Legislators in New Jersey are taking a step forward to introduce new regulations for state backed loan programs. In a controversy spanning the last several weeks, recent inquiries into private lending from organizations like HESAA sparked both investigation and hearings regarding collection practices for student loans. It was found the collection tactics were inherently aggressive, inflexible, and targeted debtors with severe action regardless of their financial situation.

Typically, students borrow from the federal government which provides them with various repayment options, often to compensate for financial problems. Private lenders are not as flexible, and with the case of HESAA, were able to pursue students without court approval. Because organizations like HESAA are backed by the state, an individual can be sued, have their wages garnished, and state tax refund blocked.

These actions prompted a hearing on Monday, August 15th. The proceeding results have lawmakers now creating several measures to both protect those with loans and halt overly aggressive actions taken by HESAA.

One of the first will require loaners to offer various repayment plans. Organizations will be required to offer income-driven repayment options, similar to those practiced by the federal government. In some cases, loan forgiveness is a path for those that have suffered a death in the family or other traumatic events.

Those that qualify for the income based repayment measures would only pay up to 10 percent of their total loans on a monthly basis. For individuals close or at the poverty line, eligibility to make no payments until their financial situation improves also exists. For those that qualify and make on time payments, total loan forgiveness can occur after 20 years.

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Despite private lenders typically working under their own terms, New Jersey operators are the exception due to their past collection tactics.

These new measures may also address relief for cosigners. When new students take out private student loans, they typically have someone sign with them, usually a parent or guardian, as opposed to a federal loan that requires no cosigner. Cosigners are responsible for paying back the loan if the student can’t, but in some New Jersey cases, the student has passed away or faced severe medical problems. While current collections disregard family death, the passing measures should allow for parents or guardians to be forgiven of the total debt owed.

The proposals were made one week after the mentioned hearings, and are expected to take effect several weeks from now.

Ultimately, these restrictions on collection tactics were in response to the pleas of those attending the hearing. Individuals had experienced “financial ruin” because of the aggressive collection tactics utilized to levels which far exceeded usual methods seen in other states. As well, these are only the first in along potential list of other protective legislation that can safeguard those facing financial instability.

At this time, HESAA has declined to make any comment on the situation beyond their statement of duty fulfillment. Representative from the organization were absent during previous hearings with no future plans regarding them as they conduct an “internal review.” How they will respond to the newly established rules to come remains to be seen.