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.
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