South Dakota Has Some of the Harshest Penalties for Defaulting on Student Loans

At last count (2019), there were more than $1.5 trillion in outstanding student loans in the United States, according to the U.S. Department of Education.

Equally staggering are the numbers of people not paying those loans back. More than one million people each year. And that number is expected to skyrocket in the next few years, as CNBC estimates nearly 40 percent of borrowers will default by 2023.

Get our free mobile app

So how do you make sure people live up to their obligations when it comes to these loans?

In South Dakota and 12 other states, you penalize them for defaulting.

The Mount Rushmore State is one of 13 across the country that threaten to revoke the professional licenses of student loan defaulters, which is impacting more and more people.

The National Conference of State Legislatures estimates that more than 25 percent of U.S. workers are required to hold a license to practice their chosen profession.

South Dakota has been following through on that threat. According to the New York Times, more than 1,500 workers with educational debt in the state had their professional licenses blocked as of October 2017.

But South Dakota doesn't stop there. The state is one of the few in the country that can also revoke the driver's, hunting, and fishing licenses, as well as camping and park permits from student loan defaulters.

But that may be changing.

U.S. News and World Report reported in 2019 that bipartisan legislation was reintroduced in the U.S. Congress that would prohibit states from revoking or denying professional licenses solely because of default on a federal student loan.

In the meantime, Alaska, Illinois, Kentucky, North Dakota, Virginia, and Washington have already prohibited the practice and the South Dakota legislature has floated the idea of repealing the state's laws at the last two sessions.