The Income-Based Repayment Swap: A New Method for Funding Law School Education
Benjamin M. Leff
American University Washington College of Law
American University - Washington College of Law
July 9, 2013
Despite extensive, public discussion of the high cost of legal education and of student debt levels, too few critics of degree cost show creativity in thinking about the optimal mechanism for funding a legal education. This Article proposes — and explores the implications of — a new model of law-school financing called an income-based repayment swap (“IBR Swap”). The IBR Swap is a student loan derivative: a novel idea that improves upon existing income share contracts. Under an IBR Swap, students still borrow money from a bank or the government to pay for their legal educations. But students then enter into contracts with a financial institution under which the institution agrees to make the students’ loan payments and the students agree to pay the institution a percentage of income. An IBR Swap is a student’s exchange of a fixed obligation to lenders for an income-based obligation to a financial institution. The parties exchange no money upfront. This Article significantly advances the debate over costs and financing of legal education, as it presents a method of education finance that departs from the existing debt model and income-based alternatives. It presents the IBR Swap in order to incite critical consideration of both the potential and the limitations of private-market mechanisms for law school finance. As such, it advances assessment of what is the most impactful role for the government in ensuring access to law school.
Number of Pages in PDF File: 49
Date posted: July 11, 2013 ; Last revised: July 14, 2015
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