New Bill By Rubio, Warren Would Stop States From Suspending Job Licenses Over Unpaid Student Loans
It’s easily one of the country’s most counterproductive policies. In 14 states, licensing boards and other government agencies can suspend, deny, or revoke a borrower’s license to work if they fail to pay back their student loans. Those laws have blocked thousands of Americans from working in their chosen field. Of course, without their occupational licenses, borrowers essentially lose their ability to earn an honest living, which can drive them ever deeper into debt.
Last year, student loan debt ballooned to over $1.5 trillion, with student loans topping car loans and credit card debt to become the second largestcategory of consumer debt. According to the Institute for College Access & Success, 8.9 million federal student loan borrowers are now in default, with over 1 million borrowers swelling their ranks each year.
Meanwhile, the number of Americans who need a license to work has almost quadrupled since the 1950s, with nearly a fifth of the nation’s workforce licensed. According to a recent study by the Institute for Justice and economists Morris Kleiner and Evgeny Vorotnikov, occupational licensing may cost the nation’s economy up to 1.9 million jobs and nearly $200 billion in “misallocated resources.”
Fortunately, lawmakers are increasingly looking to protect borrowers from losing their licenses. On Thursday, Sens. Marco Rubio (R-FL) and Elizabeth Warren (D-MA) reintroduced the Protecting JOBs Act. Under the bill (S. 609), any state that receives federal funding through the Higher Education Act would be barred from denying, suspending, or revoking an occupational license or a driver’s license “solely” because a borrower defaulted on their federal student loans.
“It is wrong to threaten a borrower’s livelihood by rescinding a professional license from those who are struggling to repay student loans, and it deprives hardworking Americans of dignified work,” Sen. Rubio said in a statement. “Our bill fixes this ‘catch-22’ and ensures that borrowers are able to continue working to pay off their loans, instead of being caught in a modern-day debtors’ prison.”
Several state legislatures seem eager to beat them to the punch. Last year, Alaska, Illinois, North Dakota, Virginia, and Washington all eliminated their default suspension laws for job licenses. This session, at least eight states are considering their own repeal legislation. None of the proposed federal or state reforms would outlaw other common tools for collecting debts, like garnishing wages or withholding tax refunds.
On Friday, the Kentucky Senate unanimously approved a bill that would ban its licensing boards from suspending job credentials. Kentucky’s Keep Americans Working Act, as its legislative purpose put it, would “ensure that hard-working Americans keep their occupational licenses while struggling to pay off student loan debt, keeping them out of welfare, out of poverty, and in the workforce.” Although records are patchy, The New York Times reported that the Bluegrass State had blocked licenses for at least 308 nurses and 223 teachers.
Enforcement can vary dramatically between states. For instance, Hawaii enacted its suspension statute in 2002, but hasn’t ever invoked that power, the state’s Department of Commerce and Consumers Affairs revealed in legislative testimony about a reform bill last month. In Georgia, another state actively considering repeal, the Secretary of State has threatened to suspend 10 professional licenses since 2012.
In sharp contrast, Florida threatened around 900 healthcare workers with the loss of their licenses because they defaulted on their student loans. Ultimately, the state has suspended 97 licenses in just over two years. One of those affected is Denise Thorman. After she could no longer pay her $9,000 student loan, Thorman lost her credential as a certified nursing assistant.
“I worked hard for my license. and now it’s gone. I don’t have the money to fight it,” Thorman told the Tampa Bay station WFTS. “Your license is gone, your livelihood is gone, the care of your patients is gone. How fair is that?”
Incredibly, health care professionals, especially nurses, are frequent targets. In Texas, where Gov. Greg Abbott has endorsed a repeal bill, since 2010, 530 nurses couldn’t renew their licenses because they had defaulted on their student loans. Over the past decade, Louisiana has stopped license renewal for 780 registered nurses. And before Illinoisrepealed its license-suspension law last year, the state blocked licenses for nearly 500 nurses, more than 400 pharmacy technicians, a dozen dentists, nine physicians, and several social workers and counselors between 2005 and 2015.
Perhaps the most aggressive state has been Tennessee. In 2017, the Tennessee Department of Health’s licensing boards suspended 208 licenses; half were for nurses. That same year, the state’s Department of Commerce and Insurance, which governs over two dozen regulatory boards, suspended, denied, or revoked 283 licenses “due to delinquency or default on a student loan,” a fiscal note for a reform bill noted in February. According to The New York Times, “from 2012 to 2017, officials reported more than 5,400 people to professional licensing agencies.”
The growing opposition to blocking job licenses over unpaid student loans is a remarkable about-face. Back in 1990, the U.S. Department of Education recommended states “deny professional licenses to defaulters until they take steps to repayment.” Many states soon followed the federal government’s lead and began enacting their own laws. “Around 2010, at the height of this legislative trend,” the National Conference of State Legislatures found that “roughly half of states had some form of license suspension for default law in place.” But less than a decade later, that figure has already fallen to 14 states. And it could drop even lower, thanks to bipartisan reform efforts like the Protecting JOBs Act.
“We shouldn’t punish people struggling to pay back their student loans by taking away their drivers’ or professional licenses, preventing them from going to work and making a living,” said Sen. Elizabeth Warren. “Our bipartisan bill removes these senseless roadblocks so that borrowers can build better financial futures.”