Student loans have an unexpected consequence if they go unpaid: Borrowers who default on their payments can lose their state-issued professional licenses.
That’s according to a news report in CNBC that found that in 19 states, government agencies can take away student loan borrowers' licenses if they default on their debt. What’s more, in South Dakota, a borrower’s driver’s license can be suspended, which makes it close to impossible for them to get to work.
The moves on the part of states are due to increasing debt levels among student loan borrowers. As a result, they are taking more drastic steps to collect the money, including revoking state professional licenses. The report noted that the actions have impacted firefighters, nurses, teachers, lawyers, massage therapists, barbers, psychologists and real estate brokers. CNBC said it was hard to determine how many people lost their licenses, but public records reviewed by The New York Times named at least 8,700 cases in which occurred.
Student loan debt has been soaring for some years now, currently standing as the biggest source of householder debt, second only to mortgages. Defaults are high, with borrowers facing all sorts of actions as lenders try to get the unpaid money, including filing lawsuits, garnishing wages, putting liens on properties and seizing refunds from taxes.
According to CNBC, the state of Tennessee is one of the more aggressive states when it comes to taking away professional licenses because of unpaid student loans. From 2012 to 2017, officials reported greater than 5,400 individuals to professional license agencies because of unpaid debt. It's not clear whether the people lost their licenses as a result.
“It's an attention-getter," said Peter Abernathy, chief aid and compliance officer for the Tennessee Student Assistance Corporation, a state-run commission that is responsible for enforcing the law. "They made a promise to the federal government that they would repay these funds. This is the last resort to get them back into payment."