Behind on Student Loans? Your Driver’s License Could be Yanked

Imagine not having the money to pay your monthly student loan bill and having your driver’s license (or professional license) suspended as a result. That nightmare scenario is a reality for many Americans.

In fact, there are 22 states in which you can lose your occupational or driver’s license if you are more than 270 days behind on paying your student loans, Bloomberg reports.

But some states are trying to get rid of laws that allow authorities to suspend driver’s and professional licenses from defaulted student debtors. The Montana Legislature just approved a bill to repeal a statute enabling the controversial practice.

Montana has suspended 92 driver’s licenses from defaulted borrowers since 2007, Bloomberg said.

“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.

Montana has limited public transportation, so most residents are required to drive to work. No license can mean no job.

In Iowa, the situation is worse. More than 900 Iowans lost their licenses because they defaulted on their student loans, Bloomberg said. The suspensions were reversed in 2013, even though the policy hasn’t changed.

“The Iowa College Student Aid Commission, which once collected federal loans in the state, reversed 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,” Bloomberg said.

Although controversial, the practice seems to work.

“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.

As if losing your driver’s license isn’t bad enough, some states suspend professional licenses of borrowers who defaulted, taking away their right to work, Bloomberg said.

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.

While Montana’s bill now awaits the governor’s approval, Iowa’s bill to repeal the consequence stalled because of a procedural obstacle.

According to Money, here are the states that allow license suspension for student loan defaults: Alabama, Alaska, California, Florida, Georgia, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Tennessee, Texas, Virginia and Washington.

Of course, defaulting on your student loans can hurt more than your ability to drive. Check out our tips on Finding Help With Your Student Loans.

What do you think of suspending the driver’s or occupational license of people who have defaulted on their student loans? Share your comments below or on our Facebook page.