TRENTON – A four-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 full Senate today.
“This package of bills is beneficial to those who will enter the post graduate world, but also those who are currently facing the financial struggles as a result of the agencies policies,” 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. These are changes that will make a difference in the lives of young people and will have a lasting impact on the strength of our great state and our economy.”
“This legislation 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). “These are significant bills to 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. These borrowers need a reasonable repayment agreement so that they 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 four reform bills that will be heard are:
- S-2510 (Cunningham/Kean, T/Ruiz) – Requires Higher Education Student Assistance Authority to obtain court order prior to using certain collection practices for defaulted loans under New Jersey College Loans to Assist State Students (NJCLASS) Loan Program. Under current law, HESAA may pursue without a court order.
- 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 and 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.”
“No one should regret the choice of going to college due to the financial repercussions that may result and these bills will help give reasonable expectations for managing their payment,” said Senator Pou (D-Passaic/Bergen). “For example, if someone tries to buy a house, a bank is not going to let them purchase a half-million dollar home if they only make $40,000 a year. Those same responsible limits should be put in place by this agency when a borrower applies for a student loan. In many cases, these are vulnerable young people who are doing the best they can to pursue an education and career. This agency should not be taking an advantage of an opportunity that will hurt a student.”
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 Senate today 29-3; the other bills cleared the full Senate unanimously. They will now head to the Assembly for further consideration.