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Economists praise programs, say it gives school an incentive to provide a good education
University of Kansas and Washington University in St. Louis are rolling out private loan programs in response to the new federal limits enacted under the One Big Beautiful Bill Act. Both programs aim to help students cover the remaining costs of tuition without turning to private lenders.
The One Big Beautiful Bill Act, a budget law signed last July by President Trump, currently only allows students pursuing a professional degree, like a law degree, to borrow $50,000 per year in taxpayer-backed loans, or $200,000 total.
In response to these new limits, the University of Kansas School of Law introduced the Jayhawk Endowment Law Program for Students, which is funded by KU Endowment. It offers fixed-rate loans to eligible students at 5 percent interest and does not require a co-signer.
The loan program is designed to fill the gap from the new federal cap of $50,000 per year in student loans, even though most students already borrow below that threshold, according to the news release.
“Last academic year, 97% of KU Law students borrowed less than $50,000 for tuition and living expenses. In addition, more than 80% of KU Law students receive scholarships, further reducing the need to borrow,” the university stated.
To qualify for the loan program, students must be full-time students with at least a 2.0 GPA. They must also be U.S. citizens or permanent residents. There is a one-time 2 percent fee, and students cannot borrow more than their total tuition.
Under the J-HELPS program, students can borrow up to $12,000 per year, with a $24,000 cap over three years. There is a 10-year repayment term. Students are not expected to make payments while in school, and there is a 5-month grace period after graduation before repayment begins.
Students are required to first exhaust federal aid options before applying for the KU Law loan.
At the Washington University School of Law, the WashU Law Supplemental Loan offers up to $25,000 per year at a fixed 7.5 percent interest rate. The JD program application website lists guaranteed availability for those who need it.
Though it is a private loan that does not qualify for federal forgiveness programs, it does not require a credit check, collateral, co-signer, or origination, guarantee, or repayment fees. It is also limited to U.S. citizens and cannot exceed the total amount of tuition.
Neither the University of Kansas nor Washington University law schools responded to multiple requests for comment via email and voicemail in the past weeks. The Fix asked for information on eligibility, interest rates, and safeguards.
Both law schools’ interest rates fall below the 7.94 percent fixed interest rate for this current school year.
American Bar Association says there are some risks, but that borrowers are getting better terms
The American Bar Association provided comments from its team.
Asked about potential problems with the new loan programs, the group told The Fix “the change may expose the school to a greater number of defaults by not screening, but by offering better terms to an individual borrower than are accessible elsewhere in the private market, that borrower’s risk of delinquency/default may be lowered by the new programs.”
The group said there are concerns around the programs due to a lack of federal protections.
Without income-driven repayment, it may be more difficult for borrowers with financial hardship, which could turn them away from public service roles, especially with changes to Public Service Loan Forgiveness,” the unsigned statement read.
“[S]ome schools have a demonstrated commitment to public service such that they might ease or remove that barrier for borrowers, e.g., creating income-sharing programs for those borrowers if they take critical jobs in their state,” the bar association wrote. “If so, and the borrower got better terms and if borrowers also gained the ability to rehabilitate delinquent or defaulted loans to keep them off their personal credit record… these new programs might actually be preferred.”
However, after the One Big Beautiful Bill Act, “a borrower with a blend of loans [will arguably] be exposed to a higher risk of default.”
Experts say loan program puts responsibility back on schools, where it belongs
Two higher education economists praised the program in comments to The Fix.
This type of loan program is a good way forward for professional programs after the One Big Beautiful Bill Act, according to Preston Cooper with the American Enterprise Institute.
“If law schools are confident that the quality of their education is worth the price of tuition, they should set up institutional loan programs like the KU or WashU programs,” Cooper told The Fix via email. “After all, the schools will only get their money back if their students can afford to pay their loans.”
Cooper said schools with programs like these would face losses if they are not repaid, so this effectively shifts responsibility onto the law schools to ensure students can repay the debt. It may even force schools to keep tuition rates steady.
“These programs make colleges more accountable by shifting financial responsibility onto the schools. If students can’t afford their loans, the colleges don’t get paid. This fundamentally changes the incentives facing higher education,” Cooper said.
A senior fellow at Unleash Prosperity, a nonprofit advocating for free-market principles and economic growth maximization, agrees the loan programs are a smart move for law schools.
“[H]aving those funds invested in their funds or university endowment… might even be a moneymaker for [bigger schools],” Richard Vedder said via a phone interview with The Fix. “They’re going to theoretically make some money on this – not quite as much as in other investments but probably close.”
The emeritus economics professor also previously directed the Center for College Affordability and Productivity.
In fact, he said “[i]t could only have a positive effect… it’s a plus for those schools and a plus for the legal profession.”
Vedder said the minimal fees and the lack of cosigners and collateral signifies the trust the law school has in its students.
“[The paperwork is] really unnecessary for someone who is getting a degree that will likely lead to a substantial income,” he said.
Especially in the age of artificial intelligence, Professor Vedder finds these loan programs to be “[a] way to enhance the pool of applicants in a way that really is not that costly but would be appealing to students.”
MORE: Connecticut may issue student loans to offset Trump limits
