Transcript:
speaker-0 (00:02.926)
This is going to be complicated, this transition to the new system, but we've been here before. I'm confident that in the future our students are going to be able to fund their education as they need. We're working with some private lenders right now to create some relationships with them. So don't panic is always a good piece of advice and we're here for you to give you individualized advice if you need.
speaker-2 (00:31.554)
This is Real Cases.
A legal podcast presented by the Stetson University College of Law. We'll sit down with Stetson Law faculty and students to examine today's critical cases and debates in environmental, international, elder and business law, plus the role of social justice in these fields. Join us as we open the case file. Episode 40, Understanding the 2026 Federal Financial Aid Changes. I'm Daniel O'Keefe, Master of English Literature from Indiana University.
Congress's new budget legislation, the One Big Beautiful Bill Act, reshapes federal student loan policy beginning in July 2026. The bill significantly alters the borrowing rules for both undergraduate and graduate students, placing new caps on federal loan amounts and eliminating grad plus loans, changes that will directly affect how law students finance their education. In today's episode, we're sitting down with Dean and Professor of Law Benjamin Barros
and Associate Director of Student Financial Planning, Heidi Gonzalez, to walk through what these updates mean for new law students, who will be impacted, and how students can plan wisely in light of the new rules.
speaker-2 (01:43.362)
To start out, could you give us a broad overview of the changes brought on by the new federal budget?
speaker-0 (01:49.614)
Sure. So the big thing is that the One Big Beautiful Bill Act puts caps on federal financial loans for law students. And so for the past 20 or so years, if you're going to graduate school, including law school, you could borrow up to your entire cost of attendance, your tuition, plus your living expenses through the Federal Grad Plus program. The Federal Grad Plus program is going away.
It's sun setting as of July 1, 2026, so this coming summer. And so we're going back to a place where we were before. We were when I went to law school in the 1990s, where there is a federal cap and then students who need to borrow more will need to borrow private loans through private lenders. And again, so when I went to law school, there was a federal cap. I borrowed up to the federal cap.
and I borrowed private loans on top of that. So the big picture is we are going back to that system and I'm confident we'll be able to adjust, but it is a pretty big change.
speaker-1 (03:01.422)
In addition to the elimination of the Grad Plus Loan program, there are changes to the borrowing limits, annual and aggregate, for the Stafford Loan program. So graduate and professional students currently can borrow $20,500 a year under the Stafford Loan program. And after July 1st, they'll be able to borrow up to $50,000. So
There's some good and some bad. The elimination of the PLUS loan program, not so good, but the increase to the annual borrowing is much better for sure.
speaker-0 (03:41.166)
on the Stafford, just to highlight what Heidi just mentioned, which is why is this a good thing or a bad thing? It's complex and it's gonna affect different people differently. As Heidi just mentioned, the Stafford loan is a better loan for borrowers than the Grad Plus loan. And so under the current system, you could borrow a little more than $20,000 on Stafford. Now the entire $50,000 cap is Stafford. So if you just wanna
really at a pretty high level talk about who the current Grad Plus program is good for and who the new Stafford loan program is for. The current Grad Plus program is better for people who are borrowing a lot of money and or who do not have very good credit because even though the Grad Plus program does require a credit check, it's much less stringent, I would say, than private lenders.
But for students who are not borrowing that much, they want to borrow some federal money, but not that much, then the new system is better because the Stafford loans a better loan. And so why does this matter right this second? It's because right now for incoming Stetson Law students this fall, we're giving people a chance to start in May if they want, in very late May.
And that is giving people a choice, if you're able to start in May, to grandfather into the existing loan system. Now, after this summer, everybody's going to have to live with the new system. But the difference between the present system and the new system is important for people who are ready to go to law school right now, who will be coming to Stetson.
So what we're doing is we're going to, for people who starting in the fall, we're going to give them the option, assuming they have their application in place early enough to start in May and grandfather into the current system. But even that is, it can be very hard to generalize other than some of the things I just mentioned. Maybe one other thing is if you really want to go into public service.
speaker-0 (06:02.274)
the public service loan forgiveness is going to be better in the current system because it applies to the entire loan where it's going to exist in the future, but it's only going to apply to the capped federal part of it. you know, it ends up being a pretty person-specific decision based on what you want to do, what your credit is, how much you want to borrow, which is why we're also encouraging people to
talk with Heidi and her colleagues to figure out what's best for you individually. And the last thing I'll say on it is that from Stetson Law's perspective, it doesn't matter to us. We're not pushing people one way or the other. This is just a service we're providing to people who starting this summer, are ready to start this summer. But it's up to each individual to figure out what works for them.
speaker-1 (06:58.636)
I just want to emphasize something that Dean Barros said, and that is students who know that they want to go into public service, who know that they might want to go into the public defender's office or what have you, they need to know that after July 1st, to make up the gap to help with their living expenses, they'll only be able to turn to private student loans, whereas
the current system, can get Grad Plus loans. So why is that important? Grad Plus loans are eligible for public service loan forgiveness. Private student loans are not. So that's a very important key takeaway for today if you are a student who's interested in public service.
speaker-2 (07:50.222)
Are both Stafford loans and Grad Plus loans eligible for public loan forgiveness? Okay.
speaker-1 (07:57.868)
Yes, they are.
speaker-0 (08:00.334)
And so the main difference is that so the public service loan forgiveness program will continue to exist, but it's only up to the capped amount. So if you really want to be a prosecutor or public defender and you're planning on borrowing all of the cost of law school, the Grad Plus program is better because the entirety of your loan would be it's all Grad Plus. And so that would all be forgiven.
Under the new system, you're probably going to borrow your $50,000 in Stafford, and you're going to borrow private loans on top of it. And that private loan part is not going to be forgivable. Another thing I should just mention here in terms of the caps is that there's a $200,000 lifetime cap. so people who might have borrowed Stafford loans in different programs, another graduate school program,
they might run into caps at, you know, they might have capping problems separate and apart from the $50,000 per year.
speaker-2 (09:07.362)
So I'm sure many students already have some undergraduate debt before they go to law school. Could you talk a little bit about that and how the lifetime borrowing cap should factor into students' decision-making?
speaker-1 (09:19.496)
As an independent undergraduate student, the maximum a student could come in with out of undergrad would be 57.5. But if they're coming in from another graduate program, if they've been in another graduate program and borrowed at the graduate level, that limits their eligibility even further. So under the current program, the aggregate borrowing limit is 138.5.
And that includes the 57.5 as an undergraduate. But you could turn to the Grad Plus Loan Program. So let me clarify that. That 138.5 is the Stafford Loan Program. That's the maximum you can borrow, aggregate borrow under the current program. Under the new program, the cap on the Stafford loan is 200,000, but the aggregate limit is 200,000.
The $257,500. So it includes that. That is in addition to the undergraduate borrowing limit, if that makes sense.
speaker-0 (10:27.754)
And am I correct, Heidi, that there's a separate $200,000 limit for grad as well?
speaker-1 (10:36.34)
Right. So that new 50,000 per year, that caps at 200,000. But the aggregate, so the 200,000 is a graduate student plus whatever you borrowed as an undergraduate student, that aggregate limit is 257,500. So just your graduate work under the new program, you're capped in Stafford loans at 200,000, which is
much better than the 138,000 that includes your undergraduate borrowing under the current program. again, this is very individualized, as Dean Barros said. For some students, that's amazing. For other students, there's other reasons why they'd want to start the May start.
speaker-2 (11:24.984)
Do you know much about what the reasoning was for why the shift from Grad Plus loans to Stafford, why they eliminated Grad Plus but bumped up Stafford?
speaker-0 (11:35.362)
not sure why they bumped up Stafford. I think that was just a simplicity thing. They wanted to get rid of the Grad Plus program. There are a lot of different potential motivations, but often stated motivation is trying to keep grad school tuition down by reducing the amount of available lending. For reasons that's probably not worth getting into, I'm
skeptical that it will have much of an impact. And part of the reason why I'm skeptical is that I think that private lending will be available for many law students. so, again, just going back to a system that we had for many, many, years of borrowing up to the federal maximum and then borrowing private on top of it.
speaker-2 (12:26.414)
Yeah, I think what you said earlier, Dean Barros, about how this was what the system looked like when you went to law school is right, is is helpful for people who are inclined to panic a little bit about the changes, because it's a reminder that well, people were able to go to law school before too. So right.
speaker-0 (12:42.476)
And thinking about what things looked like before Grad Plus, one thing I think about a lot is it used to be that going to law school part time was much more popular than it became in the 2000s. And I think the story that I was always telling was in part the availability of unrestricted Grad Plus borrowing was one of the things that led to evening programs or part time programs.
getting smaller and in many schools closing, Stetson has a really good one and it's thriving right now. and the reason I mentioned that is that, you know, when I was going to law school and I knew I was going to have to borrow the money to go, I wanted to minimize my amount of debt and I wanted to minimize my amount of private lending. And so I wanted to work, you know, because if you think about you're going to law school,
there are two big sets of costs you really need to think through. One is tuition, that's a big one, but the other is your living expenses. And many people borrow to cover their living expenses. I did for my second and third year law school because I started part-time, then I decided to switch to full-time. But that year when I was working full-time and going to law school at night, I was working in pain. I was able to pay my own rent, right? And I think that
For a lot of people, and again, this is going to be really individualized, I think that this change in borrowing might encourage more people to look at part-time programs, work and go to school at the same time, than maybe they have been for the last 20 or so years.
speaker-2 (14:30.2)
How will the course schedule work for students entering in the summer cohort in late May? Will they have three full semesters of courses finished by the end of their first year?
speaker-0 (14:40.012)
The requirements that they need to be to qualify for the Grad Plus program and be grandfathered into it is they need to take five credits and get a disbursement before July 1, 2026. They're basically just taking five credits of summer courses and then they go into a very regular full-time curriculum. we're working on the sequencing ends up getting a little complicated.
But we have it covered and that by the end of their first year, they'll be with everybody else, but they'll have essentially five extra credits and be a little bit in placed in advancement and advanced where they would be otherwise. So first it will have an orientation just like we do in the fall or we have a really good orientation here. And so that's something that we didn't want to skip over. And then the likelihood is that
Students will be taking torts, which is one of the core first-year courses, and then a one-credit additional course. And then in the spring semester, when they typically would be teaching torts, they're probably going to take professional responsibility, which is an upper-level required course.
speaker-2 (16:01.88)
So students who are entering in May would be grandfathered in under the current policy. Could you explain that a little bit?
speaker-0 (16:10.53)
Based on the way the law is written and based on our opinion of counsel, if you start before July 1, 2026, start a graduate program and get a disbursement, a graduate plus loan, then that graduate plus loan, you will qualify for the graduate plus program for the entirety of your degree.
And this is just one of those things where they had to define a start date and an end date, right? And, or sorry, an end date for Grad Plus and a start date for the new program. And so the statute has these requirements in it. You know, this late May start program would meet it and therefore the Grad Plus program applies to your entire time in law school. And just also it might help for people to imagine just transitions.
We have a whole bunch of people at Stetson Law and other law schools and other graduate schools right now that started under the Grad Plus program. They will be able to continue the entirety of their education under the Grad Plus program. So the way that the federal government did the transition is the new system applies to people who start their program after July 1, 2026. Heidi, did I do that okay?
speaker-1 (17:36.15)
You did great.
speaker-0 (17:37.708)
Hahahaha
speaker-2 (17:42.99)
Could you talk also about Stetson's flat tuition rate as well?
speaker-0 (17:48.686)
Sure. So we have a tuition guarantee. So when you start, your tuition will stay, your tuition for the entirety of the time you're in the program, you will not get tuition increases while you're in school. We do that just to give our students certainty and budgeting certainty. So you'll know how much it will cost for your tuition for your entire time. It also helps me as a dean to keep.
my students happy so I don't have to give them tuition increases in their second and third years, right? Nobody likes to give those. So that's our program we started a couple of years ago. The feedback's been really positive. So that's what that program is.
speaker-2 (18:36.078)
Would you recommend students right now who are planning on going to law school, possibly in May, possibly in the fall? What are the things that you would recommend they should be doing to prepare?
speaker-0 (18:51.502)
Well, let me start with one and then, you know, it's interesting. The first thing that came to mind would be make sure they understand what their credit score is. Right. Because understanding it's really, really, really important for people to understand that in the private for private lending, private lending can actually be very positive. The interest rates can be really positive if you have really good credit.
But yeah, it's all credit score dependent. And this is one of those things where having co-signers can help, not, it doesn't solve all the problems, right? So many law students are young, they're right out of college, or they're just finishing up college. They haven't had a chance necessarily to develop a really good long credit history. So understanding where you are in terms of your credit score is gonna be really important.
Obviously, if you have really good credit, the new system might work out well for you. But Heidi, what would you say other things students should be doing now?
speaker-1 (19:59.66)
Yeah, sure. I always tell students the first thing you want to do is come up with a budget. What is your budget? You know what you're going to be paying in tuition and fees, but we don't know what you're paying in rent. We don't know what your utilities are. We don't know what your bills look like. So come up with one month budget. What do I pay in rent every month? What do I pay in groceries? Just
one month and then multiply that times nine because there are nine months in a fall spring budget and that gives you an understanding of what you're looking at. So will that new $50,000 increase in Stafford loan cover your expenses for nine months and maybe you've got a scholarship for 20,000 on top of that you've got 70,000 between the Stafford loan program and
your scholarship money, you very well may have enough money to cover your budget. The other thing is what Dean Barros said, understand your credit and the implications of applying for a private student loan. You can get a much better interest rate if you start now cleaning up your credit. Get credit reports from all three reporting agencies, go through those.
If there are mistakes, clear those up now. Try to pay down any credit card debt. You want to position yourself so that you get the best interest rate possible. And then finally, you know, make a decision. What is going to work better for you? Will it be better for you to come before July 1st or after July 1st?
And that's what we're here for in the Financial Aid Office, to help you talk through that and help you understand what your needs are and where you'd better position yourself in which program.
speaker-0 (22:03.438)
Right. And just to, I completely agree with everything Heidi just said. And let's just shift for people who are going to be listening, who don't have the option to start in May, maybe they're still in school or the timing just doesn't work, right? Looking forward, maybe you're planning on coming to law school in two years. What can you be doing? This is, you know, focusing on credit scores really important.
This is something that you can learn a lot about online, but there are a couple of keys to maintaining good credit. One is pay everything on time. The other thing though is to establish credit. It's one of those things where having a credit card and paying it off every month is good for your credit. The credit rating more than anything,
It's reputational. It's about what is your reputation as an individual for paying your bills on time, right? It's not about wealth. You can be a multimillionaire and have bad credit if you pay your bills late all the time, right? And so that's something that if you're an undergraduate, maybe you can go to the financial aid office or the career services office or somebody else might be able to help advise you on building credit.
That's, you know, it's not something people think about that much, but you know, if I was gonna go to law school in three years, one of things I'd be thinking about right now is what can I do to make sure that when I'm going, I have a good credit score?
speaker-1 (23:48.032)
I just to add one more thing to that. That's if.
you feel as though you're going to need to turn to a private student loan. If the Stafford loan program, a combination of the Stafford loan program and maybe a scholarship that you receive is enough to cover your expenses, then you really don't need to turn to a private student loan. The private student loans are only for those students whose needs are not met between the Stafford loan program and any scholarship that they may receive.
speaker-0 (24:20.814)
Yeah, and just to translate that when Heidi's talking about the new Stafford loan program, that's the $50,000 cap, right? So if $50,000 of borrowing can cover your tuition and your expenses, then you're good. It also could be, know, everybody's different. You know, you might be at a point in your life where you're living with a significant other or a spouse and
they're working and you're not gonna have to borrow your cost of living. It's really typically, it's not the tuition, it's the tuition plus the living expenses that push people up significantly over the $50,000 per
speaker-2 (25:04.952)
Could you talk a little bit about the scholarship opportunities that Stetson, both scholarships that Stetson offers, but then also resources that you point students toward when it comes to applying for external scholarship opportunities?
speaker-0 (25:18.606)
Maybe I'll take the first part of that and then turn it over to Heidi to elaborate and talk about the second part. So like most law schools, actually all law schools, think, Stetson offers merit scholarships. So for very high credentialed students, we offer some scholarships and really law school scholarships
for incoming students tend to be very merit driven. At the undergraduate level, I think there's a lot more need-based financial aid. There are a number of reasons for that, but that's just the way the world is. It's just at Stetson, it's at pretty much all law schools. So if you are a very highly credentialed student and the credentials that really matter more than anything in this context are your LSAT score,
and your undergraduate GPA, then you may qualify for merit aid. And just a quick rule of thumb, Stetson and every other law school, we post our median LSAT and undergraduate GPA on our websites. And if you are above median on both, both undergraduate GPA and LSAT,
there's a good chance you'll qualify for some merit aid. you know, just in real candor, there's when we read applications, we're looking at the whole picture. But those two numbers at Stetson and every other law school drive a whole lot of the decision. So that's one way of figuring out, you know, where where you might stand.
speaker-1 (27:08.43)
Yeah. So in addition to those merit scholarships, Stetson also has 200 plus endowments that we award scholarships from. And some of those endowments we award multiple scholarships from. We send out our endowed scholarship notification in the fall semester. Those awards are made for the spring semester and students have to reapply for those every year.
The amounts vary. It all depends on funding available for that for every given year. But in addition to that, mean, students can start now by looking for outside resources, outside scholarships. And whenever students call asking, where can I look, where can I look, I always point them straight to the Stetson College of Law Financial Aid website.
and specifically the scholarship page where one, all of our endowments are listed, but also we have a few links to outside resources. And one is through our partner, Access Lex, who has one of the most robust law students scholarship search engines. Students have to go on to their website, create a free account. Everything's free. They won't ask for money and they can
do their research on the AccessLex Scholarship Database. We also have a link to FastWeb and that's also on our webpage, our website. Students can click on that link and type in the search bar, law student scholarships, hit enter, and they can have a field day with the number of scholarships that pop up.
And I encourage students to start now, start early, apply now to every single scholarship available. The worst they can do is say no. Some of these scholarship applications require an essay. You can write a really, really good essay and tailor it to the needs of each application, but you really only need one really good essay. But yeah, start now, start early.
speaker-1 (29:30.184)
and position yourself with as many resources as you can going into law school.
speaker-0 (29:38.178)
Just one more thing on that, just in terms of timing. As far as the a couple hundred of endowed scholarships that we have, and they kick off a significant amount of money every year, an awful lot of those are for people second and third years, just the way that they work. We do award some scholarships to students on their way in for their first year.
But most of our endowed scholarships are given in the second and third.
speaker-2 (30:14.872)
Do the merit-based scholarships usually carry through to your second and third years as well, assuming that you maintain a certain academic standard?
speaker-0 (30:22.904)
They're actually all guaranteed. As long as you're in good academic standing here, your merit scholarship stays.
speaker-1 (30:30.222)
And when students received notice that they are a recipient of one of the merit scholarships in that letters included the terms and conditions of that scholarship and what they need to do to maintain it year after year. So they're made aware of those rules.
speaker-0 (30:47.02)
But they're, yes, and they're designed, you know, it used to be, actually, if you go back 20 years ago, it was very, very common for many law schools to have merit aid that you'd have to have a pretty high GPA to maintain for your second, third year. Some law schools in some markets still do that. At Stetson, we don't. So it's...
They're designed so that people keep them for all three years.
speaker-2 (31:18.392)
Can you think of any examples of students that you've worked with who adjusted their borrowing strategy mid program?
speaker-1 (31:26.464)
It's interesting the strategies that student borrowers use to help minimize their debt. And one of my most favorite is this, and this is an insider tip, but to minimize students' debt, they'll only borrow what they need because interest begins to accrue once the loans disperse. So,
the first month or so, they may just borrow $3,000 to get them through the first two months. And then if they need more, they'll reach back out to us and say, you know what, I need an additional $1,000. And then we'll disperse that and interest begins to accrue once those funds disperse. So there are some really savvy students out there who, you know, they are squeezing blood from turnips.
speaker-0 (32:23.372)
Yeah.
speaker-1 (32:24.63)
But that's one of my favorite favorite
speaker-0 (32:27.31)
That's a really good one. So I'll give you an example of one from the 90s, which was me, because I started law school part time because I didn't want to borrow. And then I did really, really well my first year of law school that opened up certain opportunities. So one thing people should just know about law school is that if you do super, super, super well, there are certain job opportunities that are available to you you can rely on them being available.
And so I decided that for me, I wanted to transfer to full-time, borrow more money because I was certainly going to get paid more as a lawyer and graduate more quickly than I would working in publishing in New York City, right? And so that's something that people, it's also something that people should keep in mind when they're thinking about the financial aspects of law school. There are some advantages of slowing it down.
So you can work and you don't have to borrow as much. But for most people going to law school, you're going to make more as a lawyer than you did as a non-lawyer, right? And so sometimes making it quick works. But another thing is, you know, I do notice we really discourage people, except for part-time students, from working during their first year, especially during their first semester. But
Something else you notice is that a lot of our students work part-time at law firms and make some money while they're in school, and that certainly would reduce their borrowing needs. So think that that's a much more viable plan for your second and third year, I think. I'm curious, do you notice people sometimes borrowing less fees? They're working more in their second year?
speaker-1 (34:18.958)
Absolutely. Yes.
speaker-2 (34:23.959)
That's interesting. Yeah, I hadn't thought about that, about what sorts of opportunities open up for you in your second and third years in terms of employment that could have a significant impact on how much you need to borrow.
speaker-0 (34:35.714)
Yeah, yeah. a lot of our students are working as what we call law clerks in law firms there and making a decent amount of money. And that helps. They're also getting good legal experience. So that's certainly something people can consider. And I think people will probably consider even more.
liked the Grad Plus program, the unlimited borrowing for its simplicity. And it just made everybody's decision making good. But one advantage of the current of the new program is that it's going to make people think harder about their borrowing. And if you can work in law school in your second, third years and reduce your borrowing, that's going to make you happier longer term.
And I think that that's a good thing, right? I think it's easy to take the federal loans because they're available. And so in some ways that this new system, that will be a benefit of it. It has like everything else in life. It has its pluses and minuses.
speaker-1 (35:51.062)
It is so individualized. It's just so dependent on a student's circumstances. And it can be very confusing, but it's important for students and potential students to know that your financial aid office is your greatest resource for helping you work through your specific circumstances. And I encourage any student who's worried about what
they should do to schedule an appointment with us. They can go to our website, underneath the team, there's a link to schedule a virtual counseling session. They can call, they can email, however they want to reach out to us. But I encourage students to reach out to us if they are concerned about their circumstances and just want to talk through it with somebody.
speaker-0 (36:42.23)
So I agree with that. It is very individual. There's a lot of moving pieces. Heidi and the rest of our team are here for people. I encourage people to take advantage of that resource. And that's it. I think we covered all the big pictures. I think the thing I'd like to close on is just for the future.
This is going to be complicated, this transition to the new system, but we've been here before. I'm confident that in the future, our students are going to be able to fund their education as they need. We're working with some private lenders right now to create some relationships with them. So don't panic is always a good piece of advice. And we're here for you to give you individualized advice if you need it.
speaker-2 (37:38.295)
Well, thank you so much.
speaker-0 (37:39.448)
Great chatting with you. Thanks so much for the opportunity.
speaker-2 (37:42.486)
Absolutely, thank you to both of you.
speaker-1 (37:44.694)
Thank you.
speaker-2 (37:47.532)
This has been Real Cases. Thank you for listening. Check back for more episodes about an array of legal topics presented by the Stetson University College of Law. Learn more at stetson.edu.
Topics: Real Cases Podcast
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