Getting through law school is a challenging task to take on. Most students will endure three years of intensive coursework in order to become a lawyer in one of the most competitive industries around.
It doesn’t stop when one finishes their third year either. There will also be a bar exam to deal with.
The bar exam is a standardized test that is administered by the American Bar Association. A law student must pass this exam in order to be formally admitted to the bar of their jurisdiction. To put it simply, a law student has to pass this test in order to become a lawyer. And there is a limit on how many times and how often a student can take and fail the exam. The test is only offered in February and July, and depending on your state’s jurisdiction, you may only be allowed to take and fail the test a few times before being barred from participating again.
Needless to say, the bar exam is a big deal. And students need to dedicate 100% of their time to studying the summer before they’re scheduled to take the test. That means no part-time job, no other classes, no games.
So what can a student do to make the most out of their time and pass the bar exam with flying colors? How can a student manage living expenses while they’re studying for a bar, since more law schools don’t allow students at that stage of study to have jobs? It may be a good idea to look into bar study courses and bar loans to pay for them.
In this guide, we’ll be diving into everything law students need to know about bar loans. Specifically, what law students can do during the summer when they are studying for the bar exam when they need to borrow money to cover living expenses or test prep courses.
To start, let’s break down what exactly a bar loan is.
What is a bar exam loan?
A bar loan is a private loan that law students can take out in order to pay for bar study courses, the bar exam fees for their jurisdiction, and their living expenses while they are studying.
A bar loan may seem a bit excessive, but when you think about what is on the line, it makes sense why so many law students consider tacking a bar loan on top of their student loan debt. There is absolutely no room for distractions while studying the summer before the bar exam. Students can’t waste time working at a job, which can be difficult, because law students need to be able to pay for rent, electricity, food, etc. The bar exam is highly competitive, as is the law world in general, so it makes sense to get ahead of the competition by signing up for costing bar study courses and tutors.
A loan for this period of time could be greatly beneficial to law students, but it comes at a cost. Bar loans are generally not recommended because they usually come with extremely high interest rates, especially when compared to student loans. For example, Discover’s Bar Study Loan has a fixed APR of nearly 13%. Sallie Mae’s Bar Study Loan is offered with a variable aPR between 5.37 – 10.37%.
What’s worse is that bar loans usually can’t be included in student loan refinancing efforts. If it is absolutely necessary for a law student to take out a bar loan, you should aim to pay it off as soon as possible.
Let’s go into a little more detail about what kind of expenses a bar loan could cover.
Summertime expenses you’ll need to cover
Not entirely sure if you’ll have a lot of expenses when it comes to studying for the bar exam over summer break? Unfortunately, most students will have some expenses that they will have to deal with during this time.
Some law students spend their summer break at home with their parents or in their dormitory, if they attend a school that has one. Many students, however, live off-campus in houses that they need to pay for. Some students can manage a part-time job while in law school, but during the bar exam, it just simply can’t be done. It usually isn’t permitted either– a majority of law schools don’t permit students to have jobs while they’re studying.
We all have to eat, right? During the intense summertime study before the bar exam, students may also not have time to cook and may opt for takeout, which can tack on more expenses than before.
There’s a pretty insane amount of places to take bar prep courses. There are thousands of online courses and apps available, but many students opt for tutoring from a practicing lawyer or a professional tutor who has passed their bar exam already. Others may prefer to load up on study guides and materials that focus on the bar and test-taking strategies for success. All of these things cost money.
Bar exam fees
There are some fees to consider when it comes to taking the bar exam, though they vary depending on which state one will be taking the test in. In most cases, one will have to pay between $150 to $1,300 for the exam. These fees are usually directly paid to the Board of Law Examiners in the student’s jurisdiction.
Some travel will be involved in taking the bar exam. It may be held at one’s law school, but bar agencies for specific states may administer the bar exam at another location. There is also the matter of traveling to and from home during summer break.
How to avoid a bar exam loan
If a bar exam loan doesn’t seem like the ideal choice, there are actually a variety of alternatives to a bar exam loan.
Some students have already snagged a job opportunity before they’ve even graduated, but obviously can’t fulfill that job until they’ve passed the bar and legally become a lawyer. May law firms will pay for bar exam fees and study courses, as well as offer some stipends in the form of bonuses or cash advances during the summer before the bar.
A bar prep scholarship is a specific type of scholarship designed to help students through financial difficulty during their bar study period. The scholarships are based on one’s location, specific legal field, and status as a diverse candidate.
Save up beforehand
The best way to save money is to cut out unnecessary spending. Keep in mind that this absolutely does not include bar study courses and study materials– law students should be spending money on that. However, it may be wise to look at your living situation and how you can improve it financially.
Try looking for cheaper living options or possibly moving back home while you’re studying for the bar. Cooking instead of eating out may seem like it takes up too much time, but it can help law students give themselves a break and save money on food at the same time.
This may not be the best approach for everyone. You don’t want to get into unnecessary debt, which is why you probably avoided the bar exam loan in the first place. Still, some credit card providers offer introductory interest rates of 0%. Just ensure that you’ll be able to pay your credit card off before the introductory interest rate period ends. This option is more suited for students who already have a job lined up after they pass the bar.
Bar exam loan options
Ready to apply for a bar exam loan? If you’re in need but don’t know where to start, there are a few companies you can look into that are reputable.
Discover bar study loan
With this loan, you can take out between $1,000 and $16,000 in bar loan funds. The repayment terms state that the loan must be paid off within 20 years. In order to be eligible for this loan, you must be enrolled half-time at an eligible school.
Sallie Mae bar study loan
With this loan, you can take out between $1,000 and $15,000 in bar loan funds. The repayment terms state that the loan must be paid off within 15 years. In order to be eligible for this loan, you must be a US citizen and attend an eligible law school.
PNC bar study loan
With this loan, you can take out between $1,000 and $15,000 in bar loan funds. The repayment terms state that the loan must be paid off within 15 years. In order to be eligible for this loan, you must have graduated from a law school within six months of applying for the loan or expected to graduate within six months.
LendingTree bar study loan
With this loan, it’s not entirely clear how much one can take out in bar loan funds, as LendingTree has a pretty wide variety of lenders under their belt. The repayment terms for this bar exam loan also vary significantly. In order to be eligible for this loan, you must be a US citizen.
Additional options for when you can’t get a bar exam loan
Unfortunately, some students simply aren’t eligible for a bar exam loan. This comes down to credit score and other eligibility requirements such as a cosigner.
If you’ve been denied a bar loan, take the time to review bar loan alternatives. There is a possibility you may not even need that specific loan but are eligible for scholarships and employer reimbursement. There is also the option of working part-time while studying for the bar exam, though this is not usually recommended. Still, a lot of students don’t have a choice. Just do your best to ensure that your side hustle doesn’t take priority over your study hours.
If you can’t get a bar exam loan outside of the above options, there are a few other options you could consider, though most of them involve getting different types of loans.
Use leftover student loans
Once a student has graduated, they cannot take out new federal student loans. Still, one can use money that they received via a refund for their previous law school loans. If you have not yet begun the process of applying for law school or you have just started, do your best to save as much of your loan disbursements each semester for this very reason.
Borrow Grad PLUS loans
Another loan option for law students is the federal Grad PLUS loan. PLUS loans usually have pretty hefty interest rates when compared to direct loans that are unsubsidized. However, they usually have higher limits on how much one can borrow. In fact, a law student may be able to borrow up to the total costs of attendance.
When it comes to getting through law school and starting a career as an attorney, finances are a big deal. Between paying for bar prep courses and struggling to make ends meet during summer break, aspiring lawyers have a lot to worry about before they finally get a solid well-paying position at a firm. You should try your best to keep your cost of living low during your bar prep summer to minimize the financial impact of your last few months before your first paycheck.
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He is always negotiating better student loan refinancing bonuses for readers of the site.