% during in school and grace period, or plus 2.3% in repayment, not to exceed 8.25%. The current interest rate for that variable 2006-07 Stafford loan is 1.88% in school and 2.48% in repayment.

If you want to lock in this low rate or combine it with your 6.8% Stafford loans, you want to wait until about a month to two before your six month grace period ends before consolidating so you do not lose the remainder of your grace period (consolidation loans become due within 60 days after they are booked).

You will need to decide whether to only consolidate that first year loan by itself or to consolidate it with your other two - three years of 6.8% fixed loans. Because consolidation uses the weighted average rounded up to the nearest one-eight of a percent, it may be more advantageous to keep the low variable rate loan consolidated separately, but you may prefer to have only one consolidation loan with all your loans together.

The interest rate for federal loan consolidation is the weighted average of all the federal loans you wish to consolidate rounded up to the nearest eighth of a percent, capped at 8.25%. The rate is then fixed for the life of the loan (up to 25 - 30 years depending upon your debt load). Most lenders, including Direct Loans (the law school uses Direct Lending), offer a .25% interest rate reduction for automatic electronic payment.  This perk to lower your interest rate is strongly encouraged.

Remember, if you have variable interest rate loans, the rates will change July 1 every year unless you consolidate. There will be an additional .6% added to the rate after the 6 month grace period ends; the repayment rate will be based on that higher rate if you do not consolidate.

A consolidation loan comes due 60 days after it is booked.

Direct Loan Consolidation Considerations

  • Direct Loans are eligible for public interest loan forgiveness after 120 on-time payments in eligible public interest work.
  • Direct Loans are eligible for Income Based Repayment (IBR) loan forgiveness after 25 years. IBR will be available after July 1, 2009 but Income Contingent repayments will count toward the 25 years until then.
  • If you consolidate with Direct Loans and need a deferment, the subsidized portion of your loan will not accrue interest. This may not be the case with all other lenders.
  • Direct Loans offers Income Contingent Repayment that is forgiven after 25 years, if necessary (although you will be taxed on it). Other lenders offer Income Sensitive Repayment, but at this time there is no similar forgiveness option.  Payments under Income Based Repayment will be lower than in Income Contingent Repayment.
  • You will retain the 1.5% repayment incentive you received at disbursement after 12 on-time payments.
  • All your law school federal Stafford loans are through Direct Lending so the application process is simple.

For more information and to apply for a Direct Loan consolidation, please see www.loanconsolidation.ed.gov or call 800.557.7392.

Other Consolidation Lenders

  • Some lenders offer repayment incentives in addition to the .25% automatic debit reduction that are attractive, such as a 1% interest rate discount after 20 to 48 month on-time payments or a 5% principle reduction, depending on the lender. These incentives are lost if payments are late and the benefit may be revoked under certain deferment situations.  These days most of these lenders have eliminated these incentives and many lenders who used to do consolidation no longer offer the option.
  • The 1.5% Direct Loan origination fee rebate you received at disbursement will be added back in to your loan balance.

August and December Graduates

The basic information for May graduates applies to your situation as well. You will receive exit counseling information at the time of your graduation. Please let us know if you have any questions regarding your situation.

Recent College Graduates

If you are no longer enrolled in school, you may consolidate through Direct Lending or through another lender in the FFEL program. If you did not consolidate previously, you may consolidate during your grace period or during repayment. Your loan will come due within 60 days after it is booked. Student loans may be deferred while enrolled at least half-time. If interested in the public interest forgiveness programs, you should consolidate with Direct Loans and may do so for the purposes of loan forgiveness.

In General

Eligible Loans

Federal student loans include Stafford, Perkins, Grad PLUS, PLUS and SLS. You may consolidate undergraduate federal loans with your law school federal loans. If interested in the public interest or IBR forgiveness plans, it is not recommended that you include the parent PLUS in the consolidation (Grad PLUS is fine).

Perkins Loans

If you have a federal Perkins loan, you may wish to consolidate for the convenience factor. Please consider carefully whether or not the convenience outweighs the fixed 5% interest rate. Depending upon the weighted average, it may or may not alter the consolidated fixed interest rate. Please note that there are some cancellation options related to the Perkins loan that may benefit you if you qualify (see https://www.mycampusloan.com/forms/pdf/facts_disc_exit/9171.pdf). If you consolidate you will lose these cancellation benefits. You will also pay more interest over the life of the loan if you consolidate the Perkins loan because the Perkins repayment period is 10 years. If you consolidate through lenders other than Direct Loans, the subsidized interest benefit for periods of deferment will no longer exist. Depending upon when you consolidate, you may lose most of the 9 month grace period. You have 180 days in which to add another loan to your consolidation.

Grad PLUS

The Grad PLUS loan may be consolidated with your Stafford loans and is eligible for public interest loan forgiveness (private loans are not). The interest rate is fixed at 7.9% and consolidation will reduce the Grad PLUS rate somewhat and raise the overall Stafford rate. By how much will be dependent upon the weighted average – see Calculators below.

Note: A parent PLUS loan that is consolidated or paid off by consolidaton would make all loans within that consolidation ineligible for the Income Based Repayment (IBR) plan and federal loan forgiveness. If interested in IBR loan forgiveness, do not consolidate a parent PLUS loan. A Grad PLUS is eligible.

Private Loans

If you have private (credit based) student loans, you can not consolidate your private loans with your federal loans, but you may list them for total student loan indebtedness purposes – it will extend your repayment period.

Although you cannot consolidate private loans (Law Loans, Key, Citibank, etc.) with your federal loans, there are some organizations out there encouraging you to do so. We strongly advise against this because it will convert your federal loans into a commercial loan and you will lose the federal deferment and forbearance options and federal tax benefits. If you want to consolidate your private loans from different lenders together after graduation, you may do so, but consolidating your private loans together does not fix the interest rate (if a fixed rate is offered, it is typically fairly high); it simply provides a consolidation of two or more separate lender bills into a single lender statement. Along with a credit check, you may end up paying origination fees and more interest or lose some deferment options that may be offered by specific private lenders, although you also may be able to find a better variable interest rate and improved repayment options.

Calculators

For repayment calculators see www.loanconsolidation.ed.gov or http://www.finaid.org/.  For Income Based Repayment calculators see http://ibrinfo.org or http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRCalc.jsp.

Loan Repayment Assistance

Seattle University School of Law's Loan Repayment Assistance Program (LRAP) and the new federal public interest loan forgiveness plan offer help for those working in public interest employment.

Questions

Please contact Student Financial Services at 206.398.4250 or lawfa@seattleu.edu should you have any questions.

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