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.