Facing federal loan caps, US law school to give $16,000 to all new students

Sept 18 (Reuters) – Beginning next fall, Santa Clara University School of Law in California will give all incoming students a guaranteed scholarship of $16,000 for each of their three years at the university — an amount designed to ensure they can cover their entire tuition with federal student loans after a new loan cap takes effect in 2026.
Santa Clara Law’s new PLEDGE Scholarship, announced by the university on Wednesday, appears to be the first public step by a U.S. law school to address the looming federal loan caps that were adopted in July as part of President Donald Trump’s budget bill.
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The scholarships will “relieve next year’s students from the kind of financial pressure that might otherwise preclude them from pursuing rewarding legal careers,” Santa Clara law dean Michael Kaufman said in a statement.
Under the new budget bill, starting in July 2026, federal loans for borrowers in professional degree programs will be capped at $50,000 annually with a cumulative borrowing cap of $200,000. That poses a problem for high-cost programs such as medicine and law, where total loans frequently exceed that amount.
Current first-year full-time tuition at Santa Clara is $63,280. Aspiring attorneys at U.S. law schools borrowed an average of $146,800 in 2020, according to the latest data from AccessLex Institute, while 76% of law students took out loans.
The current federal loan system allows students to borrow the total amount of their tuition and living expenses at fixed interest rates. The new loan cap only applies to new borrowers, while current law students are grandfathered under the existing system.
The upcoming cap has left legal educators scrambling. A little more than half of the 197 American Bar Association-accredited law schools had full-time annual tuition above $50,000 last year, according to an analysis by the Law School Admission Council’s LawHub, whereas 29 had tuition of $70,000 or more.
Many future law students will have to turn to private lenders to borrow what their federal loans won’t cover, which could mean higher interest rates and denials for students with fewer financial resources, legal education experts have warned. But schools have other options, including boosting financial aid to reduce students’ need to borrow.
“I imagine other schools will follow Santa Clara’s example in one form or another,” AccessLex President Chris Chapman told Reuters. “Getting as many students as possible to have a cost of attendance less than $50,000 per year will be an effective tool to manage the new caps.”
Santa Clara’s $16,000 guaranteed scholarship will drop direct student costs below $50,000 even if tuition increases slightly next year. Students in the school’s part-time Flex JD program will receive scholarships worth $12,500.
Kaufman told Reuters that the estimated $3.2 million annual cost of the scholarships will come from the school’s overall financial aid budget and not from a specific donation.
The scholarships won’t eliminate the need for some Santa Clara law students to seek additional loans or use personal funds to cover their living expenses, which were estimated at $34,178 this year, Kaufman said.
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Reporting by Karen Sloan