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.
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