Over the past few years we have seen a substantial rise in the number of
student loan lawsuits filed by New Jersey Higher Education against students
in both New York and New Jersey. Although they are listed as private loans
these are a tricky bunch that can at best be categorized as quasi-private
because New Jersey has such a big role in the decision making process.
Regular private student loans like those taken out with Sallie Mae/Navient
and Discover are similar to obtaining unsecured credit cards except for
the fact that it is almost impossible to have the student loans discharged
in bankruptcy. Otherwise these private student loans may be settled for
much less than the full balance if the debtor is in default on the loans,
sometimes saving the consumer 40%-75% off of the balance.
The NJHED loans are different because the guidelines for settlement are
more aggressive, and generally difficult. The likelihood of a lawsuit
is much higher from what we have seen as NJHED often pursues litigation
against borrowers quickly so that they may obtain a judgment against them.
This judgment then allows NJHED to freeze a borrower’s bank account
or garnish their wages along with the fact that is substantially harms
their credit. Co-signer’s are equally affected in these matters
so judgments will also be enforced against parents, siblings and anyone
else that co-signs.
Solomon & Solomon, a debt collection law firm, files these lawsuits and obtains judgments
most frequently on behalf of NJHED. Unlike the private student loans discussed,
Solomon has stated that NJHED will generally only reduce the balance of
the loans by about 15% unless a substantial hardship can be shown which
can be difficult as the standard is high. NJHED also expects the settlement
payment to be paid in one lump sum unlike most private student loan lenders
which agree to reduce the balance and place consumers on an interest free
repayment from anywhere between 12-120 months.
Although these NJHED loans are problematic as compared to other private
student loans there are options and it is imperative for consumers to
protect themselves against a default judgment as the credit and financial
implications can be devastating. We have been able to defend many consumers
in these actions by settling these loans or by having Solomon & Solomon
establish low interest rate repayment options or a staggered approach
where payments start at a low amount and increase slightly every six months
until they cap off at a reasonable figure.