A REAL CATCH-22 OF student loan debt exists in the 13 states with the ability to revoke a professional license in the case of student loan default. If people are unable to work in their chosen field – the one they went to school for and presumably took out loans to fund – how can they be expected to pay their debt?
According to the National Conference of State Legislatures, during the 1950s only 5% of U.S. workers were required to hold a license to practice their chosen profession. Today, that percentage has risen to more than 25%.
Nurses, teachers, hair stylists and travel guides are just a few of the types of professionals who require a license. The training necessary to obtain those licenses can be expensive, and many people are taking out student loans to cover the costs. Overall, student loan debt in the U.S. has risen to more than $1.5 trillion. More than 1 million people default on their student loans every year, according to a report from the Urban Institute, a nonprofit research organization.
In the 1990s, the federal government urged states to use their license revocation abilities to curb the growing tide of student loan default. More recently, however, many states have changed their laws to protect borrowers from this punitive tactic. Today, 13 states have these types of laws, although enforcement varies widely.
Bipartisan legislation was reintroduced last month in Congress to prohibit states from revoking or denying professional licenses solely because of default on a federal student loan. And legislation passed in Alaska, Illinois, Kentucky, North Dakota, Virginia and Washington has already prohibited the practice in those states.
For now, these are the states that still have laws that allow professional license denial, suspension or revocation for defaulting on student loans, according to October 2018 research from the National Conference of State Legislatures:
- Louisiana (only for defaulted state education loans)
- South Dakota
In Iowa and South Dakota, those in default can also have their driver’s and hunting licenses revoked over defaulted student loans.