The University of Kansas and Washington University in St. Louis are among the first institutions to respond to loan caps by launching their own financing programs.
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Two law schools are launching new loan programs to help close funding gaps created by new limits to federal graduate student loans.
The University of Kansas and Washington University in St. Louis both plan to lend money at favorable rates to law students who have already exhausted their federal student loan options and might not meet the requirements for private loans.
In last year's One Big Beautiful Bill Act, Congress eliminated the Grad PLUS loan program and capped federal loans for programs designated professional at up to $50,000 per year and $200,000 total. Law degrees are among the degrees the Department of Education has designated “professionalâ€; graduate students in nonprofessional programs will only be able to borrow up to $20,500 per year, to a total of $100,000. The changes will go into effect July 1 and impact students entering programs in fall 2026.
Colleges are scrambling to find solutions that will help students fund their education. Some higher ed observers say the KU and WUSTL models could be replicated by other institutions.
Unlike other private lenders, the law schools will not require credit checks, making the loans accessible to students with poor or no credit history who may struggle to access the traditional private loan market. KU's program will require students to maintain a 2.0 GPA.
Steven Freedman, associate dean of admissions at KU's law school, said that the loan program was created in large part to address students' “anxieties†about the paperwork, credit checks and co-signer requirements associated with most private loans.
“We found that the co-signer requirement was one of the key concerns among students when considering loans. Similarly, while many law students come to law school with a strong credit score, many do not. Many law students are younger and have not built up a credit history,†he said. “But we trust our students. We know that our students are very successful in the marketplace, so we worked with our endowment association so that the only credit check we need is that they've been admitted to our program.â€
College affordability advocates have raised concerns about forcing students to turn to the private loan market to cover the full cost of attendance, arguing that private loans have fewer safeguards for borrowers than federal loans and many students do not have high enough credit scores to qualify. As a result, experts have suggested institutions should become their own lenders or enter into preferred lender agreements with third-party lenders to ensure their students get good deals.
KU's loan program, the Jayhawk Endowment Law Program for Students, or J-HELPS, will draw from the institution's endowment and has a fixed interest rate of 5 percent. Meanwhile, the WashU Law Supplemental Loan, which is institutionally funded, will have a 7.5 percent interest rate. Both are below 7.94 percent, the interest rate for federal graduate loans for the 2025–26 academic year.
WUSTL aimed “to set a fixed interest rate that was reasonable in the current market without imposing an origination fee,†said Carrie Burns, the law school's director of financial aid and student life, in an email to Inside Higher Ed.
Freedman noted that last year only a very small number of KU students—about 3 percent—borrowed enough to exceed the federal loan cap, so it's unlikely that a large number of students will use the program.
Preston Cooper, a senior fellow for the American Enterprise Institute, a conservative think tank, lauded the creation of the programs in a recent blog post.
“J-HELPS is exactly the sort of program that universities ought to create if their costs exceed the new loan limits,†he wrote. “If universities believe that the value of their education is worth the price of tuition, they should prove it by helping students secure financing above the new federal loan limits—ideally with their own skin in the game.â€
Daniel Collier, assistant professor of higher and adult education at the University of Memphis, said the institutional lending programs make sense as a way to address concerns about students being able to access private loans. But some institutions don't have enough capital to launch a program, while others might be concerned about their students' ability to repay them.
“I don't know if all institutions or even programs within an institution will have the ability to assume the risk to begin with, because those who need the most money, on average, are going to be those from less affluent circumstances,†he said. “Some of these initial institutions creating these programs will probably be a signal for future programs to maybe jump on board or not. But it doesn't mean that every institution can be well resourced enough to try this.â€
Another Option: Preferred Lender Agreements
Some institutions are opting not to launch their own lending services, but to turn to preferred lender agreements, in which lenders partner with a university to provide loans to their students. The University of Pennsylvania has implemented five new agreements in light of the OBBBA caps, giving students a range of options, each with unique benefits, for borrowing. Some of those benefits include multiyear approval, allowing students to be approved in advance for their full education, and a reduction in the interest rate if they graduate on time or early.
Elaine Varas, senior director for student financial aid at Penn, said incoming students have provided positive feedback about the recommended lenders, saying that the process has been uncomplicated and the lenders have been easy to work with.
Varas said that Penn decided to go with preferred lender agreements rather than creating an institutional loan program to give students more and better options.
“Competition's a good thing. So, using lenders encourages competition, and in that way, we believe the lenders were able to provide benefits the university may not have been able to,†she said.
If loan options vary significantly from institution to institution, that could factor into students' decisions about where to go to graduate school, Collier noted. Will a lower interest rate at KU entice a student who might not have otherwise gone there?
“Students will have to shop around for the best deals they can possibly get,†he said.
