A recent investigation into New Jersey's official college loan agency has found the state has some of the strictest repayment rules in the country, causing financial ruin for some while forcing others to repay debts owed even after the borrower has passed away.
New Jersey Higher Education Student Assistance Authority, HESAA, provides loans to students attending a school in-state or out-of-state, with interest rates ranging from 4.48% – 8.23%. Students coming to college from other states are also able to take out loans with the agency, which is the largest of its kind in the country, with a total of $1.9 billion in loans.
Because the program is supported by the state, it does not need court approval before it begins the process of collecting repayments through methods such as garnishing wages, taking state income tax refunds, or revoking a professional license.
"It's state-sanctioned loan-sharking," Daniel Frischberg, a bankruptcy lawyer, told the Times. "The New Jersey program is set up so that you fail."
While federal loans and similar programs in other state automatically forgive the loans in the event that the borrower dies or becomes disabled, each request made in New Jersey is reviewed on a case-by-case basis. Repayments are not adjusted by income, and borrowers who are unemployed or under financial hardships are rarely offered breaks, reports Annie Waldman for The New York Times.
The state claims it uses such tactics because it depends on Wall Street investors to finance the loans through tax-exempt bonds and must keep them satisfied in order to keep their losses to a minimum.
Loan revenues also cover close to half of the administrative budget for the agency.
One such instance involves Marcia DeOliveira-Longinetti, whose son was murdered last year in a case that has yet to be solved. While the federal government agreed to write off what he owed in terms of student loans, the state of New Jersey would not, stating as much in a letter sent to the mother, who had co-signed the loans.
"Please accept our condolences on your loss," said the letter from the Higher Education Student Assistance Authority. "After careful consideration of the information you provided, the Authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you."
The investigation found a multitude of similar incidents, including a 26-year-old who had declared bankruptcy, a 31-year-old who had fought four lawsuits brought on against her at the same time by the state, and one borrower who was diagnosed with non-Hodgkin's lymphoma and laid off from his position at Goldman Sachs but was denied the ability to defer his loans, and was then sued by the state for a total of $266,000, reports Evann Gastaldo for Newser. The state eventually took possession of a state refund he was owed while the federal government allowed him to suspend his payments.
DeOliveira-Longinetti has made 18 payments since her son's murder, with 92 left to go before his debt to the state will be completely repaid.