One of the gravest yet little-known consequences of student loan default is the loss of a professional license. In nineteen states, including Texas, Georgia and Tennessee, workers such as teachers, nurses, and firefighters can have their licenses revoked by the state if they fall behind on their student loans, rendering them unable to work. Some states like Iowa and South Dakota also have laws that enable the state to revoke people’s driver’s licenses who default on student loans. For many people in these states, not being able to drive means they will not be able to get to work.
A recent article in The Texas Tribune tells the story of a teacher who, when his online license renewal didn’t go through, found out the state had revoked it because he’d defaulted on his student loans. Unable to work, he ended up getting evicted, had his bank account garnished, and eventually had to file for personal bankruptcy.
While this teacher’s story ended in him getting his job back, not all have been so fortunate. A 2017 article in the New York Times estimates that thousands of professionals have had their licenses revoked in recent years due to student loan default.
Of all the penalties that student lenders have in their arsenal to enforce loan payments, these laws are the most draconian and the closest thing to a modern-day “debtor’s prison.” They are supposed to act as a strong incentive to force people to make their payments. But many professionals are unaware of the laws until the states have enforced them. The result is completely the opposite outcome from what the states intended. Robbing these individuals of their jobs virtually guarantees they won’t be able to pay their loans and will push them further into financial hardship.
The New York Times found that many of the states which have these laws in place, such as Hawaii, Alaska, and Massachusetts, are simply not using them. Other states such as Oklahoma and New Jersey have eliminated or softened their laws. But in the states where these laws are still actively enforced, like Texas, Tennessee, and Kentucky, any professional with a license — even barbers and massage therapists — can be rendered unable to work by the state if they default on their student loans. Of the 44 million people in the United States who currently are carrying student loans, the borrowers in these states should be aware of the terrible consequences of default.