Bar study loans are not student loans. They are private loans.

As a result, borrowers need to apply a different strategy for bar study loan elimination. Even though traditional tactics may not work, there are options unique to bar study loans.

Why are bar study loans different than other student loans?

It seems silly that someone borrowing money to study for the bar exam gets interest rates well above 10%, while an average first-year college student can easily find a student loan with an interest rate of under 5%.

The difference goes back to bankruptcy law. Congress passed special provisions that make student loans nearly impossible to discharge in bankruptcy. This is the reason that so many lenders are eager to offer student loans at low interest rates. There is less risk to the lender.

A bar study loan is different. Even though it was used to study, the lenders have much less protection. Because there is more risk associated with the loan, the interest rate is higher. Loaning money to jobless, unlicensed attorneys is risky, so lenders increase the rates to ensure profits.

Rather than treating your bar study loan as a student loan, view it as a personal loan. Even though it cannot be consolidated or refinanced like other student loans, there are other ways to lower the interest rate.

Find a better personal loan

Perhaps the best method of refinancing a bar study loan is to get another loan and use the funds to pay off the old loan.

Peer-to-peer lenders such as Lending Club and Prosper are common choices. The downside with these options is that the interest rates can vary greatly. At the low end of the spectrum, some of the rates are reasonable. However, the rates on these loans can often exceed those offered by some credit card lenders. The other downside is that there is an origination fee.

For most, working with a local bank and inquiring about a personal loan might be the best option.

Occasionally, student loan consolidation companies like SoFi also offer personal loans. These loans typically have shorter repayment terms than most student loan refinancing. With interest rates starting in the 5 to 7% range, they can considerably improve the bar study loan interest rate. They also are free of origination fees, which should always be avoided.

Lender	Interest Rates	Loan Amounts
	7.99% – 22.73%	$5,000 – $100,000
	Sherpa Thoughts: The SoFi Personal Loan has interest rates very competitive with the bar study loan lenders. SoFi is one of many lenders offering personal loans, but the SoFi interest rates are among the very best, which is why they were included here.
	5.99% – 24.99%	$2,500 – $35,000
	Sherpa Thoughts: Looking at the Discover personal loan compared to their bar study loan a couple things stick out. First, the interest rates are pretty close on the low end, but can get much higher for the bar study loan. Second, bar study borrowers have a longer period of time to repay their loans.

Borrowers with a good job may even wish to consider a credit card with a 0% interest introductory rate. The savings may be substantial if you will be able to pay off all of the debt before the credit card rate kicks in. However, this is a risky option as the full credit card interest rate may exceed the bar study loan rate.

Playing hardball with your lender

Some attorneys don’t pass the bar on the first try. Others struggle to find a job.

While federal loans have great protections like income-driven repayment and student loan forgiveness, bar study loans are less generous.

Bar study borrowers can use the viability of bankruptcy to their advantage. Some lenders have temporary rate reduction programs to help struggling borrowers. Though bar study loans are not student loans, they are excellent candidates for temporary relief.

Most lenders are large bureaucracies, and customer service representatives rarely have authority to make interest rate changes. However, a savvy law school grad may be able to track down a person who can help and persuade them that rate assistance is better than bankruptcy.

Refinance and Consolidation Options for Bar Study Loans

The key here is to understand what you are shopping for.

Student loan consolidation and refinancing is not an option for debt that isn’t actually a student loan. Once you target personal loans instead of student loans, you might find better options.

Even in the best of circumstances, the interest rates on these loans will still be higher than what you can find for student loans. For this reason, even if you can lower the interest rate slightly, this will still probably be the loan you want to pay off first.

Due to the high interest rates of personal loans and bar study loans, borrowers should prioritize eliminating this debt first.

Next Steps

• Find the lowest possible monthly payments and interest rates on your student loans.
• Attempt refinancing or consolidation or negotiating rates as described above.
• Repay the bar study loan as fast as possible.

The post Bar Study Loan Consolidation and Refinancing Options appeared first on The Student Loan Sherpa.

In some cases, a personal loan may be marketed to students making it appear to be a student loan. Borrowers who understand the differences between the two loan types can find better interest rates and avoid repayment headaches.

Student Loans vs Personal Loans Basics

Both personal loans and student loans are usually considered unsecured loans.

An unsecured loan means that there isn’t any asset or collateral attached to the debt. If you fail to make your student loan payments, your lender will not repossess your diploma or the knowledge gained at school. With secured loans, failure to pay means you could lose your house or your car, depending upon the loan.

At the most basic level, a student loan is just a personal loan with some extra rules attached.

The Special Rules for Student Debt

Student loans are treated differently than personal loans in the following ways:

Loan Uses – A personal loan can be used for anything. Students may use student loans for a wide range of educational expenses, but nothing further.

Repayment – With most personal loans, repayment begins immediately. Student loan repayment usually begins after a student finishes school, though some borrowers opt for loans that start repayment from day one.

Bankruptcy – In the United States, most debt is treated the same in bankruptcy courts. However, student loans have special rules that make student debt very difficult to discharge in bankruptcy court.

Interest rates – Student loans often have lower interest rates than personal loans. Several factors influence the interest rates, including the fact that lenders know borrowers are unlikely to erase the debt in bankruptcy. The reduced risk to the lender can mean lower interest rates for the borrower.

How Federal Student Loans Work

Within the category of student loans, there are two main types: federal and private.

At the most basic level, a federal loan is a student loan with some extra benefits.

Two significant features separate federal loans from private student loans:

• Student Loan Forgiveness – While there are many different forms of student loan forgiveness, the options for federal student loans are by far the best.
• Income-Driven Repayment – A unique feature of federal student loans is that borrowers have the option of making payments based upon what they can afford rather than what they owe. Instead of making payments based upon the loan balance, borrowers can select a repayment plan based on their earnings. Some borrowers qualify for $0 per month repayment.

Combining these two features, federal student loan borrowers have protection against unemployment and underemployment. Personal loans and private loans do not provide this protection.

Deciding Between Loan Types

If you are evaluating options to pay for school, the order of preference should look like this:

1. Federal Student Loans – Between the forgiveness programs and income-driven repayment plans, borrowers should opt for federal loans even if it means a slightly higher interest rate.
2. Private Student Loans – Most students will find that private loans are easier to obtain and have better interest rates than personal loans.
3. Personal Loans – Of the three options, personal loans will typically have the highest interest rates and the most strict repayment options. Borrowers seriously considering this option might want to revisit their plan to pay for college.

Personal Loans vs Student Loans in Refinancing

When refinancing student debt, the distinction between a personal loan and a student loan is crucial.

Some lenders advertise student loan refinancing but use personal loans for the refinance process. This is arguably good for borrowers because it means the debt is dischargeable in bankruptcy. However, it also means borrowers lose out on the student loan interest deduction.

In most cases, however, a traditional student loan refinance creates a new student loan.

At present, the following lenders offer the best refinance rates on a traditional student loan refinance:

Rank	Lender	Lowest Rate	Sherpa Review
T-1		4.86%	ELFI Review
T-1		4.86%*	Splash Financial Review
3		5.29%	Laurel Road Review

The post What are the Differences Between a Personal Loan vs a Student Loan? appeared first on The Student Loan Sherpa.