Too Much Student Loan Debt? License to Work DENIED.

On January 11, the Ohio Supreme Court ruled that one unlucky law school graduate is carrying too much student loan debt to be allowed to hold a license to practice law in the state.

Hassan Jonathan Griffin, the subject of the ruling, graduated from Ohio State University’s Moritz School of Law in 2008 after working as a stockbroker in Arizona for five years.

While in law school, Griffin amassed more than $150,000 in debt from student loans. He was already saddled with about $20,000 in college loan debt from his undergraduate studies, and he was carrying an additional $16,500 in credit card debt. Following law school, he was unable to find full-time work and took a part-time job in the Franklin County public defender’s office, earning just $12 an hour.

Griffin applied in November 2009 to take the Ohio bar exam in February 2010, but his student loan debt disclosure on the exam application triggered an investigation by the State Bar Association’s Board of Commissioners on Character and Fitness.

Following the board’s report, the Ohio Supreme Court denied Griffin’s application to take the Ohio bar exam on the grounds that he had no “feasible plan to satisfy his financial obligations” and repay his school loans. In the court’s view, Griffin’s debt level and his shaky financial situation left him lacking “the requisite character, fitness, and moral qualifications for admission to the practice of law” — qualifications that, under Ohio state rules, applicants to the Ohio bar must demonstrate prior to taking the state bar exam.

The board did recommend, however, that Griffin be permitted to reapply for the bar exam in February 2011. In order to be accepted, Griffin would need to present some kind of debt management plan to the court, setting out the arrangements he’s making to repay his student loans.

Griffin is far from the only would-be attorney to run afoul of state licensure laws due to unpaid school loans. In the last two years, Texas and New York have both denied law licenses to applicants who defaulted on large debts from college and graduate loans.

This emerging trend of denying a professional license to an applicant on the basis of excessive student loan debt hasn’t been limited to the legal profession. In October, the state of Tennessee revoked the licenses of 42 nurses who had defaulted on their college loans.

Tennessee officials say that their move to revoke the nurses’ licenses came only after 18 months of attempts to get the nurses into a repayment plan of some type for their defaulted loans. Some of these nurses, state officials noted, had been in default for as many as eight years.

The Tennessee Department of Health reports that since it relieved the 42 nurses of their credentials to work, about half of them have entered a student loan repayment plan, and their licenses have been reinstated.

Withholding or revoking a professional license because the holder has defaulted on school loans may seem harsh, but federal law allows states to withhold professional licensing credentials from defaulted borrowers and to deny already-licensed professionals a license renewal on the basis of a defaulted federal education loan.

In addition, states and the federal government can also garnish borrowers’ take-home pay by as much as 15 percent, reduce Social Security benefits, and intercept tax refunds as a means of recovering unpaid student loan debt.

A defaulted education loan can remain on one’s credit report indefinitely, as long as the loan remains in default, and for up to seven years following repayment, once the defaulted debt has been paid off.

Besides standing in the way of a professional license, the stain of a defaulted school loan on a credit report can also interfere with one’s ability to qualify for a mortgage, car loan, credit card, or other line of credit; to rent an apartment; or even to get a job, as more employers move toward including credit checks as part of the job application process.

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