Skin In the Game At Last

Startling news from the world of student-loan reform: A federal intervention appears to be not only working on its own terms but producing beneficial knock-on effects. With apologies to the Obama administration, these are great days to be on the (actual) right side of history.

Earlier this year, the University of Kansas School of Law announced a new institutionally sponsored student-loan program in response to the One Big Beautiful Bill Act. Because that law caps professional-program student lending at $50,000 a year (with a $200,000 lifetime maximum), the occasional legal Jayhawk may need private loan dollars to bridge the tuition-and-expenses gap. Now, that money will come from—and be owed back to—the institution’s endowment. If law-school graduates fail to repay what they’ve borrowed, KU will have at least some modest skin in the game.

A similar program at the Washington University School of Law was launched just over a month later, in February. Law students at the St. Louis institution may now borrow up to $25,000 per year directly from the university. As Inside Higher Ed reported last week, both schools plan to charge a lower interest rate than the one used by the federal government for graduate loans.

There is a great deal to like in these developments. Rather than contributing to the vicious circle by which federal-loan availability drives up tuition, institutional lending is likely to create a virtuous one. Poor repayment rates may force the programs in question to lower costs or raise the quality of their academic offerings—or both. (Neither school will be checking students’ credit scores or histories.) At the margins, students who ought not to be spending tens or hundreds of thousands of dollars on a legal education in the first place might be persuaded by market signals not to do so.