TRENTON — State legislators took the first step Monday toward revamping a state-run college student-loan program that parents said is inflexible, predatory and has driven families into bankruptcy.
A bill approved by the Senate Higher Education Committee would forgive NJCLASS student loans if the borrower dies, even if a parent or guardian co-signed the loan.
But parents and student borrowers who testified at a joint hearing with the Senate Legislature Oversight Committee said much more needs to be done to fix how the state Higher Education Student Assistance Authority, or HESAA, handles the loans.
“We acknowledge the debt. We want to repay it. We were denied that opportunity,” said parent Tracey Timony, who said the family was forced into bankruptcy after trying in vain to restructure her daughter’s loans to make them more affordable.
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The NJCLASS program came under scrutiny after a July story by ProPublica and the New York Times revealed that New Jersey’s stringent rules and aggressive collections process were much more restrictive than other states. It shared Timony’s story and the story of Marcia DeOliveira-Longinetti, whose son was murdered, leaving her to repay his student loans.
“I think murder should be an exception,” said DeOliveira-Longinetti, saying every month when she writes the check, she is reminded that her son will never graduate. She said at least HESAA could abate the interest, and just let her pay the principal.
“I knew I had to pay,” she said. “I know what a contract means. But parents need to be aware. I have heard from other parents who are paying for children who are dead.”
That issue is not new, but never gained traction in the Legislature.
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In 2014 Assemblyman Vincent Mazzeo, D-Atlantic, was a primary sponsor of a bill that would have forgiven student loans in the event of the borrower’s death. That bill never made it out of committee, and Mazzeo hopes his companion bill to the one approved by the Senate committee Monday will make it into law now that there is increased public interest.
Mazzeo said he sponsored the 2014 bill after learning that federal student loans are forgiven if the borrower dies but state loans are not.
“It just tried to give some forgiveness to someone who was dealing with the death of a loved one,” he said of the bill.
HESAA’s Executive Director Gabrielle Charette was asked to appear at the hearing, but she and her chief of staff, Marcia Karrow, declined. Oversight Committee Chairman Sen. Robert Gordon, D-Bergen, Passaic, read a letter from Charette saying HESAA has initiated a review of the NJCLASS loans with regard to the death of the borrower and said there is a procedure to forgive some loans if the borrower dies while in school or soon after. She said she would appear when that review is complete.
But those who testified said that is just one problem with the program that makes it almost too easy to borrow money but then impossible to actually talk to someone about problems with paying it back. They said they ended up in “HESAA hell,” with missed payments quickly sent to collection agencies, ruining both a student’s credit, and their parents’ credit if they co-signed. Wages can be garnished and tax refunds withheld, all without due process.
Senators Sandra B. Cunningham, D-Hudson, Tom Kean Jr. R-Union, Morris, Somerset, and Senator M. Teresa Ruiz D-Essex said Monday they will introduce a bill that would require a court order before HESAA could take those actions. Mazzeo will sponsor that bill in the Assembly.
The ProPublica story said the number of lawsuits filed by HESAA against borrowers has increased from 97 in 2008 to almost 1,700 in 2015.
David McMillan of Legal Services of New Jersey said NJCLASS student loans are the most difficult consumer problem for lower-income families because they are not discharged in bankruptcy and must still be repaid. He said they recommend creating an income-based repayment plan and a “rehab” program that would allow those in default to begin making payments again.
Some of those who testified said the loans fell into default quickly because borrowers could not find a job right after graduation, and payments were due almost immediately. Deborah Carney said her family was given misleading and contradictory information about the loan program and repayment options.
“HESAA was a loan shark,” she said.