The Wall Street Journal recently revealed that nearly 5 million student loan borrowers are “severely behind” on federal student loan payments. But it’s likely the number of borrowers defaulting on student loans is actually much higher.
Student loan default has serious consequences. You could lose the ability to choose a repayment plan, damage your credit, and have your wages garnished. You also could lose your professional license and sometimes your driver’s license, according to The New York Times.
That means millions of Americans might not be able to work in their fields — or might lose their jobs altogether — because of unpaid student loans.
If you’re on the verge of student loan default, find out what the rules are in your state.
How unpaid student loans could lead to a revoked license
Currently, there are 14 states where state-issued professional licenses can be suspended and two states — South Dakota and Iowa — where you can lose your driver’s license if you default on student loans.
According to The Brookings Institution, close to 30 percent of all workers in the United States now require a professional license. An analysis conducted by Reason Foundation revealed around 300 professions for which a license is required in Florida alone.
Professional licenses aren’t required just for highly skilled positions, such as doctors or lawyers, or for positions where there are public safety concerns, such as electricians. They’re also required for a wide range of occupations in some states, including:
- Travel guides
- Interior designers
- Makeup artists
An analysis of public records conducted by The New York Times revealed 8,700 cases in recent years in which licenses were either suspended or put at risk of suspension. But the news outlet itself admitted its analysis likely underestimated the total number of license suspensions.
In fact, between 2012 and 2017, officials in just one state — Tennessee — reported more than 5,400 people to professional licensing agencies because they were in default on their student loans, according to The New York Times.
State-by-state guide to license suspension for unpaid student loans
If you live in one of the states listed below, click on it to see how you could face a suspended or revoked license because of unpaid student loans.
If your state isn’t listed, it doesn’t currently suspend professional licenses because of default on student loan payments.
- South Dakota
- Washington State
According to Alaska Statute §14.43.148, licensing entities in the state can’t renew a license if they’ve received notice of unpaid student loans. This rule applies to all licensing agencies, so all professions requiring a license are affected.
According to Florida Statute § 456.072, a health care professional can have their license suspended for failing to repay any student loan the state or federal government issued or guaranteed.
The suspension will last until new payment terms have been agreed on. When your license is restored, you’ll be on probation for the duration of the loan.
A health care professional with defaulted student loans also could face a fine of up to 10 percent of the defaulted loan amount.
According to Georgia General Code § 43-1-29, all professional licensing boards in the state must suspend the license of:
- Anyone who’s in default on an educational loan
- Anyone who isn’t complying with the requirements of a service scholarship program
Since this rule applies to all licensing boards, anyone who needs a license is affected. A license can’t be reinstated until the licensing board is notified in writing that you’re making payments or satisfying scholarship requirements.
According to Hawaii Revised Statute § 436B-19.6, licensing authorities can’t reinstate the license of anyone who’s in default on a student loan. This rule applies to all professions.
The licensing authority can keep a license suspension in place and deny requests to renew a license until it receives notice from the student loan lender that the default has been resolved.
According to 20 Illinois Compiled Statute §2015, any licensing agency can deny a license or refuse a license renewal as a result of:
- Unpaid student loans
- Failure to comply with terms of a service scholarship program
But a hearing must take place first to prove you failed to make satisfactory repayment to the Illinois Student Assistance Commission for a defaulted student loan.
According to Iowa Code § 261.121, any license authorized by state law can be denied, revoked, or suspended if a borrower defaults on student loan obligations. Both professional and driver’s licenses can be revoked, and all professions are affected.
Notice is required, however. After receiving notice, you can request a conference or make payments within 20 days. If you do neither, the license suspension can go into effect.
According to Kentucky Revised Statute Annotated § 164.772, state licensing agencies can’t renew or issue a license to someone who’s in default on student loans. Anyone who needs a license is affected.
You’ll need to enter into a satisfactory repayment plan, repay the debt in full, or get the debt discharged before your license will be renewed or issued.
According to Louisiana Revised Statute Annotated § 37:2951, your application can be denied or the licensing agency can decline to renew your license if you default on any student loan guaranteed by the Louisiana Student Financial Assistance Commission.
All professions are affected if a license is required.
According to Massachusetts General Laws Annotated Chapter 30A §13, when any licensing board is notified of default, the board must deny issuing a:
- Professional certificate
- Occupational certificate
All professions are affected.
Within 30 days of being notified your license has been denied, you can request a review of the claim that you defaulted by the loan agency. If you enter into a repayment agreement or the agency determines notification of your default was in error, the loan agency will need to notify the licensing board so you can get your license back.
According to Minnesota Statute § 214.105, any health-related licensing board can refuse to grant a license to a health care professional who:
- Is intentionally in nonpayment
- Is in default on a student loan
- Fails to fulfill a service obligation
The health-related licensing board also can take further disciplinary action, but it must consider the reasons for the default. The board can’t impose disciplinary action on anyone with a long-term or permanent disability.
According to the South Dakota Department of Public Safety, defaulted student loan debt or other unpaid debt to the state could result in the suspension of your driver’s license.
Under Tennessee Code Annotated § 56-1-312, any board, commission, or agency with licensing authority can suspend, deny, or revoke a professional license if you’ve defaulted on loans or service-conditional scholarship programs. This rule applies to all professions.
The board also can take other disciplinary action if you’ve defaulted on a loan.
According to Texas Education Code Annotated §57.491, licensing agencies can’t renew the license of someone who’s in default. This rule applies to all professions.
Your license can be renewed only if you enter into a repayment agreement on the defaulted loan or if you’re no longer in default on a guaranteed loan.
According to Virginia Code Annotated §54.1-2400.5, licenses, certifications, registrations, and all other authorizations issued by a health regulatory board within the Department of Health Professions could be suspended for defaulting on a student loan.
You’ll need to reach an agreement on a payment plan or resolve your default within 30 days to avoid suspension.
Washington State’s Business and Professional Code allows for licenses to be suspended for many professionals for nonpayment of student loans.
Plumbers, escrow agents, land supervisors, real estate professionals, and sprinkler contractors are among the many professionals who could face license suspension for unpaid student loans.
Under Washington Revised Code §2.48.165 and others, disbarment is also a possibility for defaulting on a student loan.
Here are your options if you’re facing student loan default
Most states allow you to obtain or renew your license if you’ve entered into a repayment plan for unpaid student loans.
And there are ways you can try to avoid default if you’re getting close. Some of your options include:
- Placing your federal student loan into deferment or forbearance
- Lowering your federal student loan payments by switching to an income-driven repayment plan if you meet the criteria
- Talking to your private student lender and seeing if you can make arrangements to avoid default
If you’re already in student loan default, your options include:
- Entering a loan rehabilitation program
- Consolidating your federal student loans into a Direct Consolidation Loan if you meet the criteria
- Repaying your loans in full
You can learn more about each of these options in our guide to student loan default.
Since your professional license could be at risk, it’s best to act quickly before you find yourself with a revoked license due to unpaid student loans.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.81% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|