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As Law Schools Reduce Cost, Experts Say Financial Planning Still Key

Delece Smith-Barrow

The future of legal education is still under debate, as law students continue to graduate with high debt and fewer job opportunities. While a number of solutions have been kicked around, one fix that many experts agree on is making law school a more cost-efficient investment.

The American Bar Association advised law schools to develop and implement plans for reducing the cost of a J.D. and limit increases in that price in a January report from its Task Force on Legal Education.

In line with the association's position, a number of schools have already started decreasing tuition.

[Photos: View the top 20 law schools. ]

In January, the School of Law at University of Kansas announced a scholarship for Missouri residents who reside in nearby counties that would offset the difference between in-state and out-of-state tuition. The School of Law at Roger Williams University in Rhode Island also announced in January a tuition reduction of approximately 18 percent.

In fall of 2013, students at the University of Arizona Rogers College of Law could take advantage of new tuition prices -- an almost 11 percent decrease for in-state students and about an 8 percent decrease for out-of-state students. A number of other schools have also recently announced tuition cuts.

While lower tuition may help some law students pay for their education, experts believe students should still be aware of how much a J.D. can really cost and how to make smart decisions for financing it.

Students are still leaving the workforce for three years to attend school, which means three years without a salary and work experience, says Kyle McEntee, co-founder and executive director of Law School Transparency, a nonprofit legal education policy organization. He encourages students to negotiate financial aid packages and scholarship awards when planning how to finance their education.

Students offered a scholarship should ask that it increase with the rate of tuition increases, says McEntee, who received his J.D. from Vanderbilt University. If tuition goes up by 10 percent, the scholarship amount should also rise by 10 percent. If a school can't agree to this, a student should rethink going to that school, McEntee says.

[Find out how to negotiate law school financial aid.]

Students should also feel empowered to ask for better scholarship terms. If, for example, a scholarship requires the recipient to remain within the top 50 percent of the class, a student should see if that line of the contract can be changed. Amending it to say top 80 percent or "in good academic standing" may be better, McEntee says.

Planning how money will be spent during school is only one part of making smart financial decisions as a student, experts say. Longer term financial planning is also critical, especially if students take out loans.

Heather Jarvis graduated from the School of Law at Duke University in 1998 with a hefty bill. "I borrowed $125,000 to finance my education," she says. "I've been paying on it for 15 years, and I have another 15 to go."

Jarvis now provides training for universities and professional associations on how to help student loan borrowers make better decisions about student debt. She favors the tuition cuts, but doesn't see them as a cure-all.

"Even with tuition reductions people should recognize law school includes a substantial financial investment," Jarvis says.

She encourages students to avoid private loans, because they can be more risky and expensive, and opt for federal loans. Students should look into the Income Based Repayment Plan or the Pay As You Earn Repayment Plan, she says. Both include low monthly payments that are tied to income, plus the potential for forgiveness.

[Learn which law school graduates have the most debt.]

But forgiveness based on long-term income is taxable. "The forgiveness can be a valuable benefit for some people but they have to understand and prepare for the tax consequences," Jarvis says.

The various loan forgiveness plans also have different measures for eligibility that students should be aware of. Pay As You Earn can come with lower monthly payments and earlier forgiveness, but borrowers cannot have any federal loans that were taken out before Oct. 1, 2007. They must also prove financial hardship and meet other criteria. The income based plan has looser rules for eligibility.

Another option for federal loan borrowers, Jarvis notes, is Public Service Loan Forgiveness. If a person works in a position that qualifies as public service, such as the government or nonprofit, and meets other criteria, his or her debt could be canceled after 10 years of payment. "And that forgiveness is not taxable," Jarvis says.

Today's law students are more aware of how much their education costs and have more options for financing it, she says, but determined law applicants won't let price influence their future too much.

"Many students will pursue legal education in spite of high costs."

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