The Impact of Capping Graduate Loans on Law Students

Last week, the House Education and Workforce Committee advanced a bill as part of Congress’ efforts to fund priorities through the budget reconciliation process. This bill would make significant changes to federal student loans and repayment options. One proposal that would make it much harder and more expensive for low- and middle-income students to pursue a graduate or professional degree is a cap on the annual amount a student can borrow, set at the national median cost of attendance for each program of study. In addition, federal loans would be capped in the aggregate at $100,000 for graduate degrees and $150,000 for professional degrees.

By definition, the median represents the “middle” or “mid-point.” This means that when calculating the median cost of attendance across all J.D. programs, roughly half of law schools will fall below that number and roughly half will be above. What this means for students is that federal loans will no longer cover their full annual cost of attendance at roughly half of law schools. So why would Congress do this? Some policymakers believe that by capping federal student loans, schools will lower their costs. They also believe that the private student loan market will act as a comparable substitute for the federal government when it comes to higher education financing.

But that is not what would happen in practice. Instead, many low- and middle-income students would struggle to obtain financing to complete their degrees.

What Do the Data Say?

For many law students, the annual borrowing limit would not be sufficient to cover each year of their J.D. program. Data from the American Bar Association show that the national median cost of attendance for J.D. programs in 2024 was approximately $79,000.¹ While that would fully cover costs at about half of law schools, it wouldn’t be enough at roughly the other half. But even if $79,000 were enough to cover the cost to attend a given law school, the $150,000 aggregate loan limit would mean that, for many students, federal loans would not cover all three years in a J.D. program.

It’s also important to note that the proposed aggregate cap is a static figure that will stay the same until Congress legislates an increase.² Cost of attendance data show that in 2023,³ 10 law schools were below the $150,000 cap; in 2024, that number dropped to seven. Similarly, in 2023 there were 93 law schools whose total cost of attendance was above what would have been the annual loan limit that year (approximately $77,000); in 2024 that number grew to 94. As the aggregate loan limit stays constant and the cost of attendance increases, fewer students each year will be able to fully finance their law degrees using federal student loans.

Finally, the collection and analysis of program of study costs used to calculate the national median cost of attendance will take some time, making these figures outdated before they are even released to students and schools. In the meantime, costs will have increased, but the annual loan limit will not reflect those increases.

The Private Market is an Inadequate Substitute

Students without other financial support could try to get a private loan, or they would have to drop out. Some law students may fare well in the private market, but others would not be able to get a loan or would only be offered one with high interest rates and fees. Private lenders have stringent underwriting standards that consider debt-to-income ratios when making lending decisions. Students who enroll in a program that incurs high debt, but plan to enter a lower-paying public service career, for example, may have a hard time getting a private loan. It’s also important to keep in mind that private loans are not eligible for federal benefits such as income-driven repayment plans and Public Service Loan Forgiveness, making repayment harder and more expensive for borrowers least able to afford it.

If students are unable to obtain a private loan, they will have incurred debt with no degree to show for it. Without the benefits a degree provides in the job market, such as increased salary potential, students that are forced to drop out will have a much harder time repaying their loans, leaving taxpayers on the hook for defaulted loans.

Inviting Complexity and Confusion

Creating an environment where the annual loan limit for graduate and professional students changes from year to year, as the national median cost of attendance changes, would be complex and confusing for students. Financial planning for a three-year law degree would be difficult because students would have no way of knowing what the annual loan limit would be in years two and three and whether or when they would hit the $150,000 aggregate cap.

A system like this would also lead to increased administrative burden at the Department of Education, which would be responsible for calculating the national median cost of every program of study. The recent reduction in workforce at the Department may make it even more difficult for them to take on such an onerous task at this time.

Prioritize Students

As Congress works on legislation this year that would significantly alter the federal student aid system, it must ensure that higher education remains accessible and that any changes do not result in students being forced to drop out because they cannot obtain financing to complete their degrees.

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¹ American Bar Association, 2024. Compilation – All Schools Data. Section of Legal Education – ABA Required Disclosures. Analysis of full-time, non-resident cost of attendance by AccessLex Institute.

² Undergraduate loan limits were last changed in 2008.

³ American Bar Association, 2023. Compilation – All Schools Data. Section of Legal Education – ABA Required Disclosures. Analysis of full-time, non-resident cost of attendance by AccessLex Institute.