New law forgives N.J. college loans if student dies
New Jersey's student loan agency will no longer require repayment of loans if a student borrower dies, under a law signed Monday by Gov. Christie.
New Jersey's student loan agency will no longer require repayment of loans if a student borrower dies, under a law signed Monday by Gov. Christie.
The law, which directs the Higher Education Student Assistance Authority to forgive certain loans in the event of the borrower's death or total and permanent disability, addresses some of the most dramatic complaints about New Jersey's student loan program.
At a hearing in August, lawmakers heard from a woman who was still paying off student loans for her murdered son. The hearing was called following a ProPublica investigation published in conjunction with the New York Times that found that New Jersey's student loan agency, unlike other government lending programs, had "extraordinarily stringent rules that can lead to financial ruin."
The agency's reluctance to write off loans in cases of death was not the only example. Others who testified in August complained about the inability to adjust repayments based on income, forcing some borrowers into bankruptcy. Lawmakers spoke of overhauling the loan program.
In October, the Senate passed bills that would require the agency to establish an income-driven loan repayment option, and to obtain a court order before using certain collection practices for loans in default, including offsetting state income tax refunds and garnishing wages. The bills have not passed the Assembly.
The Higher Education Student Assistance Authority said at the time of the August legislative hearing that it was reviewing its policies related to cases of student death or total disability, but that it had a practice of forgiving loans if a student died and the cosigner demonstrated severe financial hardship.
The law signed by Christie Monday was introduced in January, long before the hearing. Originally applying only to cases in which a student borrower died, it was amended in September to require that loans also be forgiven for a borrower who becomes totally and permanently disabled, and be deferred for borrowers who become totally disabled temporarily.
Jennifer Azzarano, a spokeswoman for the loan agency, said Monday that executive director Gabrielle Charette "is sending a letter of notification regarding the new law to all NJCLASS loan borrowers and cosigners, along with an addendum to the terms and conditions of their promissory note."
The law is expected to increase the state's costs by $1.4 million the first year, $1.5 million the second year, and $1.6 million the third year, according to an estimate from the Office of Legislative Services. The office used the death rate for people ages 25 to 34 with some college or a college degree - 59.8 deaths per 100,000, according to the National Center for Health Statistics - the average increases in the number of outstanding loans, and the total value of those loans over the last 10 fiscal years.
That would translate to 67 loans forgiven in fiscal year 2017, at a cost of $1.38 million, according to OLS.
The office also used national data to calculate the cost of loan forgiveness for totally and permanently disabled borrowers, which it estimated at $23,000 in fiscal year 2017.
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