Law School Bar Exam Loans

The word “bar” refers to the legal profession, not a source of alcoholic beverages. Bar study loans are private education loans to help law school graduates pay for the bar exam, bar review courses and living expenses while they study for the bar.

Benefits of Bar Study Loans

• Borrow up to $15,000 or $20,000, depending on the lender
• Repayment terms of up to 15 or 20 years, with no prepayment penalties
• Payments may be deferred for up to 6 or 9 months after graduation
• A variety of flexible repayment options
• Fixed or variable interest rates are available

How do I qualify for access to a Bar Study Loan?

Since bar study loans are private student loans, they have the same eligibility requirements as most other private student loans:

• The borrower must be a U.S. citizen or a permanent resident.
• Borrowers must be enrolled at least half-time in a law school program or have recently graduated.
• Borrowers must have reached the age of majority in their state of residence. This is age 18 in most states, except for Alabama and Nebraska (age 19) and Indiana, Mississippi, New York and Puerto Rico (age 21). If the borrower does not meet age of majority requirements in their state, a creditworthy cosigner will be required.
• The borrower must satisfy credit criteria. If the borrower does not have satisfactory credit, a creditworthy cosigner will be required.

What is my interest rate going to be?

The interest rate may be fixed or variable. A fixed rate remains unchanged for the life of the loan. A variable rate changes periodically, typically on a monthly or quarterly basis.

The interest rate on a variable rate loan may be pegged to market rates by combining a variable-rate index, such as the one-month or three-month LIBOR index or Prime Lending Rate, with a fixed margin based on the borrower’s (and cosigner’s) credit.

For example, if a borrower qualifies for a variable interest rate of LIBOR + 6.0%, the interest rate will be 6.25% when the LIBOR index is 0.25% and 9.0% when the LIBOR index is 3.0%.

The London Interbank Offered Rate (LIBOR) is the interest rate banks charge each other for short-term loans. A lender’s cost of funds may be pegged to the LIBOR index (e.g., through securitizations of the lender’s loan portfolios), so the lender may set the interest rates it charges to the same index to yield a predictable spread between the interest income and expense.

The Prime Lending rate is a reference or base rate that banks use to set the price or interest rate on many of their commercial loans and consumer loan products. It is the interest rate that they charge to their best credit customers. The Prime Lending Rate is published in the Wall Street Journal.

Interest rate reductions of 0.25% or 0.50% may be available to borrowers who choose to have their loan payment automatically deducted from a bank account.