“Special Committee on the Impact of Law School Debt on the Delivery of Legal Services: Final Report and Recommendations,” Illinois State Bar Association.
Some good primary stuff:
Congress and the Department of Education should place reasonable limits on the amount that law students can borrow from the federal government. Student loans should also be made dischargeable in bankruptcy so private lenders have the incentive to properly screen loan applicants based on the chance that the school they attend will prepare them to be successful in the job market. That way, law schools will have an incentive to restrain costs to the level that students can borrow. If a school fails to do so, most students will not be able to afford to attend, and the school will close. (4)
And go diploma privilege:
Consider Ways to Reduce the Cost of Becoming Licensed: For example, supreme courts could allow qualified students to take the bar exam in February of their third year, thus avoiding the cost of studying for the bar exam after graduation, and reducing the delay before beginning work. Such a proposal should be careful not to restrict the time law students have in their third year to become practice ready. Alternatively, supreme courts should consider offering bar admission to qualified graduates of their state’s law schools without a bar exam. (6)
And some contradictory stuff:
Small Law Firms Face Challenges Hiring and Retaining Competent Attorneys… (1)
The Committee heard testimony from many recent graduates who were unable to obtain any jobs in the private sector or elsewhere paying more than $40,000-$45,000. That fact makes the academic debate about the effect of debt on graduates’ choice between the public sector and the private sector, see supra note 25, somewhat misleading. There may be no significant difference in salary between the two sectors for the many graduates who are unable to obtain higher-paying jobs in the private sector. In addition, many graduates testified that jobs were so scarce that they would take any available job. (Footnote 38, emphasis added)
Because I really can’t ask for much more from a report like this that recommends restoring bankruptcy protections to student loans, curtailing the federal loan program, and easing licensing requirement, I’m not going to waste too much energy on it. However, if the executive summary is going to read, “Exessive Law School Debt Decreases the Quantity and Quality of Legal Services Available to the Public,” then it helps to make sure it’s arguing for the right policies for persuasive reasons.
Specifically, there are two theories of how debt relates to legal services. (1) The Special Committee says that poor people can afford legal services but lawyers’ debts are raising the lawyer labor costs to the point that it’s impossible for both parties to reach an agreement. (2) People like me say demand for legal services is scant because poor people can’t afford much of anything.
If (1) is right, then we’d see much higher employment rates for graduates with less debt than more, as small firms and clients would be able to pay them. Indeed, Southern Illinois’ and Northern Illinois’ 2011 graduates finished with a disbursed amount of debt below $70,000. Assuming none of this is Grad PLUS loans, we’re talking about a ballpark estimate of $6,250 per year in debt service on $75,000 over 25 years. It’s a lot, but it’s not irreparably impossible to service that on $40,000 in annual income (okay, there’s undergrad debt too, but did most NIU/SIU grads go to expensive private universities too?).
Do we see better employment outcomes for NIU and SIU than high-debt schools? Answer: Sometimes:
I think, though, that we’d expect much higher FT/LT lawyer job rates and much lower unemployment levels for the two public law schools. Instead, they’re no better than Illinois’ mid-range private law schools, and employers appear excited at the prospect of employing Chicago and Northwestern grads, even though they should cost quite a bit more. If theory #1 were true, the “market-failure” debt threshold at these schools would’ve been surpassed many years ago.
This is why I believe the second theory is accurate, for it explains how there can be graduates who would take any job no matter what their debt levels are.
As for IBR:
Many public interest attorneys are unwilling to enroll in IBR because, although it lowers an attorney’s monthly payment, any interest unpaid at that payment level continues to accrue. Moreover, the attorney’s debt will not be forgiven until ten years of service in public interest. Funding for public interest jobs is unstable, and an attorney who does not continue in public interest law may have her accrued interest capitalized, leaving the attorney in a worse position than before. In addition, IBR does not cover private loans, the program may penalize a lawyer for the earnings of the lawyer’s spouse, a lawyer’s credit score may still suffer while on IBR, and many attorneys do not expect funding for IBR to continue in a time of government austerity. In addition, some graduates were not aware of the intricacies of IBR and may not be taking advantage of all the features available to them. (2-3)
It’s implausible that people with high Grad PLUS loan levels are not on IBR. I think the Special Committee should have put more effort in determining how many graduates are in the program to bolster its points.