Are you looking for a Fresh Start?

Laws Changing For Student Loan Defaulters

The student loan debt crisis has already gripped the attention of courtrooms from bankruptcy court to state and federal court, but finally, it has gained traction among lawmakers on both sides of the aisle.

In an unexpected allyship, Sen. Elizabeth Warren D-Mass and Sen. Marco Rubio R-Fla proposed a bill: “Protecting JOBs Act”. This bill would prevent states from “suspending, revoking or denying professional licenses and driver’s licenses ‘solely’ because a borrower defaulted on their federal student loans” (CNBC). If the bill passes, states would have two years to comply or else lose funding from the federal government. A borrower goes into default with their student loans in a very quick two-step process. After one missed student loan payment, a borrower goes into “delinquent status.” If they are not able to negotiate out of delinquent status in 9 months, they go into default.

A study conducted by the Urban Institute found that within 5 years, 40% of borrowers are expected to go into default, which would equal about 17.6M people borrowing for student loans. One of the consequences of going into default could mean the borrower losing their professional license and/or their drivers license. 15 states in America still have these laws against borrowers that would harm their career and livelihood. Illinois was previously included in this list of states, but this month the Republican Illinois Gov. Bruce Rauner signed into effect a bill proposed by Democratic Senator Scott Bennett called the “Career Preservation and Student Loan Repayment Act”. It passed almost unanimously in the Illinois Senate and House of Representatives.

This bill works similarly in that it prevents “any state government agency or board from suspending, denying or revoking a person’s license simply because they defaulted on their student loans” (“Defaulting on a student loan could cost you your job in these professions”, CNBC). The lawmakers agreed that suspending the licenses of borrowers in default doesn’t remove them from default faster, and they will take longer to repay their loans. The governor came to the shocking realization that this law did not make sense, ethically or financially. By passing the Career Preservation and Student Loan Repayment Act, Illinois joined Alaska in Washington who also removed default laws that would suspend a person’s license. It is a relief to see more Democrats and Republicans agreeing across the aisle on this issue, but perhaps it’s because they’ve found a common enemy to unite against. The Department of Education, headed by Betsy Devos, has avidly encouraged states to deny licenses to defaulters until they’re able to repay their loans. With 15 states left to change their laws and more laws passed in favor of borrowers, perhaps the tide will continue to relieve borrowers of their burdensome student loan debt.

Source: https://www.nbcnews.com/think/opinion/defaulting-student-loan-could-cost-you-your-job-these-p rofessions-ncna904476 http://www.chicagotribune.com/business/columnists/reed/ct-student-debt-veto-overturn-robert-re ed-0910-biz-20170908-column.html https://www.illinoispolicy.org/rauner-signs-bill-preventing-professional-license-suspension-for-stu dent-loan-delinquencies/ https://www.cnbc.com/2018/08/13/twenty-two-percent-of-student-loan-borrowers-fall-into-defau lt.html