Rethinking Law School Financing

From The Practice September/October 2023
Two case studies outside the traditional loan

Roughly 90 percent of law students surveyed by the American Bar Association and the AccessLex Institute indicated they had borrowed money to complete their legal education. On average, students borrow about $120,000 for law school alone. Undergraduate loans and interest further compound the situation. While law school tuition has stabilized over the past decade, funding legal education is one piece of the bigger student debt crisis. Federal loans, law school low-income protection plans, and public service loan forgiveness are some ways that students use to finance law school. There are, also national programs aimed directly at lawyers working specific sectors, such as the Legal Services Corporation–administered Herbert S. Garten Loan Repayment Assistance Program for those working in legal services or the John R. Justice Student Loan Repayment Program for prosecutors and public defenders. But what are alternative solutions to finance legal education? 

In this story, we explore two methods that students may consider when pondering legal education financing: employer-supported assistance and an alternative private-sector solution. Through two case studies—(1) law firm–funded patent lawyers and (2) a new nonprofit focused on using income share agreements at Stanford Law School1—we consider what is happening in the world of law school financing, the challenges and opportunities, and the imaginative possibilities presented by each solution. 

Employer-supported assistance

Tuition support for employee education is common in business. Much of this support is provided for professional development and, increasingly, executive education training. But it can also be more generous funding programs: in the form of degree-granting, (often) full-time university education. Corporate settings view this as talent retention and development. For valuable employees in business or consulting, “front end” tuition assistance (assistance that is provided to the employee directly for school, in contrast with reimbursement for loans or out-of-pocket expenses) can be substantial: for instance, partial or full reimbursement for an entire M.B.A.

While company-sponsored tuition assistance programs may be the norm in the business community, they are certainly not the norm in the legal profession.

What do these front-end assistance programs look like? According to a June 2023 Fortune magazine article, many top companies will pay for employees’ M.B.A. degrees, whether through full sponsorship (effectively paying for full tuition, and at times associated room and board), reimbursement, or a partial payment directly to the university each year. For example, according to Fortune, blue-chip companies including IBM, Capital One, and UPS will cover the full cost of an M.B.A. so long as the employee stays at the company for two years post-graduation. Consulting firms, such as Bain, Boston Consulting Group, and McKinsey, are also known for offering sponsorship (among other) opportunities for their employees. Other companies, ranging from AT&T to Boeing to Target to PepsiCo, offer tuition assistance programs (programs that provide front-end support). Boeing, for example, will pay $25,000 directly to the university annually for an employee’s degree. Other companies also offer tuition reimbursement programs. According to a 2022 Graduate Management Admission Council (GMAC) report, “32 percent of recruiters are now offering assistance in paying down school loans as a benefit in 2022.” While such programs often have a multitude of intense requirements (e.g., a high GPA) and there are limited opportunities for full sponsorship, according to GMAC data nearly half—45 percent—of students in full-time M.B.A. programs received financial assistance from their employers in 2017.

While company-sponsored tuition assistance programs—whether in the form of sponsorships or tuition assistance upfront or on the back end, such as helping with loan repayment upon graduation—may be the norm in the business community, they are certainly not the norm in the legal profession. There are, of course, reasons for this. Historically, many aspiring lawyers went directly from college to law school so often did not have an employer to sponsor or provide direct assistance. Similarly, law firms are composed largely of lawyers, which means—practically speaking—virtually all of them attended and graduated from law school.

That is not to say that the profession has not responded to the increased costs associated with becoming a lawyer. Many law schools, for instance, have developed loan forgiveness or low-income protection programs, including for those working in the public legal services. The Department of Justice—by some metrics the largest legal organization in the world—has its own Attorney Student Loan Repayment Program through which lawyers can qualify for “up to $6,000 per calendar year during each year of the three-year service obligation.” Law firms have also developed refinancing options through preferred vendors to help new associates with better interest rates, and there also have been limited attempts at direct loan support. In 2016, for instance, Orrick began a program through which the firm would contribute a set monthly amount to new associates to help with loan repayment. More recently, the midsize Midwest firm of Graydon started its own loan repayment program for its associates: the program will pay approximately $400 per month ($5,000 per year) of an associate’s student loan debt for as long as that employee is an associate at the firm. Finally, those interested in applying to law school (versus an M.B.A.) while working for a business may be eligible for company-based tuition assistance. However, these programs tend to have work-related education requirements such that the individual would have to show how their job would benefit from a law degree (a paralegal in an in-house legal function, for example).

According to the After the JD study, 62 percent of lawyer respondents took time off between college and law school—with 82 percent of those working in a full-time job.

While progress has been made, these programs tend to be the exception, not the rule. Moreover, unlike many corporate programs, they function largely as repayment assistance programs—after students have already taken out federal or private funding; in other words, a lawyer is already on the hook for their loans.

But as the profession changes, one might imagine further changes to how we pay for legal education. According to the After the JD study, 62 percent of lawyer respondents took time off between college and law school—with 82 percent of those working in a full-time job. Would such employers be willing to contribute to the bill? Law firms have likewise become global enterprises, employing hundreds of other professionals—those focused on legal technology and innovation, on diversity, on strategy and operations, on business development, and many others. These professionals provide vital services; however, none can be partners given regulatory rules, even as they may occupy C-suite ranks. Would law firms see the benefit to helping secure a J.D. for such valued colleagues? There is one area of law that offers lessons in this regard: patent law.

Patent law: The case study

When Julia Minitti, currently a partner at Wilson Sonsini in the Patent and Innovations group, was finishing up her Ph.D. in organic chemistry at Brown University, she thought about what would come next—and wasn’t enthralled with many of the options. She could try for academia and the higher education hiring market. She could become a medicinal chemist in the pharmaceutical industry or go into consulting. But one area that did sound interesting, particularly for the diversity of exposure to different areas of science, was patent law. She knew several people who had followed this route and was intrigued.

Law firms around the U.S. regularly recruit patent agents from the life sciences and engineering graduate fields, people with advanced understandings of complex industries. “It sounded enticing to still touch and explore science but not actually have to be at the bench and conduct experiments yourself,” Minitti says. She joined a Boston-based law firm as a patent agent, reviewing and filing patent applications based on her organic chemistry training for clients developing therapeutics. Minitti enjoyed the work, but upward mobility in the field was contingent on becoming a lawyer. A benefit for patent agents like her armed with Ph.D.s? The firm would pay for law school while she continued work as a patent agent.

Anyone who comes to law school later in life might find it a little bit less overwhelming because you’ve had other challenges that you’ve overcome.

Julia Minitti, partner, Wilson Sonsini

Minitti attended law school in the evening while working during the day. Balancing school and work was challenging, she notes, but not any more than completing a Ph.D. in organic chemistry. “If you have a Ph.D., you’ve already accomplished quite a lot and you’re older than the average law student,” Minitti says, who herself also had a child during law school. “Anyone who comes to law school later in life might find it a little bit less overwhelming because you’ve had other challenges that you’ve overcome.”

Today at Wilson Sonsini, Minitti regularly works with patent agents pursuing similar paths to her own. The firm boasts one of the largest patent agent programs in the country: they currently have over 100 patent agents, many of whom are in the firm’s Patent Agent Law School Tuition Program (PALS), which has been around for almost 20 years. At the moment, more than 30 patent agents are attending law school across more than 15 law schools. Most PALS participants come to the firm as patent agents first, but some aspiring patent attorneys have joined the program while already attending law school in their 2L or 3L years. Wilson Sonsini has recently initiated an annual 1L Life Sciences Summit to introduce 1L students, particularly those with technical backgrounds, to career opportunities at the firm, including PALS.  

PALS offers patent agents the opportunity to attend law school on a part- or full-time basis (though they are barred from working as agents during their first semester of full-time school to adjust to the demands of school). PALS agents receive salaries for their work, and the billable-hour requirements are reduced relative to full-time patent agents. For instance, part-time patent agents in the program typically work an average of 15 to 20 hours per week while in school and more hours during the summer. Wilson Sonsini pays the student directly for law school, with additional funding provided for taxes, as the tuition assistance is viewed as income. Patent agents in the PALS program who meet performance expectations may receive a full-time offer as an associate upon completing law school and be eligible to start at a higher level of seniority in recognition of their prior work at the firm. Other major law firms, particularly those with large patent practices, have similar programs

At the moment, more than 30 patent agents are attending law school across more than 15 law schools. Most PALS participants come to the firm as patent agents first, but some aspiring patent attorneys have joined the program while already attending law school in their 2L or 3L years.

The PALS program works out well for the firm too, which considers it an essential training ground for the Patents and Innovations group. “We are getting many of our Patents and Innovations associates from our PALS pipeline. So they’re homegrown,” Minitti says. “Patent practice is an art, and working first as an agent and then attending law school while working really helps new associates hit the ground running when they graduate.” It’s a balance, of course, Minitti admits. But patent agents who arrive after completing years of rigorous schooling and obtaining a Ph.D. tend to be mature and organized. And law school itself can feel more defined for someone coming from a graduate degree in the sciences, Minitti says. Science experiments can be tedious, and your future may entirely depend on the experience, connections, and decisions of your graduate adviser. “In law school, you take a course and you move on,” she adds.

Would any patent agent pursue law school without sponsorship? Many scientists do end up in law school, but patent agent programs are unique opportunities. Minitti points to the exceptional quality of the candidates they receive to at least explain that the program itself is working as intended. Wilson Sonsini focuses on early-stage companies in the life sciences and biotechnology industries, and patent agents get the opportunity to work closely with experts in many scientific fields. Patent agents develop patent portfolios, and have face time with company founders and venture capitalists, rather quickly in their tenure. Minitti says, “You come to Wilson Sonsini as a specialist from your graduate work, and all of a sudden you are exposed to a variety of areas of science, for example, CAR-T, synthetic biology, antibody-drug conjugates, and CRISPR/Cas9.” She adds, “It’s rewarding to work with companies on the cutting edge of science while being supported through law school.”

Would this type of program work for any other type of law?

Johana Roberts, who oversees the administration of the PALS program, points to the additional community, mentorship, and career development that the firm provides as a bonus. Law school can be lonely and difficult, but students in the PALS program have both their school community and others at the firm balancing similar priorities and with similar backgrounds to lean on. “A lot of people are further along in life. They have a better sense of what they need to succeed, from support to skill development,” she says. “We are able to proudly offer that support both from the firm and because students have the PALS community itself.”

Would this type of program work for any other type of law? Well, the technical expertise is invaluable. “I always say it’s much easier for us to teach law to a scientist than science to a lawyer,” Minitti says. Wilson Sonsini, for its part, is happy to support PALS graduates transitioning after law school to other legal fields if they have a desire and proclivity. At Wilson Sonsini, having a technical degree can also be useful in areas of corporate, litigation, and transactional law.

One could envision similar transitions from, say, a tax/accounting professional into tax lawyering or banking into M&A. Could a patent agent law school funding model work for the legal technologist or paralegal in a litigation practice? One might need to see more structural changes to law schools and the profession to know for certain, but rethinking the broader model is the first step.

Paying it forward: The case study

As a joint law and public policy student, Elliot Schrage knew early on that he was not interested in the typical corporate law path. While he began his career at Sullivan & Cromwell, he soon followed that up with teaching, communications, and consulting across business, human rights, and government affairs. His career took him to leading ethical sourcing for The Gap and public affairs at technology companies like Google and Facebook (now Meta). These corporate positions at the intersection of law and policy were fascinating to him, and even though he says his legal education was invaluable, he knew he was not “practicing law” in the narrowest sense of the phrase. After finding his niche, he asked himself: “How would I have been able to do this sooner?” His answer, he realized, lay in two elements. “I knew that I needed to develop some legal skills that the firm would give me, but also, I felt profoundly that I needed to address the financial issues associated with law school.” That is, debt.

Elliot Schrage saw the opportunity to build an income share agreement that would enable career choice, not constrain it.

Now, after a varied career involving different industries, Schrage wants to make it easier for students to pursue a varied career—whether that be in corporate law, public interest, government, or even nonlegal positions. Inspired by how computer bootcamps were using income share agreements (ISAs), he wondered if such a model could be tweaked to work for law school financing. ISAs are private loans structured so that borrowers have no fixed principal balance and instead pay back a percentage of their future income for a fixed period of time after they begin earning a minimum salary. ISAs, like any financing system, can have drawbacks: some have high interest rates and may be confusing to borrowers, who do not understand that ISAs are another form of debt. Unlike federal loans, ISAs have historically enjoyed limited regulatory oversight, which opened the door to potentially unscrupulous actors. As such, the Consumer Financial Protection Bureau (CFPB) took efforts in 2021 to clarify that ISAs were subject to the same Regulation Z and other consumer protection laws in a consent order with Better Future Forward (a student loan lender).

Schrage saw the opportunity to build an ISA that would enable career choice, not constrain it. His idea? The Flywheel Fund for Career Choice would start with law students and hopefully grow from there. (As a lawyer, Schrage naturally started with law school, but he also pointed to the law as a profession with a great disparity between two salary extremes, something that requires more critical examination, and could thus benefit greatly.) Payments would be income-based, and interest would effectively be capped at the same level as federal Grad PLUS loans. Make less than $100,000? Your payments are $0. Make more? You pay based on a predefined percentage of your personal gross earned income. But whatever you pay is going back into the fund to help provide for future fellowships. Schrage had the vision, but he had to go elsewhere to build the road to realize it. 

That’s where David Kafafian came in. When Kafafian arrived at law school, he was shocked that private lenders would not consider him without his parents cosigning his loans. That’s when he began to consider ISAs. While he was in law school, he began to investigate this further; alongside textbooks on constitutional law, one might have found him nose-deep in research on education financing and student loan service providers. During the spring semester of his 1L year, he started a company focused on this education financing problem. When it folded (for one reason, because he had his own student loans to pay off), he kept the idea close at hand. Today, he is the chief operating officer of Stride Funding, a mission-driven, venture-backed firm that works with borrowers and schools to provide access to higher education and workforce success through alternative financing solutions, like ISAs.

Stanford Law School and Flywheel launched their first cohort of 20 students in September 2022, aiming to provide $170,000 in loans to students through philanthropic donors.

When Schrage and Kafafian met, they instantly bonded over this shared concern. Together, they pitched their idea to law schools across the country. Stride is the “hosting platform,” processing the loans and acting as a service provider for administration. Kafafian also supported the program as a thought partner, but Flywheel maintains its own board of directors independent of Stride, and Schrage acts as chairman of the fund. Stanford Law School was the first to sign up.  

Stanford and Flywheel launched their first cohort of 20 students in September 2022, aiming to provide $170,000 in loans to students through philanthropic donors. Selecting their first Flywheel Fellows, the independent Flywheel committee created a questionnaire and selection process that identified students who were not sure what they wanted to do with their law careers. (For more on the FAQ provided to Stanford students on how the program works and various payment scenarios, see here.) In launching the fund, both Schrage and Kafafian emphasized the simplicity of the model, a critical feature to combat how pernicious and traumatizing uncertainty can be for law students, in particular. Federal forgiveness or repayment plans like Biden’s new proposed income repayment plan or the long-running Public Service Loan Forgiveness (PSIF) can be complicated, requiring people to opt in or continue in one type of career over decades. Flywheel promises fellows a predefined formula for flexible repayment that doesn’t penalize those who choose to go back and forth between firms and nonprofits, forgiveness, and a predefined cap on maximum monthly and aggregate payments to protect even the highest of earners. 

Does this mean it hurts you if you realize public interest isn’t for you and you go to a firm? No, Schrage says. He hopes fellows see themselves as community builders. “I want the people who end up in big law who have one of these fellowships to not feel, ‘Oh, I should have just taken out traditional federal loans,’ but to say, ‘Wow. Yes, I’m paying as much as I might’ve if I had taken out a Grad PLUS loan, but the money, instead of going to Sallie Mae, is going to subsidize some future student who’s going to pursue a nonprofit path.’”

Flywheel has a bigger mission, too. If Schrage and Kafafian are making the right bet, could it change legal education financing as a whole? Could it change the profession?

Schrage hopes that more people feel emboldened to explore those types of careers that might not be lucrative financially.

They both have that dream. Kafafian sees a world where top law schools could try to implement tuition-free schooling for a high percentage of the student body. Maybe they have enough cash flow coming in from their alumni and generations of ISA students, and instead of asking for funding imminently, ask for commitments later in life. This is important for Kafafian, who says it would be “a way of leveling the field where it is not about your family financial situation when you showed up, but rather, what you are going on to do next,” he says. “And inevitably, many people still end up high earners, and it’ll still be such a high positive ROI for those individuals even paying at the top amount that it’s a no-brainer.” But for others, he says, the flexibility could make the difference for those who want to explore public interest or government careers in a more affordable way. 

Schrage too hopes that more people feel emboldened to explore those types of careers that might not be lucrative financially. He says, “It’s not that they all have to go work for the ACLU or the public defender’s office. It’s that they take jobs that reflect conscious choices in how they can use their legal careers in different ways.” While ISAs are often a risk, Schrage and Kafafian built Flywheel to “incentivize career risk-taking by reducing financial risk-taking,” Kafafian says. Schrage relies on Cass Sunstein’s work, noting that the current “choice architecture” of law school leans too heavily corporate. 

Can Flywheel be a nudge in the other direction? Schrage is betting it can be. Even if 60 percent of the fellows end up choosing lower-salary careers in nonprofits, he would mark that as a success over the current number: 15 percent. Sure, they would have to fundraise more, because there would be fewer dollars going in than coming out, but it would mean more students in more diverse careers that serve a broader population, consistent with the mission of law schools to advance high-impact careers. Schrage says, either way, the model remains sustainable.

Going forward, can Flywheel and programs like it expand to an increasing number of law schools?

And while it’s hard to say what the effect of Flywheel will be, there will at least be rigorous empirical data to back up any claims. Because more students applied than they were able to accept into the first cohort, the Flywheel-Stanford team also filed for IRB approval to launch a randomized control trial to study the impact of the program. Stanford’s Ralph Richard Banks, Jackson Eli Reynolds Professor of Law, serves as principal investigator. The project’s goal is to assess the choices made by students with the fellowship and those without. In the meantime, Flywheel is eagerly looking to expand, and while Schrage does believe the legal profession as a whole calls for reform, they won’t be limited to law schools in the future.

Going forward, can Flywheel and programs like it expand to an increasing number of law schools? Can they offer the fellowship to an increasing number of students? Can it grow beyond law schools in the top 14, particularly to schools that have fewer resources as well as whose graduates face different hiring markets than the those at the top? And last, will it reach schools—across disciplines—with graduates across the board facing difficult debt-related questions? Above all, can it scale?

  1.  To facilitate clearer disclosure to student borrowers, Flywheel and Stanford Law School have agreed upon calling this product an Income Share Loan or ISL. Nonetheless, for the purposes of this article we refer to the product by its more commonly referenced market name, Income Share Agreement. []