The financial backbone of American legal education is facing an unprecedented crisis. In a move that could send shockwaves through law schools nationwide, the Trump administration has set in motion a plan to dismantle the US Department of Education, transferring its $1.6 trillion federal student loan program to the Small Business Administration (SBA). The decision—marked by deep staffing cuts and an abrupt transfer of responsibilities—has sparked alarm among law school deans, financial aid experts, and students who depend on federal loans to fund their education.
For decades, federal student loans have served as the primary financial lifeline for aspiring lawyers, allowing them to finance the costly journey through law school. With the Education Department’s established loan infrastructure set to be dismantled, uncertainty looms over whether the SBA—a government agency with no experience managing education loans—can ensure the seamless disbursement of funds. Delays, disruptions, and potentially higher borrowing costs could fundamentally alter the accessibility of legal education in the United States.
As concerns mount, legal education experts warn that this drastic reconfiguration of student loan management may not only burden law students with costlier alternatives but could also destabilize law schools that rely on tuition payments facilitated through federal loan programs. With the fall semester fast approaching, institutions are now bracing for a potentially chaotic transition that could reshape the financial landscape of legal education for years to come.

Mass layoffs and structural overhaul

On March 11, the Education Department announced plans to lay off nearly half its workforce—1,300 employees. Just over a week later, President Trump signed an executive order to dissolve the department entirely. The next day, he declared that the student loan program would be absorbed by the SBA, which itself is cutting 43% of its staff. These drastic measures raise concerns about the government’s ability to manage the complex student loan system efficiently.

Disruptions in loan disbursement loom

Law school deans fear significant delays in student loan disbursements as the SBA, an agency with no prior experience in handling education financing, takes over. University of Utah Law Dean Elizabeth Kronk Warner cautioned that the shift could lead to increased reliance on private loans, which often come with higher interest rates and limited access for low-income students.

Law schools depend heavily on federal loans

More than 76% of law students take out federal loans to cover tuition and living expenses, according to Education Department data. The federal government lends an estimated $6 billion to $7 billion annually to Juris Doctor students. Unlike medical or science programs, law schools typically lack alternative funding sources such as research grants or university subsidies, making them highly dependent on tuition revenue.

Will the SBA be ready?

University of California, Irvine School of Law Dean Austen Parrish questioned whether the SBA is equipped to handle the intricacies of student loans. “Small business loans aren’t the same as managing a student loan portfolio,” he said to Reuters, emphasizing that law students rely on these loans not just for tuition but also for housing and basic needs.

Potential consequences for students and schools

A delay in federal loan processing could force law schools to extend financing deadlines, causing logistical chaos. It may also push students toward institutions with lower tuition costs or deter them from attending law school altogether. New York Law School Dean Anthony Crowell stressed that uncertainty around staffing and loan administration under the SBA could further complicate matters.

A precarious future for legal education

With law school tuition largely funded by student loans, any turbulence in the federal loan system could have far-reaching consequences. As the transition unfolds, students and institutions alike brace for uncertainty, hoping that a new system can be implemented without upending legal education financing entirely.