Financial Literacy

Making a Plan

Take the time now to consider what financial resources you will have available to pay for three years at Berkeley Law. Making a plan about how you will spend those resources can help you to avoid borrowing more in student loans than you need. We recommend utilizing external resources, scheduling a 1:1 appointment with the Berkeley Law Financial Aid, and attending info sessions about budgeting and managing your student loan debt to help you develop a plan while attending law school. Make a list of your financial goals and set a priority level and deadline for each. You might consider answering some of the questions below to get started:

  • What are you hoping to accomplish?
  • When are you hoping to pay off your student loans or obtain student loan forgiveness?
  • Do you have credit cards you’re hoping to pay down?
  • Are you planning to buy a home or car?

 

Helpful resources:

 

Building a Portfolio

Keeping thorough documentation on your income, lines of credit, and debt will help remove the barrier of uncertainty after graduation. The effort you put now into building a portfolio of your assets and liabilities will save you time if you need this information years later, when it might not be as readily accessible.

Save a copy of each of the following documents in a physical paper and/or electronic folder:

  • The student budget found on our fees page each year. This will provide you a record of the fees you paid. You can also use this to build your post-graduation budget. Food, housing, transportation, and other living expenses are itemized to give you an idea of average bay area costs.
  • Your financial aid offers found in CalCentral. This helps you track the exact amount of educational loans borrowed while at Berkeley Law. Print these each year rather than waiting until graduation should any errors occur in campus/federal tracking systems in the meantime.
  • The National Student Loan Database System (NSLDS) report provides you with an overview of all your federal student loan details such as loan amounts, interest rates, accrued interest, the name of your lender and the loan servicing agency. (*required for LRAP application)
  • The promissory note and other documentation for any private educational loans will not be listed on NSLDS and must be tracked separately. Obtain a copy of your credit report instead to see your private loans.
  • A copy of your income tax return for each year that you file. This is important for tracking annual income and any educational credits you claim. (*required for an income-driven repayment plan application)
  • Your W-2, 1098-T, etc. for each year even if you did not file a tax return for that year.
  • Your employment contracts and job descriptions for any summer jobs while you are a student as well as your jobs after graduation. This is particularly important if you are considering the income-driven repayment plan for your federal loans or considering participating in the LRAP program. (*required for LRAP application)

These documents are helpful when completing income tax returns, determining how much to borrow in educational loans, participating in the federal government’s loan repayment plans and coming up with an overall loan repayment strategy, and completing a budget. Including any car or home loans and credit cards in this portfolio will help with the budgeting process. If you participate in LRAP, you will need to provide much of the documentation listed above as part of the LRAP application process (see the How to Apply for LRAP page for a checklist).

 

Helpful resources: Take notes and track it all on mint.com, a free service that aggregates your assets and liabilities into an online portfolio. 

 

Budgeting for While You Are in School

Developing a personal budget for the years you spend as a law school student will help you keep your expenses low with the ultimate goal of graduating with the lowest debt burden possible. A comprehensive budget which includes a plan for while you are a student as well as a plan for after graduation will help you control your spending and reach your ultimate goal. 

Tracking your spending and creating a budget for the first time might be confusing. You might first want to track your daily or weekly spending, or create a weekly budget.. Make sure you keep track of receipts or bank statements, pay stubs, and bills, and other payment records or maintain a daily log for future reference.

 

Budgeting tips: List income and anticipated expenses like rent, utilities, food, transportation, etc. to determine whether your expenses exceed your income/other funding. If expenses exceed income:

  • Look for discretionary spending which can be reduced (E.g. Are there cheaper housing options you can utilize next year? Are there public transit routes near your home?)
  • You may have the option to increase your student budget and borrow educational loans to cover certain expenses.
  • Budgeting wisely and modestly allows you to borrow less in loans.

 

Helpful resources:  There are a variety of budgeting tools available, ranging from free, simple calculators to software for purchase!

  • You may want to start with a budget in paper form found here.
  • Some budget templates compatible with Microsoft Office can be found here
  • A free online budgeting tool is www.mint.com.
  • There is also more sophisticated budgeting software that you can buy. Check out youneedabudget.com  and other software here.

 

Cost of Attendance Adjustment

If you incur additional costs such as a computer purchase, medical bills, or relocation expenses within the current academic year, consider submitting a Cost of Attendance Adjustment Request to the Berkeley Law Financial Aid Office to increase your loan eligibility. You can learn more about the process and complete an application here.

You can also return unused loans before the semester is over to lower your student loan debt. Email the Financial Aid Office for help.

 

Consumer Debt/Credit

Because consumer debt generally has a high interest rate and monthly credit card payments are not factored into the student budgets used to award financial aid, we encourage you to pay off as much of this type of debt as possible before entering law school. We also encourage you to obtain a copy of your credit report from the major credit bureaus. It generally makes more sense to utilize student loans for spending and bills compared with incurring credit card debt.

Reviewing your credit report each year is a good exercise even if you think you have good credit. Because some of your borrowing options may require credit worthiness, it is important for you to understand your credit score and take care of any credit errors you might find in these reports. You may obtain a free credit report from each credit bureau once per year. See annualcreditreport.com for details. Lenders will look for the following 5 things when you want to get a loan after law school:

  • Credit scores
  • Capacity (to pay)
  • Collateral
  • Character
  • Condition (of borrower, lender, and the economy) 

As with anything, there are bad debts and good debts. Good debts are the ones that improve one’s life, like home loans and student loans. However, these can become bad debts if they accumulate over time and do not get paid. One egregious example of a bad debt is payday loans which have extremely high interest rates, making it difficult for the borrower to repay the loan entirely. As for educational loans, it is important to note that high levels of borrowing will negatively impact one’s credit score simply because it is a large amount of debt. Consistently making your loan payments on time will help your credit score. 

 

Student Loans

A law school education is usually funded through student loans. More information about types of loans can be found on our Loans page in a convenient chart.

 

Loan Tips

General tips

  • Interest rate reductions are often more valuable than principal reductions.
  • Read the fine print carefully. All the important things to know about your loan – fees, interest rate, grace period, etc. – will be in the promissory note.
  • Remember to set up auto debit of your monthly payment in the way the lender requires.
  • Make monthly payments on time. Otherwise, you risk defaulting on your loans.

 

Private Loan tips

  • Consider the benefits that come with federal loans (such as income-driven repayment, deferment and forbearance, and the Public Service Loan Forgiveness program) before applying for a private loan.
  • To get the best interest rate on a private student loan, consider applying with a credit-worthy co-signer.
  • Analyze and compare different private lenders for hidden costs (i.e. some may charge an insurance premium at the beginning of repayment period).
  • If there’s the possibility that you will enroll in Berkeley’s LRAP program, remember that private loans do not qualify.

 

Loan Repayment

Loan payments will vary depending on the loan type, how much you owe, and the repayment option you chose. It is important to establish a budget and determine how much money you will need to borrow in loans. Don’t borrow more than you need! If you are having difficulty making monthly loan payments, student loan repayment can be postponed. In certain situations, such as re-enrollment in school, loans can qualify for deferment. This means that loan payments are temporarily suspended and interest does not accrue on subsidized loans. If you do not qualify for deferment but are experiencing financial hardship and difficulty making loan payments, you may qualify for forbearance.

If you plan to work in a public interest career, consider utilizing LRAP support during repayment. You may also qualify for Public Service Loan Forgiveness.

 

Helpful resources:

 

Links to External Resources

 

Berkeley Law Resources

Berkeley Law Financial Aid Office regularly holds presentations about financial literacy and loan repayment at the law school. Students are highly encouraged to attend these sessions. We sometimes provide webcasts of these presentations on our Info Sessions page

 

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