Ruining Lives One Billing Statement At A Time: How Student Loan Debt Can Leave You Unemployed

November 26, 2017  |  

student loans can lead to unemployment

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I’ve written in the past about how student loan debt often causes me overwhelming anxiety, especially when it appears that five digit remaining balance never changes. Every once in a while I’ll get elbows deep in crunching numbers and researching loan forgiveness, but most days as long as my credit score stays above 750, I can easily toss those billing statements in a pile on my desk and focus on happier things like Cookie Butter Oreos and the puppy love shared between “Mike” and “Eleven” of Stranger Things. And don’t even get me started on entertaining grad school. Sadly, most of my friends who have taken the plunge into the deep end of student debt are either disappointed by the lack of pay off or do so with the idea of, “I’m never going to pay it off anyway. Why not tack on another couple grand?”

If student loan debt hasn’t inspired fear in your heart just yet, the New York Times recently highlighted another reason why you may not want to be on Sallie Mae (now Navient)’s bad side. According to records obtained by the publication, 20 states suspend people’s professional or driver’s licenses if they fall behind on loan payments. So not only do loan companies want to cripple you from living your best life because of the insane amount of debt you may be carrying, but she also wants you unemployed and waiting at the bus stop. The article “When Unpaid Student Loan Bills Mean You Can No Longer Work” points out that it’s not just administrative assistants and substitute teachers that are suffering. In 19 states government agencies don’t discriminate and can seize state-issued licenses from a variety of professionals who have defaulted on their loans:

“As debt levels rise, creditors are taking increasingly tough actions to chase people who fall behind on student loans. Going after professional licenses stands out as especially punitive.”

“Firefighters, nurses, teachers, lawyers, massage therapists, barbers, psychologists and real estate brokers have all had their credentials suspended or revoked.”

OK, so if I’m a psychologist pulling in $75 K a year, theoretically I should be able to contribute a portion of my paycheck to appease the student loan gods. But everyone’s circumstances and expenses are different and if I wasn’t paying you when I had a pay check, I damn sure can’t break off Navient if I am unemployed. Is it me or does the penalty defeat the purpose?

Shannon Otto is an example of this conflicting fine print. She worked for years to achieve her dream of becoming a nurse in her hometown of Nashville, Tennessee, a state currently facing a shortage of nurses.  After years of school and amounting student loan debt, Otto was able to work as a nurse for over a decade before tragedy struck in the form of epileptic seizures she began experiencing.  She was unable to work for some time and defaulted on her student loans. Thankfully, after gaining control over her seizures, Otto was able to return to work to begin paying down her debt again, but Tennessee’s nursing board had suspended her license and in order to get it back, Otto would first have to pay $1500 up front which she can’t afford.

“I absolutely loved my job, and it seems unbelievable that I can’t do it anymore.”

The belief behind the rule that states are using on behalf of themselves and the federal government, is that faced with losing their licenses, debtors will find the money. Only what if they can’t? Then no one gets paid.

However, the article goes on to point out that sometimes this strategy actually works. In Louisiana, the nursing board notified 87 nurses last year that their student loans were in default and their licenses would not renewed until they became current on their payments. Eighty-four paid their debts, and the remaining three are unable to work. I would like to think that the best case scenario was that those nurses were just suffering from a case of “I don’t feel like paying my student loan debt right now because DSW is having a bomb sale” but I can’t help but wonder what bills didn’t get paid or what sacrifices had to be made to come up with the cash. Not that we all don’t sacrifice each day to pay the bills, but student loan debt isn’t everything in life, and I don’t appreciate the government making people feel like it should be.

Not all states are enforcing these rules even if they are on the books. Hawaii has a broad statute that was enacted in 2002 that allows it to suspend the vocational licenses of those who have defaulted on student loans, but the state licensing board has never done so. William Nhieu, a spokesperson for Hawaii’s Department of Commerce and Consumer Affairs states that this is namely because no state or federal loan agencies has ever given them the names of delinquent borrowers. Officials from the states of Iowa, Massachusetts and Washington said their laws aren’t being enforced either. Oklahoma and New Jersey eliminated their laws last year with bipartisan support.

Do you know how your state handles defaulted student loans in relation to professional licenses?  Many of us can’t afford to pay loans entirely but it doesn’t mean you have to default. Setting up a payment plan is usually an option for most folks so they can keep their careers and see their debt disappear at least a few cents at a time. But if  “Minimum Amount Owed” is still stressing you out, then what?

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