Stanford Law to offer 'income share' financing as law school costs soar
- Law students will pay 10% of future income in exchange for $170,00 upfront for tuition
- Pilot program could open new era for law school financing, proponents say
Sept 15 - Stanford Law School has teamed with a new non-profit to offer what are known as “income share agreements” to law students, a move officials said will lower the cost of a J.D. for many and make it easier for law graduates to purse lower-paying public interest positions.
Under a pilot program announced Thursday, participating first- and second-year Stanford law students will receive up to $170,000 upfront to pay for their degrees through the Flywheel Fund for Career Choice, which has been seeded with more than $2.5 million in donations. Upon graduation, participants will pay 10% of their income for 12 years to Flywheel.
The school said Flywheel will use those funds to offer new income share agreements to future law students. The program is open to graduates pursing any career path, which sets it apart from existing law school loan repayment programs that are available only to graduates working in public interest jobs.
The plan was designed to ensure that participants do not end up paying more than if they had taken out federal graduate loans to pay for law school, said David Kafafian, chief operating officer of Stride Funding, which is administering the program for Flywheel. But they will not be eligible to participate in the federal government’s Public Service Loan Forgiveness, which erases the debt of borrowers who stay in public service positions for 10 years.
Stanford Law’s chief financial officer Frank Brucato called the pilot program "a game changer," predicting it could establish a new, national model of financing law school.
The school settled on $170,000 as the median amount current and future students are projected to borrow, Brucato said. Annual tuition for Stanford Law's three-year J.D. program is now $66,924
Rising law student debt loads are a growing concern in the legal profession. Nearly 71% of law students leave campus with student loans, according to the U.S. Department of Education, and their average debt hovers around $138,500 — higher than any other field besides medicine.
A 2021 American Bar Association survey of law graduates in their first decade of practice found that 80% reported their debt influenced their job or career choice, while 67% reported feeling “high or overwhelming stress over finances in general.”
Stanford Law will fully cover repayment for Flywheel pilot participants earning less than $100,000 and subsidize payments for those earning between $100,000 and $115,000, at a projected annual cost to the school of $200,000 to $300,000, Brucato said.
The program, which will initially be limited to 20 students, also includes an income cap of $225,000, meaning monthly payments cannot exceed $1,875 for even the highest paid graduates.
Setting simple terms upfront will give law students clarity about their post-graduation finances and make it easier to move between public interest and private practice jobs, since their loan status is not tied to their type of employment, said Flywheel chairman Elliot Schrage.
That could be a relief for many students and graduates who might otherwise be carrying six figures in traditional law school debt, said Stanford law professor Ralph Richard Banks.
“This could ultimately extend far beyond Stanford,” Banks said. “There is great potential here.”
(NOTE: A previous version of this article misstated the amount Stanford Law is projected to contribute to repayments by Flywheel pilot participants.)
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