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Rising bar tab draining new law school grads

Amara Omeokwe, CNBC Producer
Saturday, 17 Aug 2013 | 3:00 PM ET
Tanya Constantine | VStock | Getty Images

For many law school graduates who took the bar exam recently, the load of grueling preparation has finally been lightened. But many complain that their wallets have been significantly lightened, too.

Between registration fees and review courses, the associated costs for getting into the bar are escalating at a time when the job market for lawyers has never been more competitive.

And it is not like there is much choice. Sixty-two percent of law graduates from the class of 2012 headed to positions where passing the bar was a mandatory requirement, according to the American Bar Association. Last year, 82,920 people took bar exams in the U.S., up 14 percent since 1995.

In the most expensive states, bar exam application fees alone can reach upwards of $1,000. Couple that with the $2,000 to $4,000 cost for the most popular review courses, like BARBRI's, and test takers face a substantial price tag. BARBRI estimates course prices have risen more than 3 percent since 2010.

Prices like that stir up resentment for some, given the $40,000 tuition law school students pay on average per year and the mixed jobs picture they face upon graduation. A recent report by The National Association for Law Placement shows that large firm hiring remains below pre-recession levels and that the overall employment rate for the legal industry has fallen for the past five years.

(Read more: Courtroom drama: Too many lawyers, too few jobs)

Christopher Carrion, 27, who graduated from New York Law School this past spring and took BARBRI'S course, said the bar exam fees made him furious. "Bar review courses, in my opinion, are the biggest rip-off ever," he said. "How would you feel if you spent well over $100,000 on law school, only to have to spend an extra couple of thousand dollars on a course to get you to pass the bar?"

That question is particularly keen for students who don't head to firms that pick up the tab for bar exam preparation. Carrion said that some of his friends did not use a bar review course at all because they could not afford it.

Such stories are part of the reason Mehran Ebadolahi founded TestMax, a test preparation company whose offerings are available solely through smartphone apps. BarMax, the company's first suite of apps to be launched, offers preparation for the New York, California and Uniform bar exams. Each app retails for $1,000 in the Apple app store.

Ebadolahi, who graduated from Harvard Law School and passed the California bar, was inspired to found TestMax after witnessing his friends' experiences with bar preparation and what he says is an anti-competitive atmosphere in the bar review space.

He points to the exclusive marketing deals that larger courses strike with law schools as an example of how smaller competitors are squeezed out. And he said such practices have led to a lack of reasonable pricing and product innovation.

"What's happened in the bar exam prep space is that because it's been a monopoly, BARBRI has implemented things like making students sit in a classroom and watch prerecorded lectures without lowering its price point," Ebadolahi said.

Ebadolahi argued that BarMax gives students everything they would get in some of the more popular courses, but at a better value. Besides the cheaper cost, Ebadolahi said that, unlike other courses, BarMax licenses questions from past bar exams so that students get a taste of authenticity.

He also pointed out that once the app is downloaded, students have access to the full-range of course materials, even without an Internet connection. Ebadolahi said this gives students more flexibility around how and when they study.

Ebadolahi said that BarMax's strength is especially evident in the examples of students who have failed using larger courses, but passed using BarMax. "What shows the quality of the course is when you can help students who, according to conventional wisdom, have no business passing the bar exam. We actively seek these students out," he explained.

But BARBRI CEO Stephen Fredette said that his company's proven track record—one that includes more than 1 million lawyers who have taken the course and passed—makes it worth the cost. "Students who take BARBRI are more likely than other students to pass the bar the first time, and there's substantial value in that," he said.

Fredette also points to BARBRI's increased enrollment last year, despite the continued entrance of new competitors, as further evidence that the company is meeting students' needs.

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Kaplan, another major player in the bar review space, has been thrust into the spotlight recently after the sale of The Washington Post Co.'s publishing arm to Amazon CEO Jeff Bezos. The remainder of The Washington Post's assets, which include Kaplan, will continue to operate under a new, soon-to-be-named company.

Kaplan's test preparation arm has shown signs of improvement this year following earlier sales declines. Revenue jumped 8 percent when compared with the first half of last year. In its most recent earnings results, the company pointed to stronger enrollment in three areas, including bar review, as part of the reason for the gains.

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Steve Marietti, general manager of Kaplan Bar Review, said that the Washington Post sale is unlikely to affect his business or strategy. He attributes the uptick in enrollment to the unit's continued focus on offerings, like unlimited essay grading and mobile apps, that he said better address bar students' needs.

While Kaplan's bar offerings cost more than $3,000 in states like New York and California, Marietti said what's most important is the course's quality, not price. "We encourage students who are going into bar review to not really think about the cost question, although that's obviously important, but the overall question of the value and fit of the bar review program," he said.

Still, Marietti said that Kaplan Bar Review is aware of the financial difficulty the exam can present for some. He highlights the availability of scholarships, given to students on a case-by-case basis. BARBRI has a similar financial assistance program. Kaplan also offers an online, on-demand bar review course that is cheaper than its on-site classes.

(Read more: Can Bezos turn a profit at Washington Post?)

For Ebadolahi, though, cost is and should be at the forefront of any conversation about the bar exam. While he said BarMax's main focus is user experience and creating a superior product, he's also highly cognizant of price. By implementing what he says are sensible measures, like limited overhead costs and a no-cost financing program, he hopes that BarMax students feel less of a financial pinch.

Ebadolahi says that his work ultimately comes down to market dynamics, because more competition benefits students. "Four thousand dollars for a bar exam prep course makes no sense, especially when you look at what you get," he said. "A competitive market would force companies like BARBRI to create a product that makes more sense."

—By CNBC's Amara Omeokwe. Follow her on Twitter @Amara_Omeokwe.

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