When you think of allies in the government, Sens. Marco Rubio, R-Fla., and Elizabeth Warren, D-Mass., don’t immediately come to mind. However, last week they joined forces to introduce a bill aimed at preventing states from revoking professional or driver’s licenses due to student loan default.
Both Rubio and Warren expressed concerns that these policies hinder borrowers from getting out of default and making payments.
“These policies don’t make sense because they make it even harder for people to put food on the table and get out of debt,” said Warren in a statement.
“Our bill would fix this ‘catch-22’ and ensure that borrowers are able to continue working to pay off their loans,” said Rubio in his statement about the bill.
Here’s what you need to know.
What’s in the Rubio-Warren bill?
Some states impose hefty penalties on borrowers who are in default on their federal student loans, such as revoking state-issued teacher and professional licenses and even suspending driver’s licenses.
Rubio and Warren are looking to change that. The bill “would prevent states from suspending, revoking or denying state professional licenses solely because borrowers are behind on their federal student loan payments,” according to Warren’s office.
If passed, the bill would give states two years from the date of enactment to comply. It would also offer a way for borrowers to file for relief if a state is in violation of the law.
It’s important to note that the bill has only been introduced in the Senate; it hasn’t been voted on. If the bill makes it out of the Senate, it’ll go to the House. If passed there, it’ll head to President Donald Trump’s desk.
What to do if you’re facing license revocation due to student loan default
Until Congress moves forward with legislation to stop states from enacting these policies, your best course of action is to avoid student loan default. That way, you won’t risk losing your ability to work or drive.
Here’s what you can do if you’re in default.
Federal loan rehabilitation
Speak with your loan servicer about how to begin the loan rehabilitation process. For Direct Loans, you’ll need to make nine payments within a 10-month period to have your default status removed.
However, you can only rehabilitate a loan once, and you have to apply to rehabilitate each of your federal student loans separately. You might also be subject to some fees as you move forward.
Federal student loan consolidation
Another option is to consolidate your federal student loans and begin a new payment plan. To qualify for this option, you need to take one of the following actions:
- Make three consecutive, on-time, and full monthly payments on each loan you want to consolidate.
- Agree to sign up for an income-driven repayment (IDR) plan on the new loan.
If you qualify for a Direct Consolidation Loan, this can be a faster way to get your federal loans out of default and salvage your professional license or ability to legally drive in your state.
Repay your loans in full
You can get out of default if you repay your student loans in full. However, if you’re in default because you can’t make your payments, it might be a challenging task to actually pay off your loans — especially if you can’t work because your state has revoked your professional license.
You could refinance your federal student loans to a private loan. This allows you to pay off your federal loans and removes the default status. Refinancing defaulted loans can be difficult, though, since many private lenders won’t allow you to do so unless the loans are rehabilitated. Plus, you lose the option of IDR and other federal benefits when you refinance to a private loan.
How to avoid federal student loan default
You’re not actually considered to be in default on your federal student loans until you’ve missed your payments for at least 270 days. This gives you some time to change course if you’re worried about affording your payments.
If you’re worried about falling into default, talk to your student loan servicer about these options:
- Get onto an IDR plan (if you qualify) so you’re better able to afford your payments.
- Use deferment or forbearance to give yourself a break while you get back on your feet.
Even if your state doesn’t revoke licenses due to default, you may still face challenges for missing payments on your debt. Missed loan payments can damage your credit score and reduce your access to federal benefits, so it makes sense to avoid federal loan default when possible.
Increase protection for student loan borrowers
As an engaged citizen, you can help increase protection for student loan borrowers. Keep track of higher education bills, such as the one introduced by Rubio and Warren, and contact your federal and state representatives to express your opinion about laws that you feel unfairly penalize borrowers.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
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.
3 Important Disclosures for SoFi.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|