Texas has joined nineteen other states by introducing a policy that threatens the professional licenses of workers who default on their student loans. Thirty-three state licensing agencies, including those that provide licenses for nurse practitioners, cosmetologists, engineers, and teachers, will not renew licenses after being notified of a default. The Texas State Bar will go a step further and suspend the licenses of attorneys rather than waiting for them to expire.
Hurting the Texas Workforce
According to The Daily Texan, the goal of these penalties may be to encourage loan payments, focusing largely on wealthy borrowers who have chosen not to pay on their loans. However, they pose a significant chance of creating even more debt, especially because there are very few borrowers who have enough income to make their payments yet choose to go into default. Jan Kruse of the National Consumer Law Center warned that, “If people have licenses suspended then they can’t work and pay their bills so the tactic could completely backfire.”
Mechele Dickerson, a law professor at UT, told the Daily Texan that those who most commonly fall behind on payments and default are people who attended school for a few years but couldn’t afford to finish. These people then find themselves with school loan debt, but no degree to land the job needed to pay off those loans. Stripping them of any professional licenses they may have been able to acquire only hurts their ability to pay on those loans even more.
How It Works
Representatives from the Trellis Company, which works with borrowers holding default loans with the state, explained that the process of losing a professional license is not immediate. Lenders determine when a payment delinquency period begins, and warn borrowers of the consequences for missing payments over the next 270 days or until the loan is paid. Once the loan is 270 days delinquent, it goes into default. Borrowers are then given 60 days or more to work out a payment plan with Trellis. Anyone who has failed to do so at the end of that period is included in a quarterly report Trellis sends to state licensing agencies listing default borrowers. From that point, the licensing agencies are responsible for handling renewal or suspension issues.
It is important to remember that school loan agreements are legally binding and have real consequences. If you can pay them, we urge you to do so. We at Bertolino LLP also understand that your professional license is a crucial part of your means of earning income and meeting your financial obligations. If that license is being threatened, you need to work with professionals that understand the role your license plays in your life and how to protect it.