New Jersey’s state loan program currently totals at $1.9 billion.
The borrowing conditions for these loans are some of the strictest in
the country. Repayment of these loans cannot be adjusted based on income
and borrowers who are unemployed or facing other financial hardships are
given few breaks. Interest rates for these loans are also higher than
those offered by similar federal programs. Upon failure to repay the state
issued loans, New Jersey can garnish wages, rescind state income tax refunds,
and revoke professional licenses without needing court approval. The Authority’s
tendency to sue borrowers and their families has increased by approximately
16% since 2010, with 1,600 suits filed in 2015.
The state run loan program has extraordinarily stringent repayment rules
and few reprieves, even for when the borrowers have died. For example,
after her sons murder in 2015, New Jersey resident Marcia DeOliveria-Longinetti
was contacted regarding his student loans. His federal loans were written
off after an administrator was informed about her son’s unfortunate
demise. However, the New Jersey state lending agency, Higher Education
Student Assistance Authority, refused to follow in the federal lender’s
footsteps. In a letter sent to Mrs. DeOliveria-Longinetti the agency offered
its condolences but demanded that monthly payments still be made because
she had co-signed her son’s loans.
In recent years, the Authority has intensified its collection efforts and
has become increasingly aggressive. In one case, a 26 year old college
graduate was forced to declare bankruptcy after his student loan payments
crippled his financial well-being. In a separate case, the Authority filed
four simultaneous lawsuits against a 31 year old paralegal after she fell
behind on her payments. The Authority also refuses to forgive or suspend
payments even when the federal government has chosen to do so. One consumer
was sued by New Jersey for his inability to pay his student loans after
being diagnosed with Hodgkin’s lymphoma and being laid off by Goldman
Sachs. While the federal government allowed him to suspend his payments,
New Jersey sought nearly $266,000 in payments and seized his state tax refund.
Following decades of using the states as middlemen for federal student
loans, Congress and the Obama administration decided to eliminate the
state’s role in federal lending in 2010. This decision followed
several scandals including New Jersey where an agency was found to have
engaged in a $2.2 million kickback scheme. The federal government now
lends directly to students. However, in the years leading up to the end
of the federal program, New Jersey greatly expanded its state loan program.
From 2005 to 2010, loans from the agency tripled to nearly $343 million
per year even though college enrollment and tuition did not reflect the
same growth. In the years that followed, New Jersey reduced its loans
by half. The state still maintains an outstanding portfolio valued at
approximately $2 billion.
In response to New Jersey’s controversial student loan program, the
New Jersey State Senate is set to hold a hearing on August 8 to discuss
the state’s student loan agency and its collection practices The
hearing will be led by State Senator Robert Gordon and State Senator Sandra
Cunningham. Additionally, the Senate Higher Education is expected to consider
a bill that would direct the state loan agency to forgive student loans
in the event of a borrower’s death.