How Student Debt can Affect Professional Licenses
For most people, education is the recognized path to a decent life and career. However, over 44 million Americans find it difficult or impossible to finance higher education, which is why most depend on student loans.
The Higher Education Act of 1965 allowed students in post-secondary education to access financial assistance to further their education. With this goal in mind, students today can access various types of student loan products, including consolidation loans, Perkins, Stafford PLUS, and private student loans.
According to Forbes, student loans in the US total to about $1.5 trillion with the average student debt in California at $22,785 for 2017.
Most of these students take these loans with the belief that they will earn enough to repay their loans once they graduate. However, most of them struggle with these crippling debts as soon as they graduate.
According to CNBC, about 11% of the students default on their loans, which accounts for more than 4 million students. Most of these defaults occur within the first three years of the first repayment. Others have their loans on deferment or other programs that allow for temporary relief.
Student Loans and Professional Licenses
According to CCRC (The Community College Research Center), about 30% of jobs in California require a license or form of certification, which is approximately 177 professions. Before you are granted a license, the relevant licensing bureau will determine whether you meet the necessary educational and work experience qualifications. Now here’s the catch, your license can be suspended if you default on your student loan.
With the cost of living so high, and with other commitments such as childcare, health emergencies, and unemployment, you are likely to default on your student loan, even when you have the intention and commitment to repay the debts. Some of the consequences of defaulting on a student loan include a poor credit score and mounting debts.
Students who default on private loans risk facing legal action; in which case, they may need the help of a License Defense Attorney to have any hope of winning. The worst and perhaps most negative consequence is losing your professional license.
A Catch-22 Situation
State governments began denying professional licenses in the 1990s following a recommendation by the Department of Education. Some of the states adopted the proposal as a means of recovering student debts, and most have enforced them.
The enforcement of the legislation was aimed at encouraging students to repay their student debts. However, situations have changed and what once was a solid way of recovering debts has become the bondage of college kids, and graduates are falling into this trap.
Some states are more vigorous in their enforcement, leading to loss of jobs for more than ten thousand Americans. The numbers could be higher since the suspended licenses are not fully reported.
However, enforcing such a law creates an unfair situation for students who have failed to make a payment for their student loans in 270 days. If your student loan is a private loan, then it becomes defaulted after 120 days – which is a short period in the face of a financial crisis.
It makes no economic sense to lose a license because you cannot repay a student loan; but for graduates in 20 states, they risk losing the licenses for jobs they had to finance through loans.
These students are deprived of the basic way of earning an income. It sinks them into further financial ruin and poverty. How can you give money when you are not making any? How are these professionals supposed to get new jobs that can meet their basic needs and leave enough for regular monthly payments to offset their debts?
Consequences By State
For states such as Louisiana, nurses and health professionals cannot renew their licenses if their student loans are in default.
Alaska, Georgia, Louisiana, North Dakota, Hawaii, New Jersey are some of the states that refuse license renewals for teachers whose federal student loans are in default.
Montana, Iowa, and Oklahoma also suspend driver’s licenses if you default on a federal student loan, meaning, defaulters have to use public means to get around.
While some states allow you to renew your license once you show any efforts of repaying the loans, most have extremely high standards that most debtors cannot meet. They have to join the unemployment wagon, despite having the desire or having shown commitment to repaying their loans.
However, residents of Arkansas, California, Florida, Georgia, Hawaii, Iowa, Massachusetts, Minnesota, Mississippi, South Dakota, and Tennessee still risk losing their licenses over defaulted loans. Massachusetts and Iowa have not enforced the laws on suspending licenses, although these laws are present.
A Ray of Hope
Senators Elizabeth Warren and Marco Rubio introduced a bill that would bar states from suspending professional and other licenses from citizens with federal student loans. The bill is a light at the end of the tunnel for many professionals, who are tied up by laws that are based on the ideals of more than 50 years ago.
In response to the bill, Alaska, North Dakota, Illinois, Kentucky, Virginia, and Washington have prohibited the suspension, revocation, or seizure of professional or driving licenses for defaulted student debts.
For others, they may have the luck of delaying the enforcement of the license suspension by filing for either Chapter 7 or Chapter 13 Bankruptcy. If students can afford a License Defense Attorney, he or she can also hire a lawyer to represent them at a bankruptcy hearing. Bankruptcy will allow the student to re-organize his or her loans and save their license from suspension or revocation.
The Waiting Game
Some people have managed to restore their licenses with the help of a License Defense Attorney, but many have remained jobless, as the cost of legal help is out of their reach.
Lawmakers remain as the only people who can save the country from the mess of its own making. The laws can change to accommodate the difficulties students experience in paying their student loans. A little understanding and compassion could go a long way in reinstating and preventing the loss of professional licenses for workers who are unable to repay their student loans. There could be better means of enforcing debtors to repay their loans without denying them their only source of income.