Did you know that Mississippi has a law on the books that allows licensing boards to suspend or revoke your professional license if you default on your student loans?
Well, until June 30 at least. This year, as part of a larger occupational license reform bill that will make it easier for ex-offenders to receive a license, the legislature adopted new language that will prohibit the state from pulling your license just because you couldn’t make a payment on your student loans.
The old law, and others like it, were meant to limit defaults and to keep borrowers from choosing not to pay back their loans. A “tough love” law, if you will. The U.S. Department of Education even previously urged states to “deny professional licenses to defaulters until they take steps to repayment.”
Mississippi certainly wasn’t alone. Prior to the repeal, the Magnolia State was one of 15 states – both red and blue – that had such a law in place. But the repeal movement has been steadily growing, with five other states scrapping their laws in the last two years.
The reasons for the sudden changes of heart are obvious. Some 44 million Americans owe a collective $1.5 trillion in student loan debt nationwide, with 8.5 million federal borrowers in default as of last year. At a time when more and more individuals are saddled with student loan debt, it makes little sense to attack their ability to earn a living in their professional field. The fastest way, and for most people the only way, to pay off debt is to generate monthly income above the basic cost of living.
When young people lose their income, they lose their ability to pay back loans in any meaningful way. At that point, borrowers are stuck in an endless cycle with no way out and few good options. Such individuals are likely to take on credit card debt or other forms of debt just to stay afloat. Continuing this process keeps a debtor spinning like a hamster in a wheel.
As the student loan crisis is growing, more Americans than ever, and more Mississippians, also need a license to obtain employment. We would call it ironic if it wasn’t so dumb and cruel.
Nearly one-in-five Mississippians need a license to work. This is a change from under five percent just a few decades prior. That is because while licensure was once limited to occupations such as medical professionals, lawyers, or teachers, it now extends to everything from an auctioneer to a shampooer. All totaled, Mississippi licenses 66 lower income occupations.
Naturally, those lower income occupations are more likely to default on student loans.
Consider cosmetologists, who are licensed in all 50 states. In Mississippi, you must clock 1,500 hours, which is more-or-less in line with other states. And you need all this for a job that has a median national wage of $25,000 per year. Not surprisingly, cosmetologists had a national default rate of over 17 percent in 2012, significantly higher than the national average. If a cosmetologist defaults, and he/she loses his/her license, what should they then do? The same could be asked of any licensed professional.
In the long run, we need to reform occupational licensing to make it easier for people to earn a living without spending a year or two in the classroom, often accruing debt. Many of the occupational licenses the state requires are onerous and serve little purpose but to protect established interests. Most occupational licenses can be replaced with less restrictive alternatives such as certification, bonding, insurance, inspections, or registration.
In the meantime, preventing licensing boards from attacking licenses because of student loan default is a good first step toward liberty and toward encouraging a defaulter to take the personal responsibility to pay off debts by exercising their right to earn a living in Mississippi.
This column appeared in the Vicksburg Post on April 24, 2019.