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November 28, 2017

In 19 states, nurses can lose their jobs for falling behind on student loans

Daily Briefing

    Government agencies in 19 states are permitted to seize state-issued professional licenses from residents who have defaulted on paying back educational loans—meaning nurses and other licensed professionals may be at risk of losing their license if they default on student loans, Jessica Silver-Greenberg, Stacy Cowley, and Natalie Kitroeff write for the New York Times.

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    'An attention-getter'

    According to the Times, student loans are currently the largest source of household debt aside from mortgages, and the growing educational debt burden has spurred an increase in defaults. Lenders have adopted various tactics to collect on debts, from garnishing wages to putting liens on cars and houses. And since 1990, with the backing of the Department of Education, states have been using another tactic, the Times reports: 19 states allow licensing boards to seize professional licenses in cases of default—though not all of the states have used the laws. A 20th state, South Dakota, permits the suspension of driver's, hunting, and fishing licenses, as well as permits for camping and park visitation.

    Advocates of the strategy argue that it serves the best interest of taxpayers, since the government backs many student loans and foots the bill in cases of default. Proponents argue that seizing certain licenses, such as a professional or driver's license, will inspire debtors to figure out ways to make their payments. Further, some states, such as South Dakota, do not require affected individuals to repay their loan in full before getting their license back—they can simply enter into a payment plan.

    "It's an attention-getter," Peter Abernathy, the chief aid and compliance officer for the Tennessee Student Assistance Corporation, said. "[Debtors] made a promise to the federal government that they would repay these funds. This is the last resort to get them back into payment." According to the Times, Tennessee is one of the more aggressive states in enforcing these laws, with officials reporting more than 5,400 individuals to professional licensing agencies between 2012 and 2017.

    But critics say the laws are self-defeating. "It's like shooting yourself in the foot, to take away the only way for these people to get back on track," Montana Rep. Daniel Zolnikov (R) said. He explained that people who fail to make student loan payments already face many kinds of punishment, "with credit scores dropping, being traced by collection agencies, just having liens," adding, "The free market has a solution to this already. What is the state doing with this hammer?"

    Similarly, Jeff Barth, a commissioner in South Dakota's Minnehaha County, called the laws shortsighted, contending that it's "better to have people gainfully employed." He added, "I don't like people skipping out on their debts, but the state is taking a pound of flesh."

    A 'traumatic' experience

    While many states and licensing boards do not track the number people who've had their licenses endangered or revoked because of defaulted loans, the New York Times' record requests found at least 8,700 such instances in in recent years—a number that likely far underestimates the total.

    Shannon Otto, a nurse in Nashville, is one such individual, the Times reports. Otto, who took out loans to fund her education, began experiencing epileptic seizures after more than a decade of working as a nurse. Unable to work, Otto defaulted on her loans.

    Otto eventually gained control of her seizures and prepared to return to the workforce—but she learned that the state Board of Nursing had suspended her license. Otto was told she would have to pay more $1,500 to get it back, an amount she couldn't afford. "I absolutely loved my job, and it seems unbelievable that I can't do it anymore," Otto said.

    Similarly, Debra Curry, a nurse in Georgia, fell behind on her loans after taking 10 years off to raise her six children. Two years after she returned to work, she received notice that her nursing license would be suspended unless she established a loan payment plan with the state. Although she responded immediately, the state advanced the suspension by mistake—and Curry had to wait a week for her license to be reinstated. "It was traumatic," she said. "How do you think I'm going to be able to pay [the loans] back if I don't have a job?" (Silver-Greenberg et. al, New York Times, 11/18).

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