Law schools are unprepared for a likely coming cap on federal student loans
Previous loan-related costs for legal education have been mostly borne by students. Will the same hold true if federal student loans are capped?
In the “One Big Beautiful Bill,” the House has approved a cap on graduate student loans from the federal government of $150,000. The Senate’s proposal for professional schools in $200,000. These figures are not indexed to inflation, from what I’ve seen. The proposals would also end GRAD Plus loans. There are other limitations on funding higher education, but this is a law school blog, so I’ll focus on that. And given that both houses agree that there should be a limit on loans, it seems likely that they’ll simply come to some agreement about the number.
Debt and legal education
I have written over the years about student loan debt and legal education, including looking at the “debt to income” ratio of recent graduates, and how a recent uptick in the student loan interest rates can quickly add five figures of debt to law school graduates.
Student loans occupy an unusual space in the strategic objectives of law schools. On the one hand, it does not take much effort to see various task force statements concerned with student loan debt, or various pledges from deans to their students that debt and the value proposition of education are high on their minds. At many schools, debt loads have actually decreased when accounting for inflation. On the other hand, tuition prices steadily rise, the cost of attendance steadily rises, and disparities in student loans regularly increase.
Worse, debt is something that is often outside of schools’ control and often something of an abstract concern. That is not to say that it is not a concern. But it is to say, if one were to look at, say, a law school’s strategic plan, or to sit in on an administrative meeting, some goal of “how do we reduce our reliance on federal student students” or “how can our students graduate with less debt” are not often, if ever, mentioned.
True, many schools do—and it is greatly praiseworthy!—offer loan repayment assistance programs for students who earn lower incomes in public service-oriented fields. These are common at the most elite schools, and often exceedingly generous. That said, of course, the vast majority of most graduates at these schools go on to elite law school employment outcomes and are quickly earning mid-six figure salaries. Debt, then, is less of a problem for graduates at these institutions.
Debt is a complicated matter, and it is more complicated for law schools. The value proposition for a law degree over the course of a, say, 40-year career is quite good. But there are significant pressures on recent law school graduates who have debt disproportionate to early-career salaries. At some law schools, of course, it is easy to secure first-year salaries of $225,000 and quickly cross $300,000 by the fourth year, in addition to mid-five figure annual bonuses. At other schools, less so.
Price tags and total loans
Let’s take Harvard Law for a moment. Its tuition in 2025-2026 will be $80,760 for one year. That will likely rise in each of the next two years, so the tuition alone should exceeds $245,000 for three years.
But students need loans for their entire cost of ninth months’ attendance at school. Harvard puts that total $121,250. At a number of schools, the total cost of attendance exceeds $100,000 for one year. That’s $300,000 to $350,000 over three years.
Many schools outside the top 20 or so schools have high tuition rates. Fordham ($74,044 in 2024), St. John’s ($72,630), Brooklyn ($72,592), George Washington ($72,520), Cardozo ($72,270), Hofstra ($70,870), and Pepperdine ($69,950) were near or over the $70,000 mark in 2024. Around 80 schools have tuition at $50,000 or higher as of 2024. And recall, that’s just tuition, not all cost of living. (Aggregated 2025 figures will be released around December.)
A cap of $150,000 or $200,000 (again, not indexed to inflation) would put significant pressure on law schools. While not all students take out loans, and far fewer take out the maximum figure for loans, average loans exceed $100,000 for law school alone. It is not hard to find students who cross $200,000 in student loan debt from law school alone—and the occasional student with $300,000 is out there. These numbers are likely only to increase, even if slowly.
A limit on federal student loans means those students will turn to private loans to supplement that amount—and likely pay even more. That said, schools have already essentially allowed these and related indirect costs to be passed along to students, such as:
A 2013 deal between President Barack Obama and congressional Republicans to end subsidized student loans for graduate students, effectively a several-thousand dollar tuition increase for a typical student taking out debt.
A 2024 interest rate hike that would add $10,000 to $15,000 in additional debt for students.
Schools with international programs that require taking out additional loans to live abroad, or schools in high cost of living areas that have experienced increased inflation or increased housing prices
Bar loans, often private loans between graduating law school and starting a legal career
Some schools maintain “conditional scholarships,” which end up significantly increasing debt for a handful of students who lose their scholarships after their first year of law school.
In each of these cases, the added costs are typically borne by students—not absorbed or mitigated by the institution. There’s no reason to believe schools will respond differently this time. A cap on federal student loans means students will have to go to the private loan market to cover their education expenses, and private loans tend to have higher interest rates. That indirect cost, again, is one likely to be passed along to students without much consideration from law schools.
Potential law school responses
Still, there is an opportunity. There is good reason for a law school—or perhaps a consortium of law schools—to secure lower interest rate loans for their students. The value proposition for a law degree in the long term is quite good, and the default rate on student loans from law students is quite low. In theory, this is a safer form of student loans than other types. But it would require some pressure from law schools to loan service providers to create these kinds of lower cost offerings.
It also places public schools in a much more advantageous position. While a few of the most elite public schools charge very high tuition, many strong, “top tier” public law schools have significantly lower costs for in-state students. Whether state legislatures continue to subsidize it is another matter.
I imagine Congress believes this is not simply a cost-saving mechanism, but that it will be an inducement for schools to keep tuition lower. I am not sure this is the case, given how institutions have reacted to other loans or costs for education, and as the price has simply been passed on to students. It is possible this is the straw that breaks the camel’s back and more awareness of student loan debt comes to institutions. But, as I opened this post, I do not believe law schools have been thinking this way for some time, and I do not believe they will be thinking about it much in the future.
It is quite plausible that it simply exacerbates the wealth gap in legal education, and the poorest students will have to take out even higher amounts of debt than the past.
To the credit of an institution like Yale, however, it has been proactive in the right ways. It expanded its financial aid to those with the greatest financial need—even as many law schools continue, in a flawed fashion, to “chase” students to maximize their LSAT and UPGA medians. It offers very generous repayment of loans to students who pursue public interest work—instead of relying on financial aid at the front end, it differentiates and subsidizes students who go into low-paying jobs at the back end rather than subsidizing students who end up going into lucrative practice. A cap on federal loans makes programs like this, in all likelihood, more expensive at schools like Yale.
As I wrote earlier this year, we’ll see which schools are proactive and which schools are reactive in moments like this, including thinking about all sorts of issues with respect to funding. That includes whether they reconsider how they finance legal education, or just pass the burden to the next class of students. And it remains to be seen if some schools, more reliant on federal loans than others, will suffer the brunt of the proposal.