Law Schools Become Lenders This Fall

The gap is real and it landed this fall

When Congress passed the One Big Beautiful Bill Act (OBBBA) in July 2025, one provision eliminated the Graduate PLUS loan for new borrowers starting July 1, 2026. For years, Grad PLUS had covered the full cost of attendance with no annual cap. If law school cost $80,000 per year, Grad PLUS could cover $80,000 per year.¹

That backstop is now gone for students starting new programs this fall.

Under the new federal loan rules, law and professional students are limited to Direct Unsubsidized Stafford Loans capped at $50,000 per year and $200,000 total over the life of a professional degree. That sounds manageable until you factor in that many law schools cost $75,000 to $100,000 per year including living expenses — leaving a gap of $25,000 to $50,000 per year with no federal option to fill it.

Private lenders exist, but they require credit history, have stricter underwriting than federal programs, and reject applicants who don't qualify. That is a real problem for new 1Ls who don't yet have the credit profile to attract competitive private loan offers.

What two schools did about it

Rather than wait for tuition prices to fall, some law schools moved early to plug the gap with institutional lending programs.

The University of Kansas School of Law launched the Jayhawk Endowment Law Program for Students (J-HELPS), funded directly from the university's endowment. The fixed interest rate is 5 percent — lower than most private lenders are offering.²

Washington University in St. Louis School of Law followed with a supplemental loan program at 7.5 percent fixed, covering up to $25,000 per year. The program is available only to students who have already exhausted federal loan options.²

Midwestern University, which serves graduate students in health-related fields including pharmacy and osteopathic medicine, launched a comparable program at 7.00 percent fixed with no origination fees.³

All three programs launched before the July 1 cutoff, meaning the schools anticipated what their incoming classes would face and built solutions before those students arrived.

$200,000 — Lifetime federal borrowing cap for professional students (law, medicine, MBA) under OBBBA^{One Big Beautiful Bill Act, July 2025}

Why this matters if you're applying in the next cycle

The presence of an institutional loan program can shift the financial calculation significantly. A 5 percent fixed institutional loan from a school's endowment is a better deal than a 9 to 12 percent private loan from a marketplace lender. But not every school has one — and most don't.

Here is what prospective law and professional students should understand before deciding where to apply:

Most schools haven't launched institutional programs. KU and WashU moved early. Many law schools are still figuring out how to respond — some are expanding scholarships, some are pointing students toward private lenders, some are waiting to see whether federal policy shifts. You won't know what a given school offers until you ask directly.

Institutional loans don't carry federal protections. These are not federal loans. They generally don't qualify for income-driven repayment plans or Public Service Loan Forgiveness. Repayment terms are set by the school. Understand what type of loan you're actually taking on before signing, and compare it carefully against federal vs. private student loan options.

Before borrowing from any school's institutional loan program, confirm in writing whether it qualifies for income-driven repayment, Public Service Loan Forgiveness, or standard federal deferment and forbearance protections. Most institutional loans do not qualify for any of these.

The gap is biggest at high-cost programs. At a school where total annual costs exceed $80,000, the $50,000 federal cap leaves a substantial shortfall. If that shortfall isn't covered by grants, scholarships, or an institutional loan program, the only remaining option is private credit — which not every applicant will qualify for.

Think through total debt before you commit. Borrowing $200,000 in federal loans plus additional private or institutional debt for a legal career is not automatically sustainable. The salary range for lawyers varies widely by practice area, geography, and employer type. The question of how much student debt is too much applies at the professional school level just as it does at the undergraduate level.

When you contact a law school's financial aid office, ask two questions: "What institutional loan options do you offer beyond federal limits?" and "What is the median debt at graduation for your current class?" Schools that know their numbers and share them are usually more forthcoming about the full cost picture.

What to do right now

If you're a current 1L this fall, review the terms of any institutional loan your school offered and confirm whether it qualifies for federal repayment programs. If you're planning to pay for graduate school at a professional program, add institutional lending to your list of questions for every financial aid conversation.

The schools that have thought this through will give you a clear answer. The ones that haven't thought it through are telling you something important too.

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Footnotes

1. NASFAA. (2026). Federal Student Aid Changes: One Big Beautiful Bill Act. nasfaa.org ↩

2. Inside Higher Ed. (2026, March 26). Law Schools Become Lenders in Response to OBBBA Loan Limits. insidehighered.com; WashU Student Life. (2026, April 2). WashU Law becomes the nation's second school to offer supplemental loan program. studlife.com ↩ ↩²

3. Insight Into Academia. (2026). As Federal Loan Limits Bite, Some Universities Step In as Lenders. insightintoacademia.com ↩