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Losing your license can be one of many bad things that happen when you default on your student loans. However, many struggling borrowers might be able to stop fearing that loss if a new bill becomes law.
Senators Marco Rubio and Elizabeth Warren recently partnered to introduce a bill designed to stop states from suspending residential driver’s and professional licenses due to unpaid federal student loans.
The bill comes after the news highlighted laws in 20 states that enabled government agencies to seize licenses from residents who had fallen behind on paying their education debts, according to LendEDU. From a records review, The New York Times found 8,700 cases of borrowers losing their licenses over the last few years; however, experts believe this number is probably even higher.
What Are the Stipulations of This Bill?
In this new bill, states would not be permitted to deny, suspend, or revoke driver’s and professional licenses from people who defaulted on federal student loans. Should the law be enacted, states will then have two years to comply.
Senator Rubio, who personally carried $150,000 in student debt from law school, said of the bill in a press release, “Difficulty repaying a student loan debt should not threaten a graduate’s job. It makes no sense to revoke a professional license from someone who is trying to pay their student loans. Our bill would fix this ‘catch-22’ and ensure that borrowers are able to continue working to pay off their loans.”
As for what the bill doesn’t do, it would not alter the current methods of collecting student loans by the federal government. It only notes a denial, suspension, and license revocation based on federal student loan default; however, it doesn’t prohibit states from performing the aforementioned actions or invalidating state-issued licenses for other reasons.
States and License Revocations
States using this tough punishment to get debtors to resume their loan payments has continued as 19 states, as of March 23, 2018, still utilized this. One state that takes a particularly tough approach is Tennessee. According to The New York Times, from 2012 to 2017, the state reported over 5,400 defaulters to professional licensing agencies, resulting in many licensing losses.
Florida currently has an initiative that allows license suspensions of healthcare professionals from a failure to repay their government student loans. It also enforces a 10 percent fine from the loan’s defaulted amount.
But Washington is one state bucking the trend by removing itself from the list of 19. In June, Washington state announced that its professionals, including nurses and teachers, will no longer lose their licenses upon their loans going into default. Time will tell if this is a trend but, Texas might also soon join in on easing this law.
Author: Debbie Baratz
Debbie Baratz has written about topics including personal finance, financial markets, and banking. And as a media relations professional, she spent 10+ years working at not-for-profit, private, and publicly-traded financial institutions. When Debbie isn’t working, she can be found working out, reading, or traveling.