I’m taking a rare vacation, which may hamper blogging. In the meantime, outgoing Illinois State Bar Association president John E. Thies has written a letter to the editor at The Am Law Daily criticizing my article on state bar association proposals, “State Bar Proposals Fail to Address Law Students’ Woes.”
The good news is I have little quarrel with Thies as even he recognizes at the end of his letter. We agree on some of the means to reform but not the reasons, which is important but not important enough to dedicate an enormous number of mental clock cycles in rejoinder, and since I didn’t make any material misstatements of fact in my article I’ll spare The Am Law Daily any corrections. (They can thank me later.)
(1) My argument was indirect, but I think my examples illustrated that the Special Committee claimed debt created a price floor. In fact, its report said “EXCESSIVE LAW SCHOOL DEBT DECREASES THE QUANTITY AND QUALITY OF LEGAL SERVICES AVAILABLE TO THE PUBLIC.” That sure sounds like a price floor to me. Then in his third paragraph, Thies agrees with me that the “public’s ability to pay” is keeping lawyer earnings down, which makes the rest of his letter confusing. Is he agreeing with me or not?
(2) As for Thies’ examples of attorneys’ employment choices due to debt. They should have access to IBR/ICR (more on that below), and in some situations it sounded like the employers wanted experienced lawyers, not recent graduates.
(3) Thus, Thies presents an economic theory stating that low-skill lawyers are discouraged from the profession by debt, creating a long-term shortage of high-skill lawyers. It sounds to me that when demand is slack for lawyers, new graduates don’t get hired. Indeed, this has been going on for a while as the profession is graying. As Thies and I agreed (I think), poor people are poor. This causes lawyer unemployment.
(4) Regarding IBR and interest capitalization, 20 U.S.C. 1098e(b)(3) says that so long as the debtor has a “partial financial hardship” interest does not capitalize onto principal, which applies to the lawyers Thies mentions. Once someone no longer has a PFH, then the interest gets capitalized, but that’s when IBR essentially turns into a 10-year repayment plan. If anything, Thies’ lawyers would be better off staying at lower-paying jobs to prevent interest capitalization. (I guess the trick is to defer compensation until after the loans are canceled. Talk about bad incentives.)
The Department of Education prints this too. Only Illinois’ three public law schools’ graduates had less than $100,000 in disbursed debt on average at graduation as of 2012. Even U of Illinois’ was $95,830. These debtors will have to fork out $8,500 per year on a 25-year repayment plan unless it’s a graduated plan. Good luck to them if they can afford it, but they’ll almost certainly choose IBR since they’re either unemployed or it costs them less in the long run thanks to cancelation.
(5) My fear isn’t of the John E. Thieses of the world but of the kinds of people who will be whispering the Philip Schrag (or worse Simkovic and McIntyre) argument into legislators’ ears that we’re wrong about student loan debt so keep shoveling the law schools money. (Better yet, pay the law schools up front and the government will recoup the costs by income taxes.)
(6) It’s asking a bit much of the Special Committee, but why do graduates from NIU and SIU have less debt yet poorer outcomes than other Illinois law school grads? If that’s so, then it’s time to consider shutting them down because they’re unnecessary. And if U of Illinois is going to charge $38,500 (2012) for in-state students and defraud the ABA just to maintain its place in the U.S. News rankings, then it’s abandoned its public mission and should be shut down too.
Now for some ROCK AND ROLL!!!!!
Okay it’s soul, but the video is genius.