Bill Allowing Income-Driven Student Loan Repayment Advances


Bill Allowing Income-Driven Student Loan Repayment Advances


Directs the Higher Education Student Assistance Authority

To Establish Repayment Option for NJCLASS Loans


TRENTON – Designed to relieve the burden of state college student loan debt, a bill sponsored by Senators Sandra B. Cunningham, Robert M. Gordon and Robert W. Singer was approved today by the Senate Higher Education Committee.  Among other provisions, the bill requires the Higher Education Student Assistance Authority to establish an income-driven repayment plan and loan rehabilitation option for borrowers under the New Jersey College Loans to Assist State Students loan program.


The bill, S-766, proposes loan repayments that limit borrowers’ monthly installments to no more than ten percent of his or her discretionary income and discharges any remaining debt after 20 years of payments.  It also allows $0 monthly payments for loan recipients with incomes at or below 150 percent of the federal poverty guideline for their family size.  The legislation also requires the HESAA to include in its adopted regulations a definition of discretionary income that would be based on federal guidelines for federal student loans.


Toward the goal of rehabilitating defaulted loans, the bill requires the HESAA to establish and notify borrowers of a loan rehabilitation option and the process for removing loans from default status. The HESAA would be required to offer a repayment agreement that is reasonable and affordable to the borrower and equal to 15 percent of the borrower’s discretionary income.


“While New Jersey needs a college-educated workforce to grow our economy, student borrowers are struggling under the weight of oppressive student loan repayments,” said Senator Cunningham (D-Hudson).  “This bill provides borrowers with options that allow them to meet their repayment obligations without having to gut other items in their monthly budget or deplete the discretionary income that fuels our local economies.


“Cuts to our state’s higher education funding has resulted in New Jersey being the fourth most expensive state in the nation for tuition and fees,” Senator Cunningham continued.  “Excluding room and board, the average cost in 2016 for in-state students at a four-year public college or university was $13,560.  With the typical New Jersey college student graduating with more than $28,000 in student loans, we need to provide common sense relief that will prevent extended personal debt for our young people.”


With the national student debt now exceeding $1 trillion, there is a growing need for viable repayment options such as those the U.S. Department of Education is initiating to individualize plans for diverse financial situations.  The bill would legislate that in order to be eligible for rehabilitation, a defaulted borrower would be required to meet the following:


  1. voluntarily make at least nine out of the ten payments required under a monthly loan rehabilitation repayment agreement with HESAA; and


  1. each voluntary payment (payments made to the HESAA that do not include income tax offset, garnishment or asset execution) would be required to be made for the full amount under the agreement;


  1. be received within 20 days of the due date for the payment;


  • require that all nine payments are to be made within a ten-month period.


  1. provide the HESAA with documentation to confirm the borrower’s discretionary income.


The bill would permit the borrower to appeal the HESAA’s determination on the payment amount.


Once a loan has been successfully rehabilitated under this program, the HESAA would be required to permit the borrower to choose any current repayment plan for an NJCLASS Loan. A defaulted loan could only be rehabilitated once.


Within 30 days of the successful completion of the loan rehabilitation repayment agreement, the HESAA would be required to remove the loan from default status and notify the credit bureaus that the loan was no longer in default status and is paid on time or paid as agreed.


Under the bill, if a NJCLASS loan is being collected by wage garnishment while the borrower is also making monthly payments on the same loan under the rehabilitation repayment agreement, the HESAA would be required to continue to collect the loan by wage garnishment until the borrower makes five monthly payments under the loan rehabilitation repayment agreement. After the borrower makes the fifth monthly payment, the HESAA would suspend the wage garnishment order to the borrower’s employer, unless otherwise directed by the borrower.


The bill would take effect the first day of the sixth month following enactment.


The bill was released from committee with a vote of 5-0 and next goes to the Senate Budget and Appropriations Committee for further consideration.

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