Derek Muller (Notre Dame; Google Scholar), Law Schools Are Unprepared for a Likely Coming Cap on Federal Student Loans:
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. … [G]iven 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. …
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.
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.
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.
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