Struggling with student loans? N.J. wants to make it easier.

Updated Apr 25, 2019

New Jersey isn’t going to erase student debt like presidential hopeful Elizabeth Warren wants. But you can get help if you find yourself in financial straits.

Gov. Phil Murphy signed a pair of bills Thursday to help student loan borrowers who have defaulted or may be on the verge of defaulting, saying more affordable repayment options will enable college graduates “to live and thrive here in the Garden State.”

One bill allows NJCLASS loan borrowers to make income-based payments for 25 years, after which the balance is forgiven. Another assists borrowers who have already defaulted on their loans and taken a hit to their credit.

New Jersey has long been considered a high-tuition, high-aid state, meaning its colleges charge above-average tuitions but the state offers generous grants and financial aid packages to low- and middle-income students.

But with New Jersey being a high-income state, many families end up paying close to sticker price for college, and state officials said they heard too many horror stories of students struggling with strict rules for loan repayment.

“The average student in New Jersey graduates college with over $30,000 in debt," Assemblyman Ralph Caputo, D-Essex, said in a statement. “NJCLASS borrowers currently lack a path to loan rehabilitation if they struggle to make payments; this bill will correct that problem and set up a system for them to make manageable on-time payments and reduce their debt.”

Under one bill signed into law (S3125), NJCLASS borrowers who run into financial hardships can reduce their monthly installment through the Repayment Assistance Program for two years.

The borrower is expected to pay 10 percent of their income above a certain threshold (150 percent of the federal poverty level). If someone, such as a parent, co-signed the loan, the co-signer must also be experiencing financial hardship for the loan to qualify for the program. And in that case, the borrowers are expected to pay 10 percent of their combined income over the federal poverty threshold.

More than 90 percent of NJCLASS loans are co-signed by a family member, said David Socolow, executive director of the Higher Education Student Assistance Authority.

If after two years the borrowers still need help, they can enroll in the Household Income Assistance Repayment Plans that limits monthly payments to 15 percent of household income over the federal poverty threshold for 25 years. After 25 years, the loan will be forgiven.

The programs are only open to loans originating after the 2017-2018 school year. Eight borrowers are currently enrolled in RAP, which launched in 2017, Socolow said.

Students with older loans can seek assistance through the state’s loan consolidation program that allows borrowers to combine their loans at a reduced interest or refinancing programs that offer lower interest rates for 10-year or 15-year terms.

Socolow said these programs are meant to act as a safety net that catches borrowers before they default.

But for people who have already defaulted, Murphy signed into law (S3149) a program that allows borrowers one chance to bring a loan out of default by entering into a settlement with HESAA and making regular payments.

“We now work out installment plans that can save these borrowers hundreds of dollars per month and repair their credit reports once they show that they’re on the road to getting out of default by completing 9 out of 10 on-time affordable monthly payments,” Socolow said. “I’m delighted that these policies will now continue, thanks to the laws that Governor Murphy is signing today.”

Do you like this post?

Be the first to comment