News Stream

Texas: 6th state to end license suspension for unpaid student loans

The story of Roderick Scott, a middle-school teacher who suffered financial ruin in order to hang on to his teaching license, helped fuel a public backlash in 2019 against the Texas's law requiring occupational license suspension of people with past-due student loans. The law bans Texas agencies from denying , suspending, or revoking a borrower's occupational license simply because they had defaulted on their student loans.

Credit: University of Texas, Austin

Threatened with license suspension when he fell behind on loan payments, Scott had to borrow money to immediately repay the loan collector, forcing him to stop paying his rent, which led to eviction, garnishment of his bank accounts, and bankruptcy.

Amid widespread outrage, dozens of Texas trade associations, unions, and advocacy groups joined to promote repeal of the three-decade-old law. A bill, SB 37, passed the Texas legislature with close to unanimous consent and was signed into law by the governor June 10, to repeal the law.

With the signing of the bill, Texas joined Arkansas, Georgia, Iowa, Kentucky, and Mississippi in repealing; only eight states can still deny licenses over unpaid student debt.

In 1989 Texas was one of the first in the nation to pass a default suspension statute. At the time, staffers on the state Sunset Advisory Commission maintained that such a law could “provide a powerful incentive for a person to stay current on his loan payments.”

But the price has been high. An investigation by the Texas Tribune found that in recent years 530 nurses and almost 250 teachers could not renew their licenses because of their student loan debt.

The bill’s sponsors said, “By threatening a person’s ability to work by suspending or failing to renew his or her professional license, such policies not only threaten a person’s employment and financial security, but also inhibit his or her ability to repay the student loan debt.” Lenders will continue to have the ability to garnish wages, seize tax refunds, and use other methods to collect on their loans.