These states will take away your driver's license if you default on student loans

Nurses and teachers across the country are at risk of losing their jobs if they default on student loans.

Nearly two dozen states have laws on the books that allow states to confiscate the driver’s licenses or professional credentials – real estate licenses, teaching credentials, nurse registrations, etc. – of people who have fallen behind on their student loan payments.

But there have been recent attempts by state lawmakers in several states to get rid of such laws, which are spelled out here by Jobs with Justice, which cites data from the National Consumer Law Center’s book, Student Loan Law.

Montana, Iowa and Oklahoma, states that aren’t exactly known for their superior public transit systems, confiscate driver’s licenses. Those same states, plus many more, including California, Florida and Texas, can prevent nurses and healthcare professionals from working if they fall into default on student loans.

Student advocates say the rules punish debtors in a way that makes no sense, by removing their ability to earn a livelihood, and thus their ability to repay their loans. Revoking driver’s licenses can also be debilitating, they say, in places where public transportation is limited and nonexistent.

“I think these policies are crazy,” Sarah Audelo, policy director for Generation Progress, the youth-focused arm of the left-leaning Center for American Progress, told Fusion. “We are talking about people who are struggling to pay back their loans and when you take away things like driver’s licenses, that’s how people get to work.”

Sarah Lovenheim of the student advocacy group Young Invincibles, said in an email to Fusion, “We should be making it easier for student borrowers to repay their loans, not harder. It’s appalling that student debt stunts our generation’s ability to live on our own, buy cars, homes, start families, and now even our drive to work.”

The groups have criticized the laws and pushed for policies that reduce expensive interest rates, but there has been little movement across states to repeal the laws.

Some of the laws were put in place in the 1990s and early 2000s when default rates were at historic lows and there may have been a public perception that people who weren’t paying back were choosing not to repay loans, not that they couldn’t afford to repay them.

Online schools offering degrees that often failed to earn their graduates steady jobs began to crop up around then, too, Ben Miller, a senior education policy analyst with the think tank New America and former Education Department advisor, told Fusion, which began to drive up default rates.

While default rates are now higher than they were back then, they have declined somewhat since their peak during the recession.

Proponents of the laws say they are a powerful way to get delinquent borrowers to fork over payments. In Montana, one of the states considering eliminating its policy, the state-created guaranty agency, which collects on overdue loans in the state, said the reversal would cost taxpayers around $239,000 each year. That’s not a significant amount of money, but proponents argue just the real threat of lost licenses has prompted debtors to cough up even more.

“It sounds like people are saying they’d rather hurt those who are hurting more in order to raise revenue in the state,” Audelo said.

“There’s this view of people who don’t come through on their debts as inherently bad people,” Miller said, “when in many cases, there might be completely understandable reasons for why someone can’t pay.”

Iowa also considered a bill to repeal its policy, but it stalled.

State records show that, across the country, thousands of professionals – teachers, nurses, real estate agents and others – have had their licenses confiscated. In Tennessee, records from the state’s guaranty agency show more than 1,500 suspended licenses. Iowa has suspended more than 900 licenses, according to Bloomberg.

Instead of revoking licenses, Audelo thinks states should spend their efforts enrolling people in income-based repayment plans.

The current strategy, she said, “makes no sense.”

Miller says the national government’s policy of garnishing wages and taking tax refunds before they end up in a debtor’s pocket is a more effective way of recouping the money.

“There are already a lot of negative consequences for failing to pay student loans,” he said. “Adding onto that by taking steps that make it hard for the borrower to earn a living probably just increases the chance they’ll never be able to pay it back.”

Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.