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Behind On Your Student Loans? These States Will Take Your Driver's License

Talk of across-the-board debt cancellation and loss socialization notwithstanding, the trillion-dollar plus pile of student loan debt America’s proud college graduates are now saddled with is a big problem. It represents a third of consumer non-housing related debt and unfortunately for distressed borrowers, isn’t generally dischargeable in bankruptcy. Between the inexorable rise in college tuition and the fact that $15-20 billion in student loan-backed ABS deals are still going off each year, this isn’t a problem that’s going away anytime soon — unless of course The White House wipes the slate clean in an effort to prove yet again that the world has generally forgotten that “cancelling” one person’s liability everywhere and always impairs someone else’s asset because, well, that’s the way math works. 

But before you think about holding out for a taxpayer government-sponsored bailout on your student loans, you may want to check the laws in your state because as it turns out, you may end up losing your driver’s license or worse, your barber’s license. Here’s more via Bloomberg

The little-known laws exist in at least 22 states and have been on the books in some states since as far back as 1990. Advocates for repealing them say they have real consequences for people who cannot make a dent in their student debt.

 

“It’s the most inappropriate consequence, because you are taking away their ability to eventually pay [their loans] back,” says Moffie Funk, the Montana state representative who sponsored the bill. In Montana, where there is little public transportation to speak of, driving is the only way most people can get to the jobs they need to repay their debt, Funk says.  

 

Since 2007, Montana has suspended the driver’s licenses of 92 people for defaulting on their student loans, according to John Barnes, a spokesman for the Montana attorney general’s office. By 2012, Iowa had suspended more than 900 licenses because the license holders could not repay their student debt, according to Geoffrey Greenwood, a spokesman at the 

 

Iowa attorney general’s office. Those suspensions were reversed two years ago but not because the policy changed. The Iowa College Student Aid Commission, which once collected federal loans in the state, reserved the suspensions and stopped revoking licenses in 2012, because the commission transferred its student loan portfolio to the Great Lakes Higher Education Corporation, a Wisconsin guaranty agency…

 

The law has also been effective as leverage against debtors in Iowa. “Once we served a written notice that we were going to revoke a license, we generally got some action from a borrower,” says Julie Leeper, the executive officer of the Iowa College Student Aid Commission. 

 

Records from states that publicly track suspensions of professional licenses suggest that hundreds of people have lost their right to work for not paying back student debt. 

 

In Tennessee, for example, the state's student loan guaranty agency, the Tennessee Student Assistance Corporation, has suspended more than 1,500 professional licenses held by people who defaulted on their student loans. Nurses aides, teachers, and emergency medical personnel have been among the most likely to lose their licenses.

Got it. So essentially, if you can’t make enough money to pay back your student debt, the state will correct the situation by taking away the license you need to get to work, and just in case, through some feat of ingenuity like a taxi or public transportation, you should happen to find a way to get there anyway, they’ll strip you of your professional license so that you can’t work period. Below is a list of states who apparently think this arrangement makes sense (via Credit.com):

Alabama

Alaska

California (ZH: which has the most student borrowers of any state in the union)

Florida

Georgia

Hawaii

Illinois

Iowa

Kentucky

Louisiana

Massachusetts

Minnesota

Mississippi

Montana

New Jersey

New Mexico

North Dakota

Oklahoma

Tennessee

Texas (ZH: which has the second most student borrowers)

Virginia

Washington

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As a reminder: