Sunday, July 21, 2013
WSJ Law Blog, Placing Bets on Law School Graduates:
Benjamin M. Leff, a tax law professor at American University, says he doesn’t see why the legal educational world is so wedded to the traditional model of student debt.
He and another colleague at the school are researching the idea of structuring a loan program as a swap transaction. Here’s how it could work. Under one model, a student would take out a loan and then enter into a contract with the school. The school agrees to cover the loan, and the student agrees to hand over to the school a percentage of future earnings over a fixed period.
The school comes out ahead when the swap is with a student who makes partner at a blue-chip law firm by the age of 30. That student would end up paying the school more than what the school pays the lender.
If a student takes longer than expected to climb the income ladder, the student’s debt load diminishes and the school loses money. So the school has an incentive to help a graduate land a lucrative job and gather more information about their students’ earnings.