How can people repay student loan debt if states take away the licenses they need to work? People who fall behind on student loan payments can lose their professional licenses in 18 states. But taking away their livelihoods just makes the problem worse.

C. Jarrett Dieterle and Shoshana Weissmann | Opinion contributors

Roderick Scott Sr., a Texas middle school teacher, had been teaching for several years when his professional license was up for renewal. Although the process is usually routine — the application can be submitted online and requires a simple fee — what happened next nearly left his life in ruins.

The Texas Education Agency denied Scott’s renewal. The reason: He had fallen behind on his student loan payments, the loan he had taken out to allow him to obtain his teacher’s license in the first place. Unbeknownst to Scott, Texas law allows the state to suspend or revoke a professional license as punishment for falling behind on student loan payments.

Scott started paying back his loan instead of his rent and other commitments, a decision that ultimately caused him to be evicted from his apartment and forced to file for bankruptcy.

The result of this Texas law — which also exists in 17 other states — is a dangerous Catch-22. Individuals who default on their student loans lose their licenses and thus heir ability to work. Stripped of their ability to earn money, these individuals have even more difficulty catching up on their loan payments, leading to a downward spiral of ever-greater debt and frustration.

Suspended licenses and lives

In addition to Scott’s story, The Texas Tribune found that over 4,000 professionals in the state of Texas were at risk of losing their professional licenses for falling behind on student loan payments. In recent years, the state has suspended the licenses of at least 500 nurses and 250 teachers on these grounds.

This situation is also playing out in other states. Tennessee and Kentucky have similar laws and use them aggressively; both have revoked hundreds of licenses in the past few years. Although it’s impossible to estimate the true scope of the problem, a New York Times investigation uncovered over 8,000 cases in which licenses were suspended or put at risk by these laws.

Loan delinquency laws mostly originate from a push in the 1980s and 1990s to more aggressively pursue delinquent borrowers. At that time a network of state guaranty agencies administered the loans. In a 1990 handbook on how they could reduce defaults, the Education Department urged states to enact laws that stripped professional licenses from defaulters. Eventually, 22 states would heed this call.

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The problem has only become more pervasive as more occupations have started requiring licenses — and more students have taken out loans to pay for their education. Today, one in four Americans must obtain an occupational license to work in their chosen profession, and four in 10 Americans under 30 have outstanding student loan debt.

Because many licenses mandate onerous educational requirements and high fees, occupational licensure often acts as a barrier to entry for lower-income individuals. Those who attempt to overcome these obstacles often have to take out student loans to pay for the education needed to qualify for a license. But doing so is fraught with risk when a state can use missed loan payments as an excuse to take away a license.

States like Texas justify their use of this power on the grounds that it can be an effective tool to encourage debtors to catch up on their loan payments. For example, after Louisiana’s nursing board declined to renew 87 nurses’ licenses on account of loan delinquency, all but three of the nurses quickly repaid their debt and had their licenses restored.

But what these topline numbers conceal is how those in default repay their loans.

In many cases, individuals faced with the loss of their professional licenses — and thus, their livelihoods — will go to extreme lengths to catch up on loan payments. Often this means taking out even more debt, such as credit debt, or repaying loans instead of other important bills.

A harsh and unnecessary punishment

Worse yet, these laws are not even needed. States and collection agencies already have numerous tools available to pursue delinquent borrowers, including garnishing wages and Social Security checks, and placing liens on a borrower’s property. Stripping professional licenses can work at cross-purposes with some of these collection methods — it’s hard to garnish wages from someone who no longer works due to a lost license.

Despite the grim effects of these laws, there’s reason for hope. A handful of states — including New Jersey, Montana, Oklahoma and Washington — have repealed their versions of these laws in recent years, often with broad bipartisan support. Even better, federal lawmakers are starting to take note of the issue as well.

A recent bill introduced by Sens. Marco Rubio, R-Fla., and Elizabeth Warren, D-Mass., would require states to eliminate these laws in order to receive federal funding that flows to states under the Higher Education Act. The legislation would give states two years to comply and would provide individuals with legal recourse if they don't.

In announcing the new bill, Rubio — who voted in favor of Florida’s version of this law when he was a state legislator — said he had a change of heart and now realizes that “difficulty repaying a student loan debt should not threaten a graduate’s job.” Warren said these laws “make it even harder for people to put food on the table and get out of debt.”

Lawmakers from both parties should follow the lead of these two senators and commit to eliminating these laws. Student loan payments are stressful enough without putting people’s livelihoods at risk.

C. Jarrett Dieterle is the director of commercial freedom and a senior fellow at the R Street Institute. Shoshana Weissmann is a policy analyst and digital media specialist at R Street.