TRENTON – A three-bill package sponsored by Senator Sandra B. Cunningham, Senator Bob Gordon, Senator M. Teresa Ruiz and Senator Nellie Pou to reform the state’s student loan program, and to help borrowers who are facing financial hardships as a result of the agency’s policies and collection methods cleared the Senate Budget and Appropriations Committee today.
“We need to repair the state’s loan program so that it provides opportunity for students to attend college, and does not set them up for failure upon graduation,” said Senator Cunningham (D-Hudson). “These bills are designed to make needed reforms to HESAA’s loan program so that future graduates will not endure the financial hardships that many are currently facing. They also will provide some assistance to those who are already dealing with challenges as a result of the agency’s policies.”
“This package of bills is aimed at reforming the loan collection process and helping students who go to college have a manageable payment plan in the years after they graduate,” said Senator Gordon (D-Bergen/Passaic). “Our legislation will help establish guidelines for families, but also boundaries so that HESAA is not issuing loans that are in excess of what a borrower can manage over the long-term. Moreover, these bills address the need for reasonable repayment agreements so that students and families are not destined for bankruptcy or a lifetime of insurmountable debt.”
In August, members of the Senate Legislative Oversight Committee and the Higher Education Committee heard from student borrowers and families about their financial hardships and the Higher Education Student Assistance Authority’s aggressive collection tactics and strict conditions that some said had ruined them financially.
The bills will help to address the debilitating financial burden that borrowers are currently facing while also preventing these kinds of issues going forward. The bills will establish a debt rehabilitation program with income standards and guidelines to help borrowers pay back their loans, set loan amount caps, create greater transparency, as well as set a new collection of standards for loans going forward. The reform bills are:
- S-2573 (Cunningham/Singer/Gordon) – Requires HESAA to establish income-driven repayment option and loan rehabilitation program for borrowers under New Jersey College Loans to Assist State Students (NJCLASS) Loan Program. An income-driven repayment option is a student loan repayment plan that sets a borrower’s monthly student loan payment at an amount that is intended to be affordable based on the borrower’s income.
- S-2577 (Cunningham/Ruiz/Gordon) – Requires HESAA to provide annual New Jersey College Loans to Assist State Students Loan Program report to Governor and Legislature and develop student loan comparison information document to increase program transparency. The purpose of this bill is to increase transparency under the NJCLASS Loan Program and public knowledge and awareness of the strict loan repayment requirements under the program as compared to federal student loan programs.
- S-2578 (Cunningham/Pou/Gordon) – Revises New Jersey College Loans to Assist State Students Loan Program to require applicants first exhaust federal student loans, require income verification, and limit total student loan amounts. One of the provisions of this bill is that it provides that a student borrower’s total loans under NJCLASS may not exceed $200,000; it also limits loan amounts based on certain factors including family income, and the cost of the institution as well as other established regulations.
“These bills will increase transparency so that students and families have more information on the financial hurdles and challenges they may face, while also ensuring that if a borrower gets behind there is due process,” said Senator Ruiz (D-Essex), a sponsor of S-2577. “We want the families and students to come away from their education proud and ready to achieve success, not burdened by debt and financial struggles.”
“Borrowers should be properly advised and guided when taking out loans and this bill will set reasonable limits,” said Senator Pou (D-Passaic/Bergen), a sponsor of S-2578. “For example, when someone buys a house, a bank is not going to let them purchase a half-million dollar home if they only make $40,000 a year, and those same responsible limits should be put in place by this agency when a borrower applies for a student loan.”
The Senate held a hearing on the issue of student loans made by HESAA after The New York Times published an investigative report in conjunction with ProPublica detailing an agency with onerous loan terms that has employed aggressive tactics in the event borrowers were not able to make payments. The Times article profiled a mother who, despite her son’s killing, was informed by HESAA that she was not eligible for loan forgiveness. A ProPublica article appearing in NJ Spotlight subsequently stated that internal emails from the agency show that staffers at the authority were instructed not to tell families that they may qualify for loan assistance unless they explicitly asked.
S-2573 cleared the committee 10-0-3; S-2577 and S-2578 both cleared the committee 13-0. All three bills will now head to the full Senate for further consideration.