Multiple events relating to student loans sparked a national buzz about debt collection practices and policies regarding student loan debt obligations that involve death or disability.
One state in particular, New Jersey, happened to be one of the main recipients of this national attention after one New Jersey mother was hampered by monthly student loan payments following her son’s death by murder. In the aftermath of this story, the aggressive nature of New Jersey tax collectors was revealed in the national spotlight which turned out to be a problem for many troubled borrowers.
It turns out that New Jersey debt collectors had developed a reputation for aggressive collection practices, and some unfortunate borrowers and obligated parties had experienced this aggression first hand. Naturally, these situational debt obligations came under fire as critics began questioning the validity and morality of such practices. While it is natural for lenders to go the extra mile to secure payment, it became clear that these situations called for special exemption despite the legal obligations of a co-signer.
In light of these developments, the New Jersey government decided to take legislative action to solve these issues. Those who have been waiting for a resolution are in luck.
NJ Governor Chris Christie signed a state bill that “directs the Higher Education Student Assistance Authority (HESAA) to forgive student loans … in the event of a student borrower’s death or total and permanent disability.”
Furthermore, this bill (S743) allows student loan borrowers who are temporarily disabled to defer payments as well as interest accumulation. The official approval date for this bill is December 5, 2016 (found on page 21 of NJ legislative action list).
To be exact, the bill calls for the full discharge of the “obligation of the student borrower and a parent or guardian who cosigned the loan” which confirms the forgiveness for co-signers on private education loans (federal loans do not require cosigners). Keep in mind that the bill explicitly states the cosigner must be a parent or a legal guardian. In order to qualify for loan forgiveness, a valid death certificate must be presented to the HESAA “within 120 days of the death.”
If the case involves permanent disability, then a “written statement from a licensed physician” must be provided to the HESAA. A written statement from a licensed physician is required to prove temporary disability; this written state defines the length of deferment of both interest and payments.
New Jersey State Legislature bill S743 directly covers the main issues presented by the public, but there is one detail that is open to either strict or loose interpretation. The bill explicitly states that the HESAA is obligated to discharge a loan for a student’s “parents or guardian” (assuming a legally recognized guardian) who cosigned the loan. This may not cover all cosigners who may not be legal guardians or parents.
The fiscal impact on the New Jersey was deemed to be of “minimal loss.” Cost predictions for the state were projected to $1.40, $1.52, and $1.64 million over the next three consecutive years.