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Cunningham, Ruiz Bills to Ease NJCLASS Loan Repayment Clear Committee

TRENTON – Two bills sponsored by Senate Higher Education Chair Sandra Cunningham and Senate Education Chair M. Teresa Ruiz which would assist those struggling to repay NJCLASS loans cleared the Senate Higher Education Committee today.

“Today we have taken a substantial step in easing the burden these student loans place on NJCLASS borrowers,” said Senator Cunningham (D-Hudson). “Income sensitivity options and remedies for defaulted loans is the light at the end of the tunnel for many struggling to make their payments each month. We are one step closer to making these important reforms a reality, and this would not have been possible without the help of David Socolow, Executive Director of HESAA. I am grateful for all the time and effort he has put in to this legislation.”

One bill, S-3125, would establish two income based repayment options under the NJCLASS loan program, a repayment assistance program (RAP) and a household income affordable repayment plan (HAIRP) for borrowers. These programs would assist borrowers facing economic hardships.

“Defaulting on a student loan can completely wreck someone’s credit score, making it harder for them to buy a car or rent an apartment for years to come,” said Senator Ruiz (D-Essex). “Allowing borrowers to rehabilitate their loan after defaulting will provide them the opportunity to begin improving their credit score while repaying their loan.”

Under RAP, eligible borrowers could have their payments reduced to 10 percent of the household income of all parties on the loan. A borrower could pay the reduced payments for up to two years, during which time the authority would pay the interest and the payments made by the borrower would be applied to the principal. After the two year period the new monthly payments would be recalculated based on the balance of the loan and the remaining length of repayment.

HAIRP would be available to eligible borrowers still in need of assistance following their participation in the repayment assistance program. They could make loan payments equal to 15 percent of the total household income of all parties on the loan, and the repayment term would be extended to 25 years. Under the bill, any remaining balance at the end of 25 years would be forgiven.

Another bill, S-3149, would establish a process for NJCLASS loans to be declared in default or rehabilitated. Under the bill, the Higher Education Student Assistance Authority could declare a loan in default when the borrowers have failed to meet certain terms of the loan and it is reasonable to determine they no longer intend to repay the loan. They could also declare a loan in default when the borrower has failed to make payments for six months, when payments are due monthly, or eight months, when payments are due less frequently.

The bill would provide that upon default, the borrower could become liable for the entire balance of the loan but would have the ability to rehabilitate the loan if they meet certain requirements. The defaulted borrower would have to demonstrate their ability and willingness to repay the loan by making nine on-time monthly payments over the course of ten months.

The bills were released from committee by votes of 3-0, and next head to the Senate Budget and Appropriations Committee for further consideration.