As many as 5.1 million student loan borrowers are at least 90 days late on their payment or already in default.
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.
If you’re on the verge of default, find out what the rules are in your state.
How unpaid student loans could lead to a revoked license
Currently, there are four states — Florida, Massachusetts, Minnesota and Tennessee — where state-issued professional licenses can be suspended. And in South Dakota, a driver’s license suspension for student loan default is also a real possibility.
About 22% of employed civilian workers in the U.S. hold 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 issued just for highly skilled positions, like doctors or lawyers, or positions where there are public safety concerns, such as electricians. They’re also required for a wide range of occupations in some states, including:
- Interior designers
- Makeup artists
- Bus drivers
- Real estate agents
A 2017 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 over unpaid student loans. 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 Times.
State-by-state guide to license suspension for unpaid student loans
Since the New York Times report, 12 states — Alaska, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Mississippi, New Mexico, Texas, Virginia and Washington — have passed legislation to drop such punishments for defaulted education debt. At the same time, a bipartisan bill has been proposed in the Senate to end the practice at the federal level.
If you live in one of the five states listed below, however, click on it to see how you could face a suspended or revoked license because of unpaid student loans.
According to Florida Statute §456.072, a health care professional can have their license suspended for failing to repay any student loan which the state or federal government issued or guaranteed.
The suspension lasts 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 student loans in default also could face a fine of up to 10% of the defaulted loan amount.
In 2019, the Florida Board of Health suspended the licenses of dozens of health care workers with defaulted loans, while working out repayment plans with others, according to media reports.
According to Massachusetts General Laws Annotated Chapter 30A §13, when any licensing board is notified of default, the board must deny issuing a professional or occupational certificate, registration or license. All professions are affected.
Within 30 days of being notified that your license has been denied, you can request the loan agency to conduct a review of the claim that you defaulted. If you enter into a repayment agreement, the loan agency will need to notify the licensing board in order for you to get your license back.
In January 2019, however, Massachusetts elected officials proposed new legislation that would prohibit license revocation in the case of student loan default.
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 not making loan payments
- Is in default on a student loan
- Fails to fulfill a service obligation
The licensing board can also 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, unpaid debt to the state results in the suspension of your driver’s license. The state’s Obligation Recovery Center, a branch of the Bureau of Administration set up in 2015, could also stop you from getting a hunting or fishing 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. However, in the wake of the New York Times investigation, elected officials in the state proposed four separate bills to do away with license seizure practices, though none have gained traction, according to The Tennessean’s reporting.
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
- 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 before you find yourself with a revoked license due to unpaid student loans.
The information in this article is accurate as of Aug. 12, 2019.
Andrew Pentis contributed to this report.