Oct 07, 2019 05:56 AM EDT
There is a Possibility that You'll Lose Your Job over Unpaid Student Loan
According to The Wall Street Journal, nearly 5 million Americans are severely behind on federal student loan payments in 2017 alone. What's alarming is the fact that the actual number of Americans in default continues to rise over the years.
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Who is Considered to be in Default?
Student loan borrowers who have missed paying for nine months are considered to be in default. One of the main reasons why borrowers default on student loans is continued wage stagnation, which made it pretty difficult for borrowers to keep up with their payments. Another issue for borrowers is their economic background. Statistics show that borrowers coming from lower-income families tend to leave school early with debt and fail on paying it later on.
With the increasing number of defaults, creditors have been taking increasingly tough measures to track down people who fail in paying student loans. One of the methods they had to implement is the suspension of professional licenses or driver's licenses for borrowers who default on their respective loans.
Now, around a third of all U.S. workers are required to have a license to practice profession- from firefighters, nurses, lawyers to travel guides, interior designers and hairstylers; hence, this implemented solution has become a big problem for many who cannot afford to pay their loans.
Based on the analysis of public records conducted by The New York Times, there is a rough estimate of around 8,700 cases in recent years wherein licenses are either suspended or put at a risk of suspension. However, the news outlet also admitted that this might have been an underestimated value of the actual number of license suspension cases.
It all began in the 1990s when the U.S. Department of Education urged the states to adopt laws in requiring the license regulatory boards to suspend professional licenses along with driver's licenses once they received notice from education commission informing them about the unpaid student loans of an applicant. Fast forward to 2010, around half all the states had adopted laws of license suspension for borrowers who default on student loans. Nowadays, there are around thirteen states across the country that can seize professional licenses from borrowers who fall severely behind their student loan bills. According to US News, there used to be more but some states have changed their laws in order to protect borrowers from such punitive measures.
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How Can You Deal with Student Loan Default Issues?
Without jobs, it would extremely difficult for borrowers to pay the loans back. This means that having your license suspended can put you in danger of losing income and drowning in debt. Although some states allow the renewal of a license after entering a repayment plan, it's best to avoid facing student loan default in the first place. There is, after all, an option to place your federal student loan to deferment. Its payment can also be lowered by switching to an income-driven repayment plan. Moreover, arrangements can also be discussed upon with your private student creditor to avoid default.
In case you are already in student loan default, entering a loan rehabilitation program can be one of your options. Also, if you are eligible, you can lower your monthly payments through a direct consolidation loan. If nothing checks, you may have to repay your loans in full.
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