Your child is in college and Federal financial aid isn’t enough to pay for tuition. You’re presented with an application for an NJCLASS loan issued by HESAA (Higher Education Student Assistance Authority) which your child asks you to cosign since these loans are based on credit worthiness. Your kid explains to you that their financial aid advisor said these are great loans with low interest rates. You happily sign the promissory note to make your child happy. You go about your business happy to have helped.
Now fast forward… 4 years have passed and your child is about to graduate. You’re a proud parent! Then one day, you go home to find you’ve just been served with the summons and complaint to a lawsuit filed on behalf of the state by a private collection lawyer.
What just happened?
Well, I see it all the time. You cosigned for a student loan that (depending on the repayment option you selected) requires repayment to begin upon graduation. There is no grace period like a federal loan. You figured your child would be responsible enough to repay the loan. Unfortunately, your child may have inadvertently ignored their mail, and probably didn’t have a job upon graduation to repay it anyway. You see, an NJCLASS loan defaults after 180 days of non-payment, and you have never made a payment.
Okay, so the loan is in default. You say to yourself: I’ll call up HESAA and explain the situation. They’ll understand and certainly remove the loan from a default status. NOPE. According to one collection attorney, “New Jersey Higher Education does not offer a program to reinstate defaulted NJCLASS loans…”. I was told however, you can clear a default in one of three ways.
- You can pay the entire balance by liquidating all your assets.
- If the state was at fault, they will fix the error and reinstate you; or
- You may be able to get a discharge of your student loans by showing and “undue hardship” under section 523 of the bankruptcy code. (this is hard to do)
So the loan is in default, what can they possibly do?
Under the NJCLASS program, the State may do any of the following:
- Expedited increase of the interest rate;
- Take your State income tax refunds or State tax rebates;
- Take legal action against the borrower and any cosigner;
- Assess collection charges including attorney fees of up to 30 percent of the debt collected;
- Deny eligibility for other student aid;
- Negative credit reporting;
- Administrative wage garnishment (garnishment without a judgment);
- Offset of lottery prize winnings; and
- Suspend any New Jersey occupational and professional licenses.
So for those of you reading this, who have been contemplating taking an NJCLASS Loan, DON’T.
Contact The Law Office of Andrew B. Finberg, LLC
To set up an appointment with an experienced attorney at The Law Office of Andrew B. Finberg, LLC, we have the experience you need and the help you can afford when considering a consumer or business bankruptcy filing. Contact our office online or call us at (856) 988-9055.