US Education Department closure imperils law school finances, deans say (2025)

March 31 (Reuters) - The Trump administration’s recent moves to shutter the U.S. Department of Education and shift management of the $1.6 trillion federal student loan program to the Small Business Administration threaten to disrupt the flow of money vital to law school operations, deans and other legal education experts said.

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Potential delays in the disbursement of federal student loans and the possible resurgence of the costlier private student loan market could result from the upheaval of the Education Department, said University of Utah Law Dean Elizabeth Kronk Warner.

The Education Department, when asked for comment on the impact of the changes, pointed to a March 23 appearance by Secretary Linda McMahon on CNN’s State of the Union in which she said the administration is looking to place programs where they can “operate very efficiently.”

The SBA, in a prepared statement, said on March 24 that it is “working closely with the White House, Department of Education, and Congress to finalize a plan for the strategic transfer of responsibilities related to the student loan program.”

University of California, Irvine School of Law Dean Austen Parrish said the SBA's inexperience handling the massive student loan program could be problematic.

“Small business loans aren’t the same as managing a student loan portfolio," Parrish said, adding that students rely on federal loans for housing and food in addition to tuition.

More than three-quarters of law students (76%) take out loans to cover their tuition and living expenses, Education Department data show. Public and private law schools use that tuition money to fund their operations, and students' financing must be in place when the school year starts in August or September.

Should federal loan disbursements be delayed, law schools would likely have to scramble to extend their financing deadlines, said Utah's Warner.

Delays could force students to seek out private loans, which tend to come with higher interest rates and may not be available to lower-income students, Warner said. Any disruption in student loans could also push law students toward schools with lower tuition, Warner added, and some may decide not to attend at all if their loan repayment costs are higher than expected.

Among the looming questions for law schools are whether the SBA will have enough staff to properly run and oversee the program and if it will design a new system for administering loans or stick with the existing one, said New York Law School Dean Anthony Crowell.

The federal government lends an estimated $6 billion to $7 billion annually to Juris Doctor students, said Chris Chapman, president of AccessLex Institute, which advocates for affordable legal education. Chapman ran the institute’s previous incarnation as a private graduate student loan lender.

Law students graduate with an average $161,300 in loans — more than any other professional or graduate-level program outside of medicine, Education Department data shows.

The majority of public and private law schools are funded almost entirely through student loan tuition, said higher education expert Robert Shireman, a fellow at The Century Foundation, a progressive think tank. Unlike science and medical programs, they typically receive neither large public and private grants nor supplemental funding from their universities, Shireman said.

Deep staffing cuts at both the Education Department and the SBA are likely to impact how effectively and efficiently the federal student loan program functions, Chapman said.

He pointed to widespread technical issues and delays in 2024 when the Education Department updated its Free Application for Federal Student Aid, which students use to apply for loans.

“If you try to run something with half the people you had the day before, there’s probably going to be some hiccups,” Chapman said.

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Reporting by Karen Sloan

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