When nurses fall behind in their student loan repayments, they can lose their license to practice in terms of the law in some states of the US. They then lose their jobs and are even less able to repay their debt. Fortunately, an increasing number of States have recently changed these punitive laws.
Because of high levels of default on government assisted student loans, many states passed legislation from 2000 onwards that forced state licensing boards to withhold the licenses of persons who default on their payments. This was seen as a way of tracking defaulters because they have to renew their licenses regularly. According to the New York Times, nurses in 19 States currently stand to have their licenses suspended for non-payment of student loans.
In its annual report the Louisiana State Board of Nursing reported that in 2017, 87 nurses had their licenses withheld due to the statutory requirements for defaulting on student loans. This was an increase of around 11.54% on the previous year, and approximately 50% of these nurses were first time defaulters. While the majority of these nurses were able to make arrangements and had their licenses restored, three of them were still unable to practice in Louisiana.
“…87 nurses had their licences withheld due to the statutory requirements for defaulting on student loans.”
With the rising cost of education, the amount of debt that students have to make to get their degrees has become alarming. A recent Forbes report describes student loan debt as a severe $13 Trillion crisis with graduates of the class of 2016 starting off their careers with an average of $37 000 of debt. “Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans.” Millennials can expect to pay between 8% – 10% of their income on student loan debt for up to 12 years after graduating. The default rate is also increasing year-on-year, and it currently stands at 11.2%. At the same time, however, salaries are not rising to the same extent.
Nurses and teachers feature high among those who default and lose their licenses. Both these professions are known to be underpaid while also serving a critical role in their communities. The system – which has been referred to by opponents as a modern day debtor’s prison – seems totally contradictory because, when a person is unable to continue working in their career, their ability to pay their debt is further reduced. It also affects others besides the persons themselves – many have children and even aged parents who are dependent on their income.
“when a person is unable to continue working in their career, their ability to pay their debt is further reduced.”
Fortunately, in many states, the laws that provide for the suspension of licenses to practice are now being changed. Just this year the legislation was amended in Oklahoma, New Jersey, and North Dakota.
Nurses who are struggling with state-financed student debt repayments should weigh their options in good time before they default and might lose their license. Arrangements can be made for income-based repayments, including student forgiveness plans, or student loan refinancing with private lenders at a lower interest rate. With the current shortage of nurses, some employers also offer repayment of student loans as part of their recruitment package.