Ibrahim Gardner
In the United States, student loan debt has risen to over $1.5 trillion, and many Americans face the reality of losing their driver's or professional licenses for failing to pay their student loans. As of 2020, 22 states have laws that allow authorities to suspend licenses for those who default on their student loans. This has been enforced in states such as Tennessee, where over 1,500 licenses were suspended, and Montana, where 92 licenses were suspended. However, some states are trying to abolish these laws, with Montana and Iowa introducing bills to repeal the statute.
| Characteristics | Values |
|---|---|
| Number of states that can suspend your license for not paying student loans | 19, 22, or 23 (including Washington) |
| Types of licenses | Driver's license, Professional licenses (e.g., doctors, nurses, lawyers, teachers, barbers, transportation professionals, etc.) |
| Impact | Inability to work, difficulty repaying loans |
| Legislative changes | Some states are trying to repeal these laws (e.g., Iowa, Montana, Louisiana, Tennessee, Texas, Georgia, Massachusetts, etc.) |
| Number of people impacted | Thousands of cases identified by The New York Times, over 900 in Iowa in 2012, 308 nurses and 223 teachers in Kentucky, 5,400 in Tennessee |
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What You'll Learn
US states that revoke licenses
As of 2018, at least 16 states in the US deny, suspend or revoke state-issued professional or driver's licenses if loan borrowers default on their student loans. These states include Iowa, South Dakota, Montana, Tennessee, Kentucky, Washington, Arkansas, Illinois, and North Dakota.
In Iowa, for instance, more than 900 driver's licenses were temporarily suspended in 2012 for failure to pay student loans. In Kentucky, the licenses of 308 nurses and 223 teachers were revoked in recent years for student loan default. Tennessee has also been particularly aggressive, with more than 5,400 people reported to the state's professional licensing agencies from 2002 to 2017. In one month alone, 42 Tennessee nurses lost their licenses.
In 2015, Montana, Oklahoma, and New Jersey repealed their provisions, and multiple bills were introduced in both houses of Tennessee's legislature to do the same in 2017-2018. However, some states with these laws rarely enforce them, including Alaska, Hawaii, Massachusetts, and Washington.
The laws in these states can impact a wide range of workers, from teachers to attorneys, physicians, nurses, pharmacists, physical therapists, dentists, barbers, accountants, and more. This creates a Catch-22 situation for those who fall behind on their payments as they lose their licenses and, subsequently, their income to catch up.
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Driver's licenses suspended
In the United States, student loan debt has risen to over $1.5 trillion, and many Americans face the reality of having their driver's licenses suspended due to defaulting on their student loans. As of 2020, there were 22 states with laws that enable the suspension of driver's licenses for those who are unable to pay their student loans. These states include Alabama, Alaska, California, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Tennessee, Texas, Virginia, and Washington.
The specific laws and consequences for license suspension vary by state. For example, in Iowa, more than 900 driver's licenses were temporarily suspended in 2012 due to unpaid student loans. In Montana, 92 driver's licenses have been suspended since 2007. Meanwhile, Tennessee has been particularly aggressive in enforcing license suspension, with over 5,400 people reported to the state's professional licensing agencies from 2002 to 2017.
License suspension can significantly impact an individual's ability to work and repay their debts. Recognizing this counterintuitive punishment, some states are challenging and repealing these laws. Montana, for instance, has approved a bill to repeal the statute, and Iowa and South Dakota have also introduced similar legislation.
If you are facing difficulty in repaying your student loans, it is essential to take proactive measures. Reach out to your loan servicer or a nonprofit credit counselor to discuss your options and take advantage of protections such as forbearance, deferment, and income-driven repayment plans.
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Professional licenses at risk
Defaulting on student loans can have severe consequences, including the suspension of professional licenses in several U.S. states. This means that individuals who are unable to keep up with their loan payments may also lose their ability to work in their chosen profession, creating a Catch-22 situation.
According to various sources, the number of states that can revoke professional licenses due to student loan default ranges from 13 to 22. Some of the states that allow this practice include Alabama, Alaska, California, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Tennessee, Texas, Virginia, and Washington.
The professions affected by license suspension vary by state but can include doctors, nurses, teachers, social workers, barbers, transportation professionals, lawyers, hair stylists, and travel guides. For example, in Tennessee, the state's student loan guaranty agency has suspended the licenses of nurses' aides, teachers, and emergency medical personnel.
It's important to note that some states are actively working to repeal these laws. Iowa and Montana, for instance, have considered bills to repeal laws that allow the suspension of driver's licenses for student loan defaulters. Additionally, legislative efforts to abolish license revocation for unpaid student debt have been seen in Louisiana, Tennessee, Georgia, Iowa, Massachusetts, and South Dakota.
If you are facing difficulty in repaying your student loans, it is crucial to take proactive measures. Reach out to your loan servicer or a nonprofit credit counselor to discuss your options, such as forbearance, deferment, income-driven repayment plans, or loan rehabilitation programs. Taking action early can help prevent the loss of your professional license and the resulting negative impact on your career and financial situation.
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Nurses, teachers, doctors affected
Defaulting on student loans can have serious consequences, and in some cases, it can even lead to the suspension of professional licenses. This is a particular concern for nurses, teachers, and doctors, who often carry a significant amount of student loan debt.
Nurses, in particular, have faced the risk of losing their licenses due to unpaid student loans. In the United States, at least 19 states allow government agencies to seize professional licenses from residents who default on their educational debts. This means that nurses in these states could lose their licenses if they fall behind on their student loan payments. The specifics of professional license discipline for student loan default vary by state, but the potential impact on a nurse's career is significant. For example, in Texas, the Board of Nursing is authorized to deny, revoke, or suspend a nurse's license if they default on their student loans.
Teachers may also face challenges in maintaining their licenses if they default on student loans. While there is no specific mention of teachers losing their licenses due to unpaid student loans, the broader consequences of defaulting on loans can affect their ability to work. This includes damage to credit scores, wage garnishment, and tax refund offsets, which can impact their overall financial well-being and, by extension, their ability to maintain their teaching licenses.
Doctors often face substantial student loan debt, with the average medical school debt for 2024 graduates hovering around $200,000. While there is no direct link between doctors losing their medical licenses due to unpaid student loans, the financial burden can be overwhelming. To assist with this, there are loan forgiveness programs and repayment assistance programs specifically for doctors. These programs are often tied to service commitments, such as working in underserved communities or conducting research.
It is important to note that losing one's license due to unpaid student loans is a complex issue, and the specific consequences vary depending on the state and profession. While nurses have been particularly affected, it is crucial for individuals in any profession to seek legal and financial advice to understand their rights and options in managing their student loan debt.
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Options to avoid defaulting
Defaulting on student loans can have serious consequences, including the suspension of licenses in some states. To avoid defaulting, borrowers can consider the following options:
- Income-driven repayment plans: Borrowers can move to a lower-payment option, such as an income-driven repayment (IDR) plan. These plans are based on a borrower's income and can provide some flexibility if they are struggling to make payments.
- Autopay and interest reduction: Signing up for autopay ensures that payments are made directly from a borrower's bank account each month, reducing the risk of missing a payment. Additionally, some lenders may offer a reduction in the interest rate for borrowers who use autopay.
- Deferment or forbearance: If borrowers cannot afford their payments, even under an IDR plan, they can temporarily pause their monthly payments through deferment or forbearance. Deferment and forbearance are options available for economic hardship or other circumstances that make it difficult for a borrower to pay. These options allow for a temporary suspension of payments, but there may be time limits.
- Contact the lender: Borrowers can contact their loan servicer, lender, or the financial aid office at their school to discuss repayment options and seek help and advice.
- Federal Student Aid: Federal Student Aid provides resources and support for borrowers with federal student loans, including a loan simulator to calculate repayment options and information about forbearance and deferment.
It is important to prioritize making loan payments on time and to take initiative early on if financial distress is anticipated. Student loans can significantly impact credit scores and defaulting may result in wage garnishment and additional penalties.
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Frequently asked questions
Yes. In 22 U.S. states, authorities can suspend your driver's license or professional license if you default on your student loans.
Alabama, Alaska, California, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Tennessee, Texas, Virginia and Washington.
If you are struggling to pay your student loans, it is important to take action as soon as possible. Reach out to your loan servicer or a nonprofit credit counsellor to discuss your options.
Defaulting on your student loans can trash your credit, and the loans will continue to incur interest and fees for as long as they remain unpaid.
