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Ditch the bar exam? Bar report on 'crushing burden' of student debt says idea should be considered

State supreme courts should consider allowing qualified law school graduates to become lawyers without taking the bar exam, according to a report on the “crushing burden” of student debt by a committee of the Illinois State Bar Association.

In the alternative, supreme courts could allow qualified students to take the bar exam in February of their third year, reducing the costs of studying after graduation and cutting the delay to obtain a license, according to the report (PDF) released on Tuesday. The state bar’s Board of Governors is recommending approval by the ISBA’s policy-making assembly, according to a press release.

The Special Committee on the Impact of Law School Debt, appointed in June 2012, held five public hearings throughout Illinois to learn about the burden of law school debt and issued its recommendations.

The average student graduates from law school with more than $100,000 in law school debt. “After adding accrued interest, undergraduate debt, and bar study loans, the debt burden of new attorneys frequently increases to $150,000 to $200,000, levels of debt that impose a crushing burden,” according to the special committee’s report.

“The debt burden is an inexorable force that ruins the credit scores of many young attorneys trapped in an endless cycle of forbearances, deferments, refinancings, and struggles to make even the minimum monthly payment,” the report says. “The financial plight of many young attorneys forces them to delay important life milestones, such as marriage, starting a family, or buying a house. In the worst cases, some young lawyers must leave the profession before their careers have even begun, either because their debt prevents them from joining the bar, or because they simply cannot find a way to make their monthly debt payments without taking a job outside the law. In short, the consequences for young lawyers are devastating.”

Many small firms can’t pay salaries needed by new lawyers with high debt, resulting in high turnover after the lawyers receive training and then look for higher-paying positions, the report says. A lack of jobs or underemployment is also spurring a jump in new graduates entering solo practice, from 2.8 percent in 2007 to 6 percent 2011.

“The special committee heard much anecdotal evidence suggesting that attorneys with heavy debt loads may be more likely to commit ethics violations,” the report says. “The greatest pressures are on solo practitioners, who may take work beyond their level of competency, face financial pressures to prolong litigation, or terminate a representation inappropriately if a client has difficulty paying. Evidence from the Attorney Registration and Disciplinary Commission does not yet show an increase in ethics violations among lawyers with heavy debt loads. Nonetheless, this data may be a lagging indicator of a problem that is already developing.”

The report’s recommendations include:

• Congress should restrict federal loan eligibility to schools whose graduates meet certain standards for employment and debt repayment. This would put pressure on law schools to train lawyers for practice at an affordable price.

• 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 their law schools will prepare them for a successful job search. “That way, law schools will have an incentive to restrain costs to the level that students can borrow,” the report says. “If a school fails to do so, most students will not be able to afford to attend, and the school will close.”

• Law schools should emphasize practice-oriented courses, and should cut down on the amount of scholarship needed for hiring and tenure. “The inadequate ‘practice ready’ skills of new graduates has apparently contributed to the reality that only 55 percent of the law school class of 2011 had full time, permanent jobs that required a JD nine months after graduation,” the report says. Schools should also teach a bar review course at no extra cost, and cut back on “exotic” classes such as “law and literature.”

• The ABA Section of Legal Education and Admissions to the Bar should revise accreditation standards to allow appropriate flexibility, and should require collection of jobs and salary data for multiple graduation years.

• Funds available for the federal government’s income-based repayment plan should be targeted to lawyers most in need. The money savings could be used to grant loan forgiveness to public interest lawyers on a yearly basis, rather than after 10 years of public interest service. Many public interest lawyers don’t want to enroll in the IBR program because lower monthly payments result in additional accrued interest that will have to be paid if the lawyer isn’t able to keep the public interest job for 10 years, the report says. “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,” the report says.