Student Loan Advice from Heather Jarvis

Heather Jarvis is an attorney and student loan expert who graduated from Duke University School of Law with $125,000 in student loan debt. After working as a public interest attorney, she went to work for a nonprofit organization in Washington D.C. with the desire to break down the financial barriers to practicing public interest law.

Jarvis helped pass the College Cost Reduction and Access Act, and she now works to educate students about what they can do to better deal with their own student loan debts. She recently visited OU Law to discuss this important topic with our students, and 3L Will Holland followed up with her for even more advice.

Q: When you talk to students, what are their most common concerns? Is it simply that they worry about their ability to pay back their loans?

A: It is. People worry.  Especially today with the job market being what it is, a lot of folks are needing time after graduation to find that right job opportunity. People are concerned about what to do before they get into the position that they’re looking for.

There’s also a lot of just general confusion around what the right thing to do is. There are a lot of options when it comes to selecting a repayment plan and that kind of thing, and it’s just overly complicated. 

Q: It is. So what do you tell these students when they come to you?

A: Unfortunately, it’s not simple, and it’s not one-size-fits-all, so I always encourage people to start by doing a clear inventory of their student loans. Unfortunately, it’s not even always entirely obvious how many different loans you have or where they are, or who you need to deal with.

People can have loans all over the place, and they can be transferred to different loan servicers and lenders, so I teach people how to get a good inventory right using the National Student Loan Data System. That’s an online resource that the federal government provides. 

Then, I encourage them to go ahead and pull a copy of their credit report just to double check on whatever private student loans they may have that won’t show up on the federal database. And then I urge people to really understand the different options, because there are a lot of choices, and what you decide to do can make a big difference in your bottom line cost over time.

Q: So, what are some of these different options? I saw on your website that you mentioned things like consolidation or income-based repayment -- those types of options.

A: I think most graduates should at least evaluate whether consolidation makes sense for them. Consolidation has more to do with getting your loans all in one place so that you can manage them more easily than it does with reducing cost. It used to be more incentive involved cost reduction, but consolidation for most people now is more about making things easier for you to track.

So consolidation is one thing to think of. It gives you access to additional repayment options as well. I think, especially for the law school audience, a lot of people should be considering the income-based repayment plan. There’re actually a number of different repayment options that include income as the driving factor, and those programs are really good, especially for law grads to consider, because they’re very beneficial for people whose debt loads tend to be on the high side.

If you look at the average and median numbers, legal education tends to come with a fair amount of student debt for most people. Now, of course, OU is one of the better values in legal education, so your folks may not be struggling as much as some graduates will – but it’s still not cheap to get a legal education. So, I think income-based repayment has a lot of advantages.

Another thing to keep in mind is the quicker you repay a loan, the less it’s going to cost you over time. That’s just simply the way interest works. So if you pay for things with borrowed money, they cost more if it takes you longer to repay that debt. 

Q: So, should students be trying to pay off their debt really quickly and not saving any money, or should they be trying to put some money into savings at the same time and kind of pay off their debt more slowly? What would you advise?

A: Those are the right questions to be asking. You really can’t make your student loan decisions in a vacuum. You’ve got to look at your whole financial situation. If you’ve got student loan debt, you should also look and see if you have any other debt. Some folks with student loans will also have, for example, credit card debt, and credit cards are usually at higher interest rates than student loans, and sometimes remarkably higher.

If you’re somebody who has a lot of credit card debt, then that’s almost certainly the first thing you should be doing with your money before you slam those student loans or save. It’s a good question you’re asking, ‘if I have some extra money, what should I do with it? Should I save it or should I send it to my loans?’ And that depends, but there are many times when it’s probably better to send it to your loans because you can look at it as kind of a guaranteed return on your investment. For example, if you have Grad Plus Loans that are at around 7.9 percent, or you may have borrowed them at 8.25 percent, if you send extra money to your Grad Plus Loans, you have essentially a guaranteed return on your investment of 8.25 or 7.9, and nobody is going to guarantee you that kind of return in any other savings or investment plan.

If you’re just going to put the money in the bank, the interest rates are super low right now, and people aren’t getting anything back really for their money. Whereas if you put it in the stock market or other long term investments, you may 12 percent return, or if you adjust it for inflation, maybe it’s 8 percent. Things have changed; it’s much softer and much less certain than it used to be. A lot of folks graduating now have 6.8 percent Stafford Loans and 7.9 percent Grad Plus Loans and probably shouldn’t be investing, for example, in the stock market. But it gets more complicated if you’re deciding, ‘OK, should I save money for a down payment on a house?’ Because if you buy a house without a down payment, you’re going to pay a lot more. You’re probably going to have to pay the purchase mortgage insurance, and, with the long term of your loan, it might cost more, than if you had saved for a down payment. You’ve got to see what your own personal goals are and where you want to be.

Q: Do you advise students of a realistic time frame for paying off their debt? I saw on your website, I think you said you were potentially facing like 30 years of repayments. Is that totally unrealistic or does that happen?

A: It’s not unusual for graduated professionals to need 20 or 30 years to repay their student loans. We have to look at it like it’s a mortgage-sized debt, in some cases. In order to keep your monthly payments affordable, you may have to spread them out over time. But it really depends on how much you owe, and it depends on your career path. You may have a more modest debt burden or a more reasonable debt burden – and I think many of your grads do because of the value of the OU legal education. The truth is that most lawyers don’t make tons of money. Between 40 and 60K is really kind of the sweet spot for where most lawyers start out being paid. And if that’s the case, if you were paying on a 10-year schedule, which is the “standard” for fast track repayment, you could be looking at $1,000 to $1,200 payments for a typical law grad each month. That’s not easy to do when you’re making those kinds of salaries.

Depending on how much you’re willing to live the frugal lifestyle, and also depending on where you live, it makes sense for these grads to really be thinking about the costs that they can control.  The main cost you can control the best is your housing cost. That’s the biggest ticket item that you have the most choice about. If you choose to live in New York, it’s going to be high. If you don’t, it’ll be more reasonable and you can pay off your loans faster. 

Q: What about for students who are undergraduates right now who are thinking about going to law school? What advice do you have for them?

A: I think people should really consider cost as part of their analysis when choosing a school. I think that that’s important. I had the idea and was told by my first generation college-educated family that, ‘you should go to the best school you can get into’ regardless of price. I don’t think that’s good advice. I think that people should understand what they’re looking for in a school; they should choose a school that has the programs and curriculum that they’re interested in, is where they want to be, and realize that price does matter, and it can have huge implications for your entire life. It’s not necessarily the case that a school with a lower tuition is cheaper than a school with a higher tuition. Sometimes private schools have more money to give. But it depends on your competitiveness as a student in terms of what the schools are looking for.

The main advice I give people who are going to be borrowing for school is to always look to the federal student loans first. Never consider private student loans unless you must. And, when you’re in law school, you don’t have to borrow private loans; you can get Stafford Loans and then Grad Plus Loans. Those are both federal, and really the main reason that people borrow private loans is on their way out of school for that bar study loan.  I really encourage folks to minimize their borrowing under that program because it’s just not going to be the same kind of debt; it’s going to be more expensive, less flexible, and potentially problematic.

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