New Jersey Higher Education Loan Program

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.‚Äč

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