TaxProf Op-Ed: Stephens on LL.M. Degrees and Student Loan Limits

This TaxProf Blog Op-Ed is by John Stephens, Director, Graduate Tax Program at NYU School of Law:

On Thursday, November 6, 2025, the US Department of Education (DoE) concluded negotiated rulemaking on new student loan limitations under the One Big Beautiful Bill Act (OBBBA), which will impact graduate and professional programs. In the new year we expect to see regulations released which tell us which degree programs qualify as “professional.” Students in these degree programs can take out up to $50,000 annually in federal loans. Students in other graduate programs will be limited to $20,500 per academic year in federal loans. We know the J.D. will be considered a professional degree, but the LL.M. degree likely will not be. Nor will an MBA, a Master’s in Tax, a Master’s in Accounting, et cetera. These students will likely be limited to $20,500 in federal loans per year. After reaching this limit, they can seek private educational loans, which typically have stringent lending criteria, as well as higher (and variable) interest rates and fees. This annual limit will not cover the full cost of J.D. education for many students, and may only cover a much smaller portion of a post-J.D. LL.M.

In addition to imposing new federal loan limitations, the OBBBA phased out Grad PLUS loans. There will be lifetime federal Stafford loan limits on graduate and professional education, alongside limits on the amount of federal loans a student can borrow each year. For students who start a professional degree in fall 2026, the lifetime limit is $200,000, including any graduate degree loans, but not including undergraduate loans.

Many public and private law schools have an annual cost of attendance (student expense budget) of over $100,000, which includes tuition and fees, as well as housing, insurance, books, et cetera. Many students receive financial aid, however. The average amount of law school debt in 2022 was approximately $119,000, though many students have additional undergraduate and graduate loan totals in addition to their law school debt. The 2022 data suggest that roughly a quarter of JD graduates aren’t taking out any loans, which implies higher average law school debt among students who rely on the federal student loan system.

Between July 2006 and July 2026, Grad PLUS federal loans covered the entire cost of attendance for graduate and professional students. Before that, we had subsidized and unsubsidized federal loans up to a similar limit, with private loans handling the remainder. In 2005, however, $18,500 went a lot farther than $20,500 does today—due to inflation, the real difference is about $10,000. So the OBBBA’s limitations are different and worse for students seeking an LL.M., but not exactly new. What could go wrong when private lenders fill these gaps? We can look to the 2007 student loan scandal for some ideas.

Past DoE regulations conditioned federal loans on whether a degree prepared students for an occupation and met loan-debt-to-income ratios, to a bit of success. (These regulations only applied to for-profit schools and non-degree programs.) The OBBBA’s new loan limit may curtail lending to programs that don’t provide a good return on investment, but it will also severely restrict lending to programs that provide a great return on investment. LL.M. programs, especially in taxation, are a good example of where these loan limits will impede students’ long-term success.

Perhaps shifting lending to the private sector will price in the risk of specific degree programs. Or maybe this shift will be a Hobson’s choice for everyone, and just shift loan origination from the public market to private for-profit lenders. Prices will go up for all students, especially those with lower credit ratings, while repayment rates may not change much. Privatization may not lead to efficiencies.

Finally, as a matter of federalism, the regulation of the professions and licensure—crucial inputs for the DoE’s in-process regulations—is handled by the states. For better or worse, each state sets rules for what will satisfy the educational requirements for a given profession. For example, foreign-trained lawyers may need an LL.M. degree to sit for the New York state bar, and some states look to LL.M. degrees for establishing a legal specialization. The DoE’s in-process rules do not seem to align with how the states regulate and define professional education. This misalignment may prevent states from filling their established needs for highly educated professionals in various fields.

Overall, it’s hard to see how the DoE’s consensus rules advance consistent values—liberal or conservative—in higher education. These rules warrant some revisiting before they become final in the spring.

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