The Money Dies

For 40 years, there was a secret. Nothing hidden, just a fact nobody said out loud. The federal government would lend any admitted law student every dollar of their cost of attendance, with no underwriting, no ceiling, and no check on whether the degree would ever pay off. The school set the price, the government covered it, and the student signed the note.

Brian Tamanaha called it “a funding program for law schools, with students serving as conduits.”¹ He wrote that in 2012. Nobody changed it. The secret held for another 14 years while tuition climbed, debt grew, and schools that couldn’t have survived any other way kept teaching first-year students about offer and acceptance.

On July 1, 2026, the secret ends.

The One Big Beautiful Bill Act eliminates the Grad PLUS program for new law school borrowers.² It gets replaced by federal caps of $50,000 per year and $200,000 over a lifetime for JD students, 1 of 11 qualifying professional fields.³ A private law degree runs around $270,000 over 3 years at many schools. Federal loans now cover about $200,000 of that, so there’s a gap of roughly $70,000.⁴ One catch: $200,000 is the lifetime ceiling, and the $50,000-a-year cap bites first, so a 3-year student can only borrow $150,000 of it. At expensive schools the real gap runs even bigger, and $70,000 is the floor.

That $70,000 doesn’t disappear. Someone has to fill it, and the terms depend on who.

At a school whose graduates land in Big Law or federal clerkships, private lenders fill the gap. And unlike the federal government, they check first: bar passage rates, employment outcomes, whether graduates earn enough to pay the debt back. A Vanderbilt grad or a Georgetown grad can borrow the gap at reasonable rates, because the lender knows the market for that degree is real.

For schools ranked 50th to 150th, it’s a different conversation.

Take a composite built from numbers I see in real applicant files every cycle. A first-generation applicant, call her Alejandra, gets into a regional private law school outside the T14 with a half-scholarship. That brings her tuition to about $35,000 a year. Add living costs and her all-in runs about $57,000 a year. Federal loans stop at $50,000 a year, so over 3 years there’s roughly a $20,000 gap she has to close with private financing.⁵

She goes to 4 private lenders. 3 decline. The school’s bar passage rate is 68 percent on the most recent test. Its full-time, long-term, bar-required employment rate is 57 percent at 10 months out. The 4th lender approves her at 12.8 percent variable. On a 10-year repayment, the interest alone adds close to $16,000 to her cost.

Alejandra picks a different school. Lower-ranked, but a full scholarship and no private loan gap. To her, the 12.8 percent rate stacked on the original loan load looks like a trap. She walks.

The school she was going to attend loses her tuition. The school she chose gains a first-generation applicant with a solid LSAT score who enrolled for the money. The incoming-class median ticks down half a point. The discount rate ticks up. The doom loop I described in Chapter 2 turns another notch.⁶

Now multiply Alejandra by thousands of applicants running the same math in the same cycle. Schools at the bottom of the private-lender risk curve lose the entire category of careful applicant who was always borderline on cost. What’s left is a smaller, less selective pool: students with family money, students fine with the 13 percent rate, and students who didn’t fully do the math. None of those groups build a healthy school.

Glenn Reynolds put it plainly a decade before it happened: “As with any subsidized product, prices rose to absorb the subsidy.”⁷ Remove the subsidy and the revenue that climbing built starts to deflate. A school priced at $50,000 a year because the government would fund $50,000 a year has no floor under that price now except what students can actually borrow and repay.

The pressure won’t land where you’d expect, either. The worst-ranked schools have been on financial life support for years, and many are already in triage. The most visible squeeze hits the second tier. Schools ranked 30th to 100th built their tuition on the assumption that middle-income students with decent LSAT scores would borrow whatever the school charged, because the government was backing the check. That assumption is gone.

Then the repayment rewrite makes it worse.

The Repayment Assistance Plan (RAP, the new federal repayment program) takes effect July 1, 2026. It replaces the old income-driven repayment options for any borrower who takes out new loans on or after that date.⁸ PSLF (Public Service Loan Forgiveness, which cancels debt after 10 years of public-sector work) survives, but RAP is now the only path to it. The standard 10-year plan doesn’t qualify anymore, so anyone chasing forgiveness through public service has to use RAP.

RAP’s terms run 1 to 10 percent of AGI (adjusted gross income, or your taxable income) depending on income bracket, over a 30-year term, with taxable forgiveness at the end.⁹ The old SAVE plan, the most borrower-friendly income-driven option, is being phased out.

Look, for most borrowers that’s workable. The wrinkle hits schools ranked outside the T20.

A meaningful share of graduates from those schools, between 25 and 30 percent at many of them, have been flowing into public-service and government jobs. Not because it’s the career they dreamed of. Because it’s a job. A public defender position or a county prosecutor slot counts as a bar-required job on the employment survey, so those hires pumped up the figures that made schools look like they were placing students in legal careers. And PSLF made the salary bearable, because the loan would eventually go away.

RAP keeps the path open but makes it worse: a less generous monthly formula, a 30-year term, and a taxable forgiveness event at the end.¹⁰ Some graduates who would have taken a $55,000 government job under SAVE now look at the RAP terms and the tax bill coming in year 30, and take something outside the law that pays more now. The public-service pipeline narrows. The employment survey at those schools shows more JD-advantage hires and non-professional roles, outcomes that look like the degree didn’t fully work. The ranking takes the hit, the applicant pool shrinks, and the scholarship budget grows to make up for it.

The loop tightens again.

Paul Campos warned about this in 2012. He flagged that Congress could eliminate income-based repayment, and that schools hadn’t priced in the risk.¹¹ The 2026 law didn’t go all the way, but it went far enough to bend the pipeline the middle tier depended on to dress up their outcomes.

So 2 of the 3 financial pillars that held up the price of a law degree at a non-elite school are going soft at the same time. The federal loan that covered the full cost is now capped $70,000 below the actual cost at many private schools. The repayment structure that made a mid-salary legal career bearable is less borrower-friendly than it was 6 months ago. The third pillar, the one that lets schools set any price they want and recruit to it, gets its chapter next.

The schools that built their budgets on those pillars, hired faculty into them, borrowed against the tuition projections they implied, and locked in cost structures through ABA accreditation requirements they can’t easily cut, don’t have a good answer yet. Some will find one. Others won’t get far enough ahead of it to try.

The people who designed Grad PLUS were trying to help students afford law school, and they succeeded the way a painkiller does, by hiding the problem long enough for it to grow into something worse. The students who borrowed under it are fine. They keep their prior terms and they still get PSLF. The students who enroll starting July 2026 meet a different world, one where a private lender actually reads their school’s bar passage rate before deciding what to charge them.

Harsh, but honest in a way the system never bothered to be.

The number that flatters, and the distribution that tells the truth

The median starting salary for the law class of 2024 was about $95,000.¹² Schools advertise a version of that number on their employment-outcomes pages, sometimes next to a bar chart, sometimes buried in a footnote. Applicants see it and feel relief. $95,000 sounds like it works.

It doesn’t, not really. The median (the middle number) hides how the salaries actually spread out, and almost nobody thinks about the spread when they picture the payoff. Understanding it is the most important financial move an applicant can make before sending a deposit.

NALP (the National Association for Law Placement, which tracks lawyer employment data) collected full-time salary data for the class of 2024 from 24,937 reported salaries.¹² Plot those salaries on a chart and you don’t get a bell curve with most salaries near the middle. You get 2 humps with a valley between them. Statisticians call it bimodal (2 peaks, not 1).

About 53 percent of reported salaries fell in the $55,000 to $100,000 band. That’s the left hump, the wide one, and it’s most law graduates: regional firms, government jobs, public defenders, prosecutors, in-house roles at smaller companies, nonprofits. Real legal careers. About 23 percent of salaries clustered at the other end, between $215,000 and $225,000, with a sharp spike right at $225,000.¹² That’s Big Law: Vault 100 firms, Am Law 200 firms, the starting salary the big firms set together, which has barely moved as a round number in years.

The valley between those 2 humps, the $100,000 to $215,000 range, is nearly empty. Almost nobody earns a starting salary in that range. You’re either on the left or on the right.

The $95,000 median sits in the valley. It describes a salary almost nobody in the data actually earns. When a set of numbers has 2 peaks, the middle number just falls in the empty space between the 2 common outcomes. Using it to describe a typical law grad’s pay is like averaging 2 completely different jobs and pretending the result tells you about either one.

Now add debt.

The average law grad borrows about $112,500 for the degree alone.¹³ Count undergraduate debt and interest too, and the total owed at graduation is closer to $137,500.¹³ Monthly payments on $112,500 in federal loans under a standard 10-year plan run roughly $1,200 to $1,400, depending on the rate. On the right hump, at $225,000, that payment is 6 or 7 percent of gross monthly income. Uncomfortable, but manageable. You save for the mortgage and take the vacation.

On the left hump, at $65,000, that same $1,200 payment is around 22 percent of gross income. That’s before taxes, rent, or the car payment you need to reach a county courthouse 40 miles from anywhere. The debt that feels like a rounding error at $225,000 feels like a second job at $65,000.

The right hump pays off law school debt comfortably. The left hump carries it for years, sometimes decades, and for many graduates it shapes every financial decision: where to live, whether to marry, whether to have kids, whether to stay in a legal job that isn’t working or risk something else.

The problem is where the odds actually put most graduates.

23 percent of reported salaries landed in the Big Law band. 53 percent landed in the left hump. The remaining roughly 24 percent were scattered in the valley and at other points, many of them part-time roles, business roles where the JD is incidental, or positions too varied to cluster cleanly.¹² Even allowing for graduates who don’t report salary data to NALP, most law graduates end up on the left side.

But most applicants picture the right side, the $225,000 spike, the salary that makes the debt look small. That’s what the marketing implies, or at least what applicants infer. The school lists its median, the median looks close enough to promising, and nobody hands them the full picture of the spread.

Before the federal borrowing caps changed on July 1, 2026, this mattered, but it wasn’t life-or-death. A student who borrowed $150,000 for a school with 40 percent Big Law placement was taking a real risk. But the federal government backstopped it, and income-driven repayment softened the left-hump math. The bet was expensive without being catastrophic.

The caps change the stakes. With cost of attendance at $270,000 or more over 3 years and federal borrowing capped at $200,000 total, a student has to close a $70,000 gap or more with private loans that carry credit-based interest rates. Private lenders have always priced for the left hump. The rate they offer, 11 or 12 percent variable, is set by what happens when a graduate earns $65,000 in year 1 and is still there 5 years later.

So the applicant is borrowing private money at private-risk rates to finance a bet that most law graduates lose. Under the new borrowing rules, the distance between the salary they imagined and the salary they’re likely to earn is the whole financial decision.

The bimodal spread isn’t new. NALP has published it for years. It just wasn’t the information applicants were handed when they were deciding whether to enroll. Going forward, it should sit at the center of the calculation.

The gap, in real numbers

Here’s the arithmetic behind the $70,000 gap.

The $70,000 gap from earlier in this chapter is real money, and after July 1, 2026 it comes from private credit, family wealth, or a scholarship big enough to close it.¹⁴ For a first-generation applicant without family money and without a top-tier scholarship, private credit is the only option. And private lenders, unlike the federal government before 2026, price the risk. A student borrowing $70,000 at a variable rate of 11 to 13 percent, typical for a mid-ranked school with mediocre outcome data, pays a real cost well above the face amount.

Now layer in the repayment math.

RAP charges 1 to 10 percent of adjusted gross income, minus $50 per dependent, over a 30-year term, with taxable forgiveness at the end.¹⁵ Take an illustrative composite. A borrower with $70,000 AGI and no dependents falls in the mid-brackets and pays roughly 5 percent of income, about $292 per month. Over 30 years that’s about $105,000 paid.

The math isn’t done there. On a $150,000 federal balance at the current Direct Loan rate (around 7 to 8 percent), the monthly interest alone runs roughly $875 to $1,000, so a $292 payment doesn’t come close to covering it. RAP blocks negative amortization, meaning the principal doesn’t grow, and it barely shrinks.¹⁶ Thirty years in, the remaining federal balance, still somewhere near $130,000, gets forgiven, and the forgiven amount counts as taxable income in year 30. A borrower with a $130,000 forgiveness event at a 24 percent marginal rate owes roughly $31,000 to the IRS the year the forgiveness hits. That bill gets paid from savings, or not at all.

Total economic cost across the federal loan alone, combining 30 years of RAP payments plus a conservative tax estimate on the forgiveness event, lands somewhere around $135,000. On a $150,000 principal that leads to an average salary in the $70,000 to $80,000 range, that’s not a crisis, just a big number. A $70,000 private loan on top of it, at 12 percent, adds another $45,000 to $55,000 in interest over a 10-year private repayment. Now the total cost of the degree, across all borrowing and repayment, runs roughly $250,000 to $260,000, for a job that might pay $75,000 in year 1.

That’s the math a careful applicant runs, or should run, before signing the promissory note.¹⁷

Watch: why law school pricing is a money game

Law School Just Became a MONEY Game (Why 2026 Changes Law School Forever)

This chapter is from Anyone Can Beat the Law School Collapse by Steve Schwartz, LSAT Coach and Founder of LSAT Unplugged. I've been coaching the LSAT since 2005.

Published July 28, 2026.