The Assembly recently voted to revoke New Jersey’s ability to suspend the professional licenses of those who default on their student loans.
On the face of it, that makes sense. Licenses to teach, provide emergency medical care or practice law enable their holders to work and make money. Temporarily lifting licenses not only might devastate their holders but might prevent them from repaying the loans.
And yet, legislators chose to give student-loan repayment agencies this leverage just 18 years ago. They must have had a reason. Some 20 or so other states do the same or go even further, suspending the driver’s licenses of some who fail to repay their student loans.
One of the sponsors of the current bill, Assemblyman Vincent Mazzeo, said license suspensions don’t help either the debtors or collectors, but the debt collectors say otherwise. They consider the threat of suspending a professional license a valuable tool for extracting long-overdue payments — one that is seldom actually used.
Efforts typically are made to get delinquent borrowers to enroll in repayment plans tied to their income levels. Often there’s no response, but when debtors receive written notice that their licenses might be suspended, they generally start working with the collection agencies, student aid executives say.
The number of license suspensions for loan defaults in New Jersey isn’t known, but data from other states suggest the percentage is small.
For licenses through the Division of Consumer Affairs, a hearing is required before a license may be suspended. Licenses to practice law may only be suspended by the state Supreme Court.
Student debt is a national problem that looks like it will fall to taxpayers for a bailout some day. Current student debt stands at about $1 trillion, and graduates in New Jersey average $19,242 in debt.
There are probably better ways to motivate graduates to come to terms with repaying their student loans. Bankruptcy law already makes it difficult to discharge student loan debt in Chapters 7 or 13.
Removing the threat of a license suspension is OK, but N.J. legislators should also look into other, more effective and considerate tools and methods for getting more outstanding student debt repaid.
The timing of the bill to revoke the ability to suspend licenses suggests legislators aren’t interested in that or the student debt calamity building nationwide.
Introduced at the start of last year and not passed by the Assembly until last month, the bill probably will be inserted by the Senate into the grand parade of shiny baubles to be showered on the public ahead of the fall election.
As ever, citizens and taxpayers wait and wait for their elected representatives to meaningfully address the serious and burdensome issues facing the state.