Legislature(2017 - 2018)BUTROVICH 205
04/12/2017 08:00 AM EDUCATION
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HB 86-STUDENT LOAN DEFAULT/OCC. LICENSE RENEWAL 8:10:24 AM CHAIR HUGHES announced the consideration of HB 86. 8:10:32 AM REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, sponsor of HB 86. He thanked the committee for hearing HB 86. He quoted Thomas Jefferson, "Government is best which governs least." The goal of HB 86 is to revoke Alaska Commission on Postsecondary Education's (ACPE) authority to use non-renewal of occupational licensing as an incentive to ensure payment of student loans in the instance of default. As the consequences of defaulting are already severe and ACPE has not exercised this authority since 2010, it makes sense to repeal these statutes. 8:11:17 AM OWEN PHILLIPS, Staff, Representative Matt Claman, Alaska State Legislature, presented information on HB 86, on behalf of the sponsor. He read from the sponsor statement: House Bill 86 repeals current statutes that allow the Alaska Commission on Postsecondary Education (ACPE) to threaten nonrenewal of occupational licenses for individuals who have defaulted on their student loans. Effectively, nonrenewal of an occupational license could obstruct an individual's main source of income and make repayment of the defaulted loan difficult if not impossible. The ACPE has not used this power since 2010, and prior to 2010, only 155 instances were listed. Repealing this authority will allow licensed individuals to continue their practice, earn an income, and pay back their defaulted loans without the fear of losing their occupational license and their income from that occupation. Delinquency and default have serious consequences. Loss of an occupational license may take away a debtor's best means to pay off their student loan. Student loan default can harm the borrower's credit and continued loan debt can create late fees, additional interest, potential court costs, collection fees, attorney's fees, and other costs associated with the collection process. Failure to repay a student loan may result in liens on property and adverse reports to consumer reporting agencies. An initial default can have a domino effect that increases the challenge of getting out of debt. The current statute (AS 14.43.145 (4)) states that the commission has the authority to provide notice to a licensing authority for nonrenewal of a license. If the ACPE posts such, the licensing entity may not renew said license during the next renewal cycle. Affected occupations include licenses for nurses, pharmacists, social workers, veterinarians, dentists, attorneys, teachers (k-12), EMS workers, and correctional officers. In the 1990s and early 2000s, Congress passed legislation to give states the authority to revoke, suspend, or refuse to renew a variety of licenses in the instance of defaults on loans, as student aid was often provided by states. There are currently 21 states with similar statutes in place. Last year, Montana became the first state to repeal statues that allowed the state to revoke a license in the event of a student loan default. Due to the potential barriers that current Alaska statutes may cause, passing HB 86 will allow borrowers, who may already be struggling, the opportunity to maintain their practice while addressing their financial challenges. 8:12:49 AM MR. PHILLIPS presented the sectional analysis of the bill: Section 1 deletes language that is no longer necessary after the repeals mentioned in Section 2. Section 2 repeals AS 14.43.145(a)(4), which gives the authority to the Commission to provided notice of a default to a licensing entity for non-renewal of the license. It also repeals AS 14.43.148, which indicates that a licensing entity may not renew a license if they have received such notice from the Commission that the licensee has defaulted on a loan issued by the Commission and AS 21.27.390(d), which makes reference to temporary licenses. MR. PHILLIPS noted those present to answer questions. 8:14:10 AM SENATOR BEGICH asked how often recovation was used, if at all. MR. PHILLIPS replied that prior to 2010 it was used 155 times, and to date there are 46 outstanding cases of loans that were never paid back. 8:14:38 AM CHAIR HUGHES asked if, under current statute, there is a way for a student who defaults to not lose their license or if it is up to the discretion of ACPE. MR. PHILLIPS understood that it is discretionary. He suggested Ms. Butler can address that question. CHAIR HUGHES asked how many students are currently receiving student loans. MR. PHILLIPS shared data from ACPE: there are currently 17,400 borrowers equaling about $240 million. CHAIR HUGHES asked if there is any other place in statute where a person gets penalized for defaulting on their loan. MR. PHILLIPS replied that garnishing wages has worked very well because individuals are allowed to still earn some income. 8:16:25 AM CHAIR HUGHES asked how the decision to garnish wages is made. 8:16:38 AM MR. PHILLIPS deferred to Ms. Butler to answer. SENATOR COGHILL liked the ability to work and pay off debt at the same time. He noted AS 21.27.390 applied to temporary licenses and asked what they were. MR. PHILLIPS said he would have to look it up. 8:17:51 AM REPRESENTATIVE CLAMAN related that they discovered that when revoking licenses, those with occupational licenses would go to another state to obtain a license and Alaska was not able to garnish their wages. It was doubly ineffective. Taking wages away was also not effective. SENATOR COGHILL said Senator Begich discovered that AS 21.27.390 applies to a variety of temporary licenses. He agreed with the sponsor's point. 8:19:27 AM CHAIR HUGHES commented out that the bill applies to all occupational licenses and has an impact across the economy. CHAIR HUGHES requested Ms. Butler address members' questions, explain the current process, and state the administration's position on the bill. 8:19:51 AM STEPHANIE BUTLER, Executive Director, Alaska Commission on Postsecondary Education (ACPE), Executive Officer, Alaska Student Loan Corporation, Department of Education and Early Development (DEED), answered questions on HB 86. She provided the history of ACPE's efforts to collect defaulted loans. She spoke of an effective means to collect defaulted loans - wage garnishment. Taking occupational licenses away was ineffective, as was putting a hold on the license renewal. She noted there are 40 holds pending, but it appears that none of the people are in Alaska. Should the legislation pass, they would release those holds. 8:22:02 AM SENATOR BEGICH recalled when Representative Porchet tried various methods of loan collection. 8:22:35 AM CHAIR HUGHES said it is a good bill and is needed. She pointed out that when people leave the state, the state loses jurisdiction. She asked, if the bill were to not pass, and someone defaults and is in Alaska, would it be up to ACEP to proceed with the different authorities. 8:23:23 AM MS. BUTLER explained that wage garnishment is an automated process which treats all equally. It is set into motion when a person has not made a payment in six months or they have not made an arrangement for a deferment. At 180 days they are notified and they receive notifications every 30 days up until that time. They have 30 days to appeal the default, after which, wage garnishment commences. At that point their option to be relieved from wage garnishment is to demonstrate financial hardship. CHAIR HUGHES asked if the default will be reflected on a credit score for those who move out of state. MS. BUTLER said yes. 8:24:58 AM CHAIR HUGHES opened public testimony, and seeing no testifiers, closed public testimony. She held HB 86 in committee.