Military Issues with Defaulting on Student Loans
Part 1 of 3: Service members and their families have unique issues particular to their line of work when it comes to defaulted student loans.
Defaulting on student loans can result in lots of career problems, not just financial worries. In 2011, The New York Times cited the Department of Education’s latest default numbers: they’re up to 8.8% for schools across the board. For-profit colleges and universities have a default rate of almost double that – 15% — within two years of graduation. According to the federal publication, “Federal Student Loans: Learn the Basics and Manage Your Debt,” Americans received $92 billion in loans in 2006. The student loan debt clock shows outstanding student loan debt that is yet uncollected is approaching the $1 trillion mark.
With recent governmental budget concerns, it’s no surprise that it would like to rein in the defaults. Government money going out and not coming back in has been the bane of taxpayers. Some of the tools the service has at its disposal are more “stick” than “carrot”, which should be of particular importance to any service member who may be in danger of defaulting. Certainly, one of the main reasons people join the military is for the financial benefits. Indeed, when you go to the live recruiting chat , one of the categories you may check before speaking to someone is if you are “interested in financial stability”. However, it sometimes is a catch-22 as to being able to join the military and serve in certain slots if you are already financially unstable.
Defaulting on loans can affect service members in several direct ways. A portion of your wages may be garnished. You may not be able to obtain a professional license that you need to do your work: this can be a medical, legal, pilots’, even a barber’s license. Many civilian jobs require licenses, including funeral directors, real estate brokers, detectives, engineers. Each state differs slightly in its licensing requirements, so check your state of residence to see if your profession could be affected by defaulting on student loans. If you need a license to work in your profession, know that it can be canceled, revoked, or simply not renewed for failing to pay back loans. Working without a required license can result in criminal penalties. That means jail. A defaulted student loan may jeopardize employment with the government or if you are already employed, it may be cause for termination.