Facing Student Loan Default? You Could Lose Your License in These States

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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.

Alaska

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.

The state does allow for one temporary license to be issued if the only thing preventing license renewal is unpaid student loans. But if you get a temporary license, you’ll have to pay a fee for it.

Florida

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.

Georgia

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.

Hawaii

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.

Illinois

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.

Iowa

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.

Kentucky

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.

Louisiana

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.

Massachusetts

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
  • Registration
  • License

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.

Minnesota

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.

South Dakota

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.

Tennessee

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.

Texas

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.

Virginia

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

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?

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1 Important Disclosures for Earnest.

Earnest Disclosures

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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% 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 Month/Day/Year, 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 08/21/18. 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 hello@earnest.com, or call 888-601-2801 for more information on ourstudent 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.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.

Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.

Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.

Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance:Fixed rates from 3.899% APR to 7.804% APR (with AutoPay). Variable rates from 2.470% APR to 6.990% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.470% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.64% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for LendKey.

LendKey Disclosures

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.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of October 1, 2018, the one-month LIBOR rate is 2.22%. Variable interest rates range from 2.72%-8.32% (2.72%-8.32% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled. Applicants with an Associate’s degree or with no degree must have made at least 12 qualifying payments after leaving school. Qualifying payments are the most recent on time and consecutive payments of principal and interest on the loans being refinanced. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a cosigner who is a U.S. citizen or permanent resident. The cosigner (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a cosigner will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.47% – 6.99%3Undergrad
& Graduate
Visit SoFi
2.47% – 6.23%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.95% – 6.37%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.72% – 8.32%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.