New Jersey Lawmakers Vote to Forgive Deceased Students’ Loans

The New Jersey State Senate on Thursday unanimously approved a bill requiring the state’s student loan agency to forgive the debts of borrowers who die or become permanently disabled.

The measure, approved by a 34-0 vote, passed the State Assembly last month, and now heads to Gov. Chris Christie, who has 45 days to either sign or veto it. The legislation would end the agency’s efforts to seek repayment from the families of deceased students, a practice disclosed in July in an investigation by ProPublica in collaboration with The New York Times.

“The trauma a family must be dealing with when they lose their child, and then to have someone banging on their door for money?” said Senator James Beach, a Democrat who was among the bill’s sponsors. “I think that’s outrageous.”

If the bill becomes law, almost 70 loans to disabled and dead borrowers would be forgiven each year, at a cost to the state of about $1.5 million, according to a projection this month by New Jersey’s nonpartisan Office of Legislative Services.

During its session on Thursday, the Senate passed other bills geared toward reining in the loan agency, the Higher Education Student Assistance Authority, and easing the financial burden on student borrowers.

One of those bills would require the agency to obtain a court order before garnishing wages, taking state tax refunds or suspending professional licenses — actions it can now take against delinquent borrowers without court approval. Another bill would set a borrower’s monthly payment at a level deemed to be affordable based on his or her income.

The investigation by ProPublica and The Times described a range of aggressive tactics employed by the loan authority, which operates the largest state-based student lending program in the country and has almost $2 billion in outstanding loans.

Because of the high cost of college education, students often seek alternative sources of funding, including loans from state programs like New Jersey’s or from private banks, to supplement federal aid. The federal government forgives student loans upon a borrower’s death or permanent disability.

The New Jersey agency offers student loans with stringent terms that have caused financial ruin for many families, the investigation found. The loans come with higher interest rates than similar federal programs. The investigation found that the agency did not accept death as a sufficient reason to forgive loans.

After Marcia DeOliveira-Longinetti’s son was murdered last year, for example, she asked that the state agency forgive his student loans, which totaled about $16,000. The agency refused, requiring Ms. DeOliveira-Longinetti, who co-signed the loans, to continue to pay off the debt.

Nearly a dozen people testified before legislators at a State Senate hearing in August, saying they were troubled by the agency’s loan program. Several families described how they had resorted to bankruptcy to manage their high debt burden.

The agency’s executive director, Gabrielle Charette, declined the Legislature’s request to testify at the hearing. Instead, she sent a letter to legislators in which she said the agency had undertaken an internal review of its practices, and would brief the lawmakers when that review was completed.

Ms. Charette was appointed by Mr. Christie, a Republican, who also has the power to appoint a majority of the agency’s board members and can overrule any action taken by the board.

Marcia A. Karrow, the agency’s chief of staff, called the investigation by ProPublica and The Times a “salacious narrative” that misrepresented the agency’s practices. Ms. Karrow, a Republican, has previously said the loan authority was merely meeting its statutory obligations in seeking repayment of all debts.

Over the past five years, the agency has increasingly pursued borrowers in the courts to settle delinquent loans. In 2010, fewer than 100 borrowers and their co-signers faced litigation from the agency. Last year, the agency filed more than 1,600 suits. Because the loan program is supported by tax-exempt bonds, the agency is required to keep its losses to a minimum.

The state loan agency and the governor’s office declined to comment on the matter.

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