Report Title:

License Sanctions for Student Loan Default

 

Description:

Authorizes the licensing authority to suspend, deny, or refuse to renew, reinstate, or restore the license of any person who has defaulted or breached any obligation under a student loan, student loan repayment contract, or scholarship contract. (SD1)

 

 

HOUSE OF REPRESENTATIVES

H.B. NO.

2752

TWENTY-FIRST LEGISLATURE, 2002

H.D. 1

STATE OF HAWAII

S.D. 1


 

A BILL FOR AN ACT

 

Relating to professional and vocational Licenses.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that individuals who default on federal or state student loans and scholarship contracts create a significant taxpayer liability. The only sanction against defaulters presently in use in Hawaii is the exclusion of medical professionals from participation in medicaid and medicare, resulting in the loss of clinical services to the most needy in our communities. The legislature finds that those individuals who have received a substantial economic benefit from their student loans at the expense of taxpayers should be required to honor their service or loan commitment.

The purpose of this Act is to encourage repayment of student loans and deter future defaulters by authorizing the licensing authority to suspend the license of any person who has defaulted on a student loan or breached or failed to perform the service requirements of a student loan repayment or scholarship contract.

SECTION 2. Section 436B-2, Hawaii Revised Statutes, is amended by adding four new definitions to be appropriately inserted and to read as follows:

""Administering entity" means the federal or state governmental entity that administers a student loan, student loan repayment, or scholarship program.

"Scholarship contract" means a grant made by this State, an agency of this State, or the United States, to a person to support the person while attending a public or private institution of higher education or other post-secondary educational establishment in exchange for the person's agreement to perform a service obligation.

"Student loan" means a loan made to, or guaranteed by this State, an agency of this State, or the United States, on behalf of a person to support the person while attending a public or private institution of higher education or other post-secondary educational establishment.

"Student loan repayment contract" means an agreement by this State, an agency of this State, or the United States, to repay all or part of a person's student loan in exchange for the person's agreement to perform a service obligation."

SECTION 3. Chapter 436B, Hawaii Revised Statutes, is amended by adding a new section to part V to be appropriately designated and to read as follows:

"436B-    Professional and vocational license sanction for breach of student loan or scholarship contract. (a) In addition to any other acts or conditions provided by law, the licensing authority shall refuse to renew, reinstate, or restore, or shall deny or suspend the license of any person who has been certified by an administering entity as being in default or breach of any obligation under any student loan, student loan repayment contract, or scholarship contract. A licensing authority in receipt of such certification shall refuse to renew, reinstate, or restore, or shall deny or suspend the license without further review or hearing concerning the license action.

(b) The licensing authority shall only renew, reinstate, restore, or grant the license upon receipt of an authorization from the administering entity stating that the person against whom the licensing action was taken is making payments or taking other action satisfying the terms of the student loan, student loan repayment contract, or scholarship contract and is no longer in default or breach of the loan or contract.

(c) Any licensing fees paid prior to the suspension or denial of a license under this section shall be forfeited. The licensing authority may charge fees for reinstating or restoring a license and to cover the costs of administering this section. Chapter 91 and sections 92-17, 436B-18, 436B-20, 436B-21, 436B-24, and 436B-25 shall not apply to a license suspension or denial under this section.

(d) This section shall not apply to an individual against whom a court order is entered in connection with the default or breach in the nature of a garnishment process or other form of court-ordered repayment."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2050.