Feb 17 (Reuters) – For tens of thousands of aspiring lawyers, the math of paying for a U.S. law degree changes on July 1, 2026, when a new cap is set to limit federal loans for professional degree programs at $50,000 a year and $200,000 in total.
The change could force more students to obtain higher-interest, non-dischargeable private loans in the coming months, seven law school administrators and education financing experts told Reuters, potentially shutting out lower-income students and increasing the overall price tag of a law degree.
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They said some admitted students may opt for cheaper schools or pull out altogether when they calculate the repayment of their combined federal and private loans, while schools may scramble to funnel financial aid to lower-income students denied by private lenders.
“We probably will have better answers come July 1, but there’s still a lot of variables we don’t know,” said Joseph Lindsay, assistant dean of admissions and financial aid at the University of California, Berkeley School of Law, where current tuition and living costs total $104,145 and students borrowed an average of $64,087 in federal funds last year.
One incoming law student, who spoke to Reuters on condition that his name not be used, said he applied to eight schools but ruled some out after realizing he would need to take private loans to attend.
“It really put a strain on my options,” said the student, who is aiming for a public-sector career rather than a high-paying corporate law job. “There’s just no way I would be able to take out private loans and pay them off effectively with that kind of job.”
Unlike federal loans, private student loans can’t be discharged under the Public Service Loan Forgiveness program, which wipes out the loan balances of borrowers in government and other public interest positions after 10 years. The incoming student said he plans to accept an offer from the University of North Carolina School of Law thanks to a scholarship that will eliminate the need for a private loan.
RESURGENCE OF PRIVATE LOANS
The new loan cap on professional degree programs is part of a broad reset of graduate lending under last year’s federal budget law. It applies to an estimated 43,000 incoming law students who are now receiving admissions decisions and will be lining up financing in the spring and summer, based on historical data from the American Bar Association.
Private lending hasn’t been a major part of law school financing since 2006, when the federal government began allowing graduate and professional students to borrow their full tuition and cost of living, making it difficult to predict what terms and interest rates students may face come July.
Lenders determine student loan worthiness and rates based on credit scores, debt, earning potential and other factors. Current private educational loan interest rates range from about 6% to 18%.
When AccessLex Institute was a private student lender, it approved 75% to 80% of law student loan applicants with about 15% requiring cosigners, said president Chris Chapman. The organization transitioned into a nonprofit focused on law school access and affordability after federal lending expanded.
In 2025, a quarter of American Bar Association-accredited law schools had average annual federal student borrowing above the $50,000 cap, according to an analysis of U.S. Department of Education data by University of Tennessee, Knoxville education leadership and policy studies professor Robert Kelchen.
The University of Chicago Law School topped the list with students borrowing an average $77,377 a year, followed by New York University School of Law at $74,679 and Columbia Law School at $71,634. All three schools declined to comment on the impact of the upcoming loan cap, though an NYU Law spokesperson said nearly 62% of its current first-year students received a scholarship.
Private lenders may look more favorably upon law student borrowers because lawyers tend to earn relatively high salaries upon graduation, Kelchen said. The Education Department data show that Chicago, NYU and Columbia’s law schools each had median annual earnings above $250,000 four years after graduation.
That’s not the case with all law schools that have heavy student borrowing, however. San Diego’s California Western School of Law had the fifth-highest average annual borrowing amount in 2025 at $69,601, with a median graduate salary of $100,889—less than half that of the four schools with higher average borrowing. Ten other law schools had average federal borrowing above $50,000 but median incomes below $100,000 four years after graduation, Kelchen’s analysis showed.
California Western law dean Miriam Baer said she expects applicants to be more “price-sensitive” this year. The school has seen more interest in its part-time evening program, which enables students to work full time and reduce their need for loans. California Western also plans to offer scholarships to at least 85% of entering students and make it easier for them to retain those scholarships in subsequent years, Baer said.
The Santa Clara University School of Law in September said it will give guaranteed annual scholarships of $16,000 to all new students this year to bring its current $63,280 tuition below the new cap, though some students will still need to take out private loans to cover living expenses.
Applications to the school are up 40% over last year, double the 20% increase of the national applicant pool, said the school’s dean Michael Kaufman.
“I have to believe part of that bump is due to the certainty around financial assistance for incoming students,” he said.
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Reporting by Karen Sloan
US law schools, students fear rising costs from new federal loan cap
