private lender Loans
Up until recently, most lenders were private entities that received federal guarantees, but a small segment of the law student loan business was done by the federal government. In 2010, the federal government ended that approach. Today, the bulk of lending is done through Direct Federal Unsubsidized loans and Federal GradPlus loans.
Law schools do not control eligibility requirements. The schools serve only as processing entities. Schools help students process the loans and help the federal government distribute the loans and receive no compensation for their services. They are subject to tight controls on their handling of the student loan funds. Schools are audited annually. In addition, law schools do not receive interest payments or principal repayments made by students. For loans made since 2010, loan repayment principal and all interest is paid to the federal government, at interest rates established by the federal government. Schools are not involved in the repayment process, which takes place after the loan recipients leave a school.
Nor do law schools have control over loan forgiveness. A law school cannot forgive an obligation of a recipient to either a private lender or the federal government.
Default rates are calculated and reported by the federal government. No schools calculate their own default rates, which are calculated by the government and are publicly available. The default rates for law school graduates, and those who attended law school but did not graduate, are far below the federal requirement established by the Department of Education.