Student loan debt is a burden, and that fact is no secret. In fact, more and more students are forced to take out student loans because the cost of tuition is rising and minimum wage jobs are just not enough to incur the cost of living and the cost of schooling. Unfortunately, this creates a situation where you need to choose between school or a job. Student loans have allowed students to not have to make that decision by providing them with the funds they need for school. This is all given under the stipulation and promise to pay back these loans when the time comes.
But, what happens when a student dies before they can pay back the student loans or during their repayment period? The debt generally falls onto the parents, specifically if it was a loan that was cosigned by the parents. This situation is not common, but it does happen. Parents of a deceased student can be left with tens of thousands of dollars in debt with no respite.
Fortunately for parents and students in New Jersey, a new bill was signed that will put an end to debt collectors who are trying to collect on student loan debt that belongs to a deceased child or permanently disabled individual.
Below, we will take a deeper look into what the bill says and what it means for parents who have deceased children or students who are permanently disabled.
The NJ Student Loan Bill and What to Know
Chris Christie, New Jersey’s Governor, signed the bill in late 2016 (December 6th to be exact). The bill specifically states that the student loan agency is required to forgive all student loan borrowers who have become permanently disabled or who have died.
In July of 2016, ProPublica and the New York Times conducted an investigation, which revealed that New Jersey’s student loan agency would aggressively go after and seek out repayment of student loans even after the student has passed away. Some of the families that experienced the harassment from these agencies were forced into financial situations that great exacerbated the loss of family.
The student loan agency is known as the Higher Education Student Assistance Authority, and they are said to have about $1.9 billion dollars in outstanding student loan debt. Unfortunately, at the time, Chris Christie could not address the issue and did not make any comments on the situation, even after being shown the data and information that ProPublica uncovered.
While Christie did not make any comments, the investigation was fruitful because it launched legislation into action that would protect those families. Christie and state lawmakers, in late 2016, reformed the agency’s operations and signed the bill into effect.
State Senator James Beach said, “A parent’s worst nightmare is losing a child.” He continued to say that, “If that unfortunate event were to occur, the last thing a parent should have to face is someone calling to collect money for student loans.”
That statement couldn’t be any truer if it tried. Parents who have lost their children should never feel harassed and should not have to deal with a situation such as those that were included in the investigation. The new law is designed to put an end to these practices and to protect the parents of the student borrowers.
This new law helps to align the state’s program with the federal student loan program, which allows for forgiveness should the student die or become permanently disabled.
The New Jersey nonpartisan Office of Legislative Services created a projection for this new law and stated that about 70 loans per year would be forgiven, which would add up to about $1.5 million dollars of student loan debt. This amount seems negligible when placed next to the total student loan debt.
New Jersey Assemblyman, Andrew Zwicker, has stated that he believes it is cruel and unacceptable to expect a student’s family to pay for the deceased child’s student loan debt. The student loan agency in New Jersey said that it would inform borrowers and their families of the legislative changes and that the agency is committed to being able to provide students and families with informational and financial resources.
New Jersey Student Loan Program Questionable from the Start
While you may shake your head that the state’s student loan agency would even pressure these families to pay the debt, it is no surprise that they did. In fact, the state’s student loan program has been questionable at best and has raised some eyebrows for quite some time, which may be why many students head out of the state to ensure their dream of an education.
In fact, the state’s student loan program does not allow a student to repay their debt based on their income, which is an option in many other states. In addition, if a student falls behind on their student loan payments, the agency will seize their tax refunds, garnish wages, and suspend any professional licenses the student holds. This is a bit harsh and done a lot quicker than other agencies.
In addition, the agency has been criticized because they have higher interest rates on their student loans when compared with other federal student loans.
On a side note, the agency is known to encourage students to purchase life insurance policies in the event that they may pass away. This was done in an effort to “protect” the student and the student’s family since the student loans would NOT be forgiven.
Since the agency started to ramp up their aggressive behaviors to collect debt prior to the new bill, over 1,600 lawsuits were filed against the agency.
Final Thoughts on New Jersey Student Loan Debt Collection of Deceased Students
It does not seem fair that the parents would be held liable if a student passes away with student loan debt. Fortunately, this new bill will stop the aggressive acts of the state’s student loan agency and parents will no longer be responsible for paying off their deceased child’s student loan debt.