NJ may not let you off the hook for student debt — even if you die!
The New Jersey state Senate's Higher Education and Legislative committee held a joint hearing Monday to gather information about the Higher Education Student Assistance Authority, after a report surfaced alleging aggressive, unfair and shocking tactics used by the agency to try and collect money from borrowers.
The report appeared in the New York Times and ProPublica last month. They quoted a bankruptcy lawyer referring to the program as "state-sanctioned loan sharking," It detailed a student loan program that often won't forgive debts or work with borrowers to adjust repayments even in the fact of extreme financial hardship — or, in some cases, the death of the borrower.
The report also described a spike in the number of lawsuits the program filed against borrowers for defaulting on their loans — from less than 100 in 2010 to 1,600 last year. A spokesperson for the program said New Jersey's authority had consistently offered borrowers lower rates than a federal loan program and that most borrowers were happy with their arrangements.
The chief administrator of HESAA, Gabrielle Charette, was invited to the hearing to answer questions and discuss the allegations, but she was a no-show. She sent a message to lawmakers saying her agency is reviewing the situation, and it would not be proper for her to discuss things right now.
Several borrowers and co-signers of loans did attend, and told their stories to the committee members.
Marcia DeOliveira of Stafford Township told the panel members her son Kevin was murdered a year and a half ago, and his federal student loans were forgiven, but HESAA has continued to insist she pay off the money that was borrowed because she had co-signed the loan. Her story was also featured in the Times/ProPublica report.
“My son wasn’t sick. He didn’t get into a car accident. He was murdered in his own home," she said. “I think that should be an exception because this doesn’t happen every day. They’re not wasting money forgiving this loan.
"Every month I have to write a check for the next seven to eight years reminding myself that my son is not going to graduate.”
She also said even if she has to pay back his loans she should not be paying interest.
“He’s not going to graduate. He’s not going to use that. So why can’t I just pay what he borrowed? That’s the part I really do not understand,” she said.
Deborah Carney of East Brunswick told members of both committees her son Brian struggled to get a job after college, and tried to make partial payments, but ultimately was forced to declare bankruptcy.
She said her son’s story is a small part of a much bigger picture.
“I’m sure you have heard about the next bubble that is going to burst, the student loan bubble, but have any of you seen what the bubble looks like?” she asked the committee members. “As I speak, student loan debt is increasing by an estimated $28 hundred every single second, $164 thousand every single minute, $9.9 million every single hour, $236 million dollars every single today. Today the student loan debt is almost $1.4 trillion.”
Carney alleged HESAA has consistently misrepresented facts about borrowing and repayment options. She said the program's lack of flexibility in working with borrowers is outrageous.
“HESAA provides no assistance to struggling borrowers, unemployed borrowers or under-employed borrowers. They don’t care. They want their money and they don’t care where it comes from,” she said. “There are no flexible repayment options, no true deferment programs, no refinance options and no loan rehabilitation options. Borrowers and co-signers are facing financial turmoil and having their lives destroyed by this debt.”
According to the Times/ProPublica report, the spokesperson said that New Jersey does offer struggling borrowers "a number of deferments and forbearances" — for instance, for recent graduates, for those in the armed services of for those with significant financial hardships. But the program also stressed more than 90 percent of loans are cosigned — and that if a student borrower is struggling to repay a loan as agreed, the cosigner has responsibility to help .
Carney also said everyone in New Jersey is affected by this.
“College grads with significant debt are not starting new businesses. They can’t afford to move out of their parents’ home. They are unable to purchase cars and homes. They’re holding off on getting married,” she said. “If we do nothing to alleviate this debt it will eventually take its toll on New Jersey’s economy. It’s just a matter of time.
"These borrowers cannot make any significant contributions to this economy because their entire paycheck is going toward repaying their college loans. They don’t have anything left to give.”
Carney urged the committees to enact legislation mandating HESAA work with all struggling borrowers by restructuring loans.
"The fact that HESAA is hardly trying is a disgrace to the state," she said. "None of these borrowers should have to feel that their college degree was the worst mistake of their lives."
Cassandra Alessio of Clifton, who attended Fairleigh Dickinson University, said the lives of many young people have been ruined by overwhelming student loan debt.
“Imagine going to bed every night knowing tomorrow will not be a better day. You feel hopeless. You feel trapped,” she said. “Imagine going to bed knowing that you can’t get married because you have over $100,000 in debt that no person would even consider marrying. There is no light at the end of the tunnel for borrowers. There is no end date in sight for paying back N.J. class loans. The interest alone is causing borrowers to not even have the chance to touch the principal.”
She stressed “I, like all other borrowers, can’t afford basic living costs. I can’t afford to save for emergencies, I can’t afford to save for retirement."
Committee members were moved by what they heard.
"The state should be supporting students and young workers in particular, not putting up additional barriers to their future success,” said state Sen. Bob Gordon (D-Bergen/Passaic), chairman of the Senate Legislative Oversight Committee.