Decades-old SC law bars student loan defaulters from government jobs | News

The recent firing of a Charleston County sheriff’s official has shined a light on an obscure law that has barred student debtors from holding government jobs in South Carolina for more than four decades. 

Some public officials believe the law needs to be revisited by legislators, with at least one law professor raising concerns it could be disproportionately harming minority job candidates. 

On April 1, Charleston County Sheriff Kristin Graziano fired Chief Deputy Joyce Smith for failing to remediate several federal student loans that had been in default since at least January 2021, when the former North Charleston police major was first hired.

Graziano said in a termination letter she gave Smith time to address the problem but she failed to do so. By January, the loans had fallen into “Collection status.”

The county’s top cop told Smith she was responsible for enforcing the law, which included S.C. Statute 59-111-50.

But the sheriff’s decision raised eyebrows among local and state officials, many of whom were unaware the law even existed.

South Carolina law prohibits anyone who has willfully defaulted on a federal student loan from government employment unless they remediate the loan through their lender.

The law was passed in 1980 amid national concerns about student loan debt and the rising rate of default on federally backed student loans. High inflation rates and a stagnant economy drove the default rate into the double digits by the late 1970s. Some officials also worried student borrowers would choose to discharge their debts through bankruptcy rather than pay them off.

A clamor for accountability rang out across the country. Joining the choir was Rep. Bobby Kinard, a North Charleston Democrat who introduced a bill that would become the student loan default law.

Kinard, who later became mayor of North Charleston, told The Associated Press at the time that anyone who willfully defaulted on a student loan was a thief.

“If a person borrows money and gives his word he’ll pay it back, and doesn’t, it’s the same as stealing,” the lawyer-legislator said.

Kinard said he learned about the problem after people asked him for legal help declaring bankruptcy to avoid paying their student loan debt.

“They’re not bankrupt,” he said. “Most just don’t want to pay back the loan.”

Rep. Marshall Cain later amended the bill to allow borrowers to hold state jobs if they remediated their loans through their provider. The Aiken Republican told the AP he was concerned that the bill could conceivably stop a person from getting a job to pay back their debt.

The bill passed and was signed into law by Gov. Dick Riley in April 1980.

With it came a change to the state job application that remains today: A person must certify they are not in default on their federal student loans when they apply for a state job. That’s true whether they wants to police the streets or sweep them, teach at a public university or mop the floors. 

Few states appeared to follow the Palmetto State’s lead on the employment ban.

Josh Cunningham, a project manager for the National Conference of State Legislatures, researched the number of states that have similar laws on the books at the request of The Post and Courier.

Cunningham said he was only able to find one state, Illinois, that also prohibited state employment for defaulted borrowers who don’t cure their loans.

In Florida, state workers run the risk of having 10 percent of their paychecks withheld if they find themselves in similar trouble, but the law expressly forbids firing someone over their debt, according to Cunningham.

If South Carolina legislators hoped the new law would help fix the nation’s debt problems, they were sorely mistaken. The student debt crisis has only grown worse in the intervening decades.

As of January, Americans owed $1.61 trillion in federal student loan debt, according to the Education Data Initiative. Roughly 12 percent of student loans are currently in default, meaning a payment has been past due for more than 270 days, despite an ongoing moratorium on student loan repayment in response to the COVID-19 pandemic.

The educational landscape has changed in the 40-plus years since South Carolina passed the law. College costs, and the debt students take on to attend the institutions, has risen substantially, even as four-year degrees have become increasingly important to landing a well-paying job.

In the 1980-81 school year, students obtaining a four-year degree from a public university spent on average about $8,300 in today’s dollars, including the cost of tuition, fees and lodging, according to The College Board. Nowadays, a student will spend on average nearly triple that, $22,700, for the same degree.

Bankruptcy laws have also changed since 1980 to stop students from discharging their debts.

South Carolina’s law allows for state employees to keep their jobs if they fix their debt problem.

If the employee can’t pay the entire sum off at once, they have two options for escaping default: rehabilitation or consolidation. Both plans require the student to make a certain number of affordable monthly payments, as determined by the loan provider, before the debt is no longer considered default.

It’s unclear why Smith, who made $126,000 a year at the Sheriff’s Office, did not remediate her loans. The former chief deputy has not responded to requests for comment.

But to catch up on debt payments, a person needs a job in the first place.

It’s hard to know how many people have been denied state jobs, or simply never applied, because of their defaulted student debts.

Several employment attorneys and professors told The Post and Courier they were only dimly aware that the law existed before Smith’s firing made headlines.

Columbia attorney Lewis Cromer has practiced employment law since 1959. He said he knew about the law, but it rarely came up in litigation.

“I’ve heard of it over the course of my practice, but I have no idea when it came into effect,” Cromer said

Dennis Nolan began teaching labor law at the University of South Carolina in 1974, while also running an arbitration-and-mediation practice on the side. 

“Usually I keep a pretty close eye on employment law developments in SC but this one escaped me,” Nolan said in an email.

Joe Seiner, another USC law professor, said he was also unfamiliar with the law, but he was concerned about the disparate impact it may be having on minority hiring in government.

African American college graduates on average owe $25,000 more in student loan debt than White students while also experiencing higher rates of default — 18 percent compared with 9 percent. At 13 percent, Hispanic students are also more likely to default than Whites.

Seiner said that if the law did discriminate against certain groups more than others, it might run afoul of federal employment protections.

Public officials also expressed concerns about the law.

Ninth Circuit Public Defender Ashley Pennington said he’s never had to turn down a candidate or fire one of his attorneys over student loans, but he still thought the law was bad policy.

Poor planning or just bad luck can cause a person to fall behind on their debts, Pennington said.

“It obviously serves society for those with student debt who want to work to find employment,” the public defender said.

Rep. Jerry Govan, who is running for state superintendent of education, co-sponsored the Student Loan Bill of Rights Act last year to strengthen protections for borrowers in South Carolina, but it did not address the state’s hiring practice.

The Orangeburg Democrat said people needed to pay their obligations, but the law essentially trapped people in a debtors’ prison.

“If you can’t get a job, how are you going to pay off debt?” he said. “It just doesn’t make sense.”

Govan said he would contact State Human Resources to find out how many people have been turned down for state jobs because of student loan default.

Even Graziano expressed reservations about the law.

In an April 12 statement, the sheriff said she’d like to see the law amended to assist employees struggling financially who make reasonable efforts to address the debt problem.

However, she pointed out that debt is a bigger issue for law enforcement officers, who may be more susceptible to influence or bribery because of money troubles.