A state legislator from Kaua’i has proposed suspending or denying the professional license of anyone who defaults on their federal or state educational loan. Rep. Bertha Kawakami (D-14th District) said House Bill 2752, if passed, would allow the suspension or
A state legislator from Kaua’i has proposed suspending or denying the professional license of anyone who defaults on their federal or state educational loan.
Rep. Bertha Kawakami (D-14th District) said House Bill 2752, if passed, would allow the suspension or denial of a professional’s license until they begin repaying their student loan.
Professions subject to the suspension would include healthcare, construction, finance and other highly skilled trades.
Licensees who contact the loan agency to work out their delinquency or who have been granted a deferment would not be subject to the suspension, Kawakami said.
Suspension or denial of a defaulter’s license would only be used as a last resort after other attempts at collection have failed, she added.
Currently, there are few enforcement measures available to encourage defaulters to pay off their government loans. Kawakami said her legislation targets persons who ignore their financial responsibility by imposing a penalty “they must take seriously.”
Kawakami said she introduced the legislation because “student loans provide an excellent opportunity and make higher education a possibility for all, and it is important that those who make use of this economic benefit fulfill their financial obligation.”
To continue the economic viability of federal and state educational loan programs, “those who have reaped the benefits of student loans and are now successful career professionals should be held accountable,” Kawakami assserted. “Suspending their licenses to practice will both encourage repayment and deter future defaulters.”
According to the University of Hawai’i General Accounting and Loan Office, there are 1,008 delinquent student loans under the State Higher Education Loan Program amounting to over $2 million. This program is funded by legislative appropriations, and unpaid loans lose money for taxpayers, Kawakami said.
In 1999, the U.S. Department of Education’s Family Federal Education Loan Program and the William D. Ford Federal Direct Loan Program listed Hawaii as having the 11th highest cohort default rate among the 50 states and the District of Colombia. Hawaii’s rate was 6.4 percent, compared to a national average of 5.6 percent.
Hawai’i default rates for other federal loans are even higher. As of June 30, 2000, 1,701 Perkins Loan recipients at local colleges and universities were in default, with the outstanding balance totaling almost $3.5 million.
Hawaii’s cohort default rate for this loan was 13.85 percent.
Defaulted federal loans adversely affect Hawai’i, as well, according to Kawakami. Healthcare professionals who don’t pay their Health Education Assistance Loans (HEAL) administered by the Department of Health and Human Services are prohibited from participating in Medicaid and Medicare, resulting in a loss of clinicians for the most needy patients.
Forty-two healthcare professionals in Hawai’i who have defaulted on their HEAL loans. Their total amount of default is nearly $3.5 million, of which one borrower alone owes almost half a million dollars, Kawakami said.
Kawakami said legislation similar to her proposal has been enacted in Maryland, Texas, Georgia and New York.
The Hawai’i measure is patterned after current state law on child support enforcement. Professional licenses of individuals who don’t pay child support can be suspended.
