Some Schools Launch Direct Lending Program to Students as an Alternative to Private Loans

New federal caps on graduate student loans, enacted with the intent to pressure colleges into lowering tuition, are instead prompting a handful of well-resourced schools to launch their own “institutional lending” programs, offering loans directly to students who exceed the caps rather than pushing them toward pricier private loans. The University of Kansas School of Law and Washington University School of Law in St. Louis are among the first to roll out such programs, funded through endowments or broader university resources, with officials arguing they offer better terms than private lenders. Higher education groups say interest in the model is growing, but most schools are still assessing whether it makes sense for them, since it requires substantial upfront capital and confidence that students will repay. Critics warn this just substitutes one form of debt for another and could create conflicts of interest when a school acts as both educator and lender. Observers broadly agree these programs will likely remain limited to a small number of financially strong institutions rather than becoming widespread, reports POLITICO.