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Legislators Go Only Part Way to Help Those Struggling with Student Loans

Progress has definitely been made, but a loan rehabilitation program for those in default seems to have been abandoned

sad graduate

A year after holding hearings on questionable practices by the authority that operates New Jersey’s student loan program, lawmakers have delivered on only some of their promises to help those struggling to meet their loan obligations. And they appear to have abandoned what the loan program’s loudest critics consider the most important of these: a loan rehabilitation program for those in default.

Following a hearing last August by two Senate committees on what some senators termed “predatory” and “loan sharking” practices by the New Jersey Higher Education Student Assistance Authority, lawmakers introduced and began moving quickly nine bills dealing with student loans and, more broadly, college costs.

To date, four have been signed. Three of those were among dozens Gov. Chris Christie signed last Friday before leaving the state. One of those, (A-2926), repeals a law that had allowed for the suspension of the professional licenses of attorneys and others for nonpayment of state or federal student loans. Another, (A-4088), creates the High School to College Readiness Commission that is charged with helping better prepare students for college, including by recommending ways to educate students and their parents about the costs of college, state, and federal aid programs and issues concerning student loan debt and repayment.

"The goal of this is to make sure students in New Jersey fully understand the academic preparations for, and the financial implications of, their college choices and increase their ability to successfully complete a college education without crippling them financially for a lifetime," said Assemblywoman Mila Jasey (D-Essex) and a bill co-sponsor as well as chair of the Assembly Higher Education Committee, in a statement issued last Friday. "As many students start college underprepared in skills for the rigor of the coursework and the ever-increasing cost of higher education leads more and more students and their families into devastating debt burdens — at times, without a degree to show for it — this legislation must be a priority for our state."

Transparency and accountability

The third bill, (A-4238), is another measure designed to increase both transparency of and accountability by HESAA. It requires the authority to provide an annual report on the New Jersey College Loans to Assist State Students (NJCLASS) program to the governor and the Legislature and to develop a loan comparison-information document to allow borrowers to compare NJCLASS loans with those available under the federal student loan programs and provide examples of loan repayment costs.

"It has become the norm for families and students to take on an overwhelming amount of debt to pursue educational goals. This new law will increase transparency under NJCLASS loan programs, better educate families on loan repayment options and requirements, and help families understand how much they can realistically handle in student loans," said Assemblywoman Shavonda Sumter (D-Passaic), a co-sponsor of the bill.

The first bill of the package to pass, signed last December, corrected what many legislators had considered a heartless and egregious practice by HESAA in continuing to force collection on the student loans of young people who had died while still in school or shortly thereafter. Senate Bill S-743 directs the agency to forgive loans when a borrower dies or is rendered permanently or totally disabled and to defer payments when a person suffers a severe temporary disability. Its cost, as estimated by the nonpartisan Office of Legislative Services, is estimated at between $1.4 million and $1.6 million a year.

Reapplying for loan forgiveness

At its April meeting, HESAA adopted language implementing these changes and allowed people who may have applied for loan forgiveness in the past to reapply. At the same time, the authority put in place an income-driven loan repayment program for borrowers of New Jersey College Loans to Assist State Students (NJCLASS) loans. Starting with the coming year, those who cannot make their minimum loan payments will be able to pay 10 percent of their disposable income over 150 percent of the federal poverty level, currently $18,090 for a single person, for up to two years and have that payment applied to lower the loan principal.

An income-based repayment plan, as well as a rehabilitation program to allow those considered in default to get back into repayment status, are part of a bill, (A4088), that former students and their families considered the keystone of the bill package introduced last year. Despite having passed the Senate and two Assembly committees, Jasey seemed to indicate that bill is off the table.

"Unfortunately, we cannot go back in time and assist the many NJCLASS borrowers who already have had the agonizing experience of declaring bankruptcy or dealing with collection agencies, but HESAA now has taken action that will benefit borrowers going forward, which ultimately will benefit the entire state," said Jasey in a press release shortly after the HESAA action. That release seemed to indicate the bill was no longer under consideration, stating it “would have” required HESAA to establish an income-driven repayment option.

‘A slap in the face’

“To me, that’s a complete slap in the face to every borrower who brought to light the conditions HESAA put them through,” said Deborah Carney, whose son wound up filing for bankruptcy after being unable to afford his NJCLASS loan payment of $1,000 a month after graduating – it took him 18 months to find a job and then the one he landed paid just $35,000 a year.

Carney was among a number of borrowers and their family members who testified before a joint Senate committee about HESAA last August. Among the problems they enumerated were that HESAA had misled borrowers about flexible repayment options, did not allow for refinancing or loan consolidation, considered loans in default even when borrowers made partial payments, and sent them to collection where they faced additional fees, as well as refusing to even volunteer information about the possible forgiveness of debt when students died.

At the time, senators were outraged. Sen. Robert Gordon (D-Bergen), chair of the Senate Oversight Committee, suggested scrapping the state loan program and starting over from scratch and conducting an independent audit of the authority.

NJCLASS issued nearly 11,000 loans totaling more than $163 million in the 2015 fiscal year — an average of $15,269 per student borrower. The program had nearly $2 billion in outstanding loans held by New Jerseyans in college and out-of-state students taking classes at New Jersey schools as of June 20, 2015. While the program is administered by a state authority, the money lent comes from private bonds. Students can borrow an amount up to the total for tuition, room, board, fees, books, and other related costs, minus any other financial aid they receive.

Carney, whose son has a petition on change.org demanding that HESAA offer a rehabilitation program, said she and others will keep working to help borrowers in trouble, but that might need to wait for the next governor.

Meanwhile, four other bills from the original package remain pending in the Legislature. None are specifically directed at helping HESAA borrowers, but would try to lower costs in other ways.

Assembly Bill A-4086 would create the Two to Four Loan-Free Students Program. Similar to NJ STARS scholarships for high achievers, this program would use state Tuition Aid Grant money to provide free schooling for low-income students.

The Succeed in New Jersey Program, (A-4085), would have the state spend up to $10 million a year repaying a maximum of $6,000 loans annually for as many as three years for low-to-moderate income borrowers who work in careers deemed to be in high demand by state labor officials.

The total cost of college would be reduced by the College-Ready Students Program, (A-4087), which would allow public high school juniors and seniors to take dual enrollment courses at county colleges tuition-free.

And A-4117 would allow counties to leverage their improvement authorities to refinance student loans for borrowers with high interest rates, easing their debt burden.

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