Cunningham, Ruiz Bills to Ease NJCLASS Loan Repayment Clear Senate

TRENTON – Two bills sponsored by Senate Higher Education Chair Sandra Cunningham and Senate Education Chair M. Teresa Ruiz, which would assist those struggling to repay NJCLASS loans, cleared the Senate today.

“Income sensitivity options and remedies for defaulted loans will provide much needed relief for many struggling to make their payments each month. We have been working on these changes for over two years, and we are now one step closer to making them a reality,” said Senator Cunningham (D-Hudson). “I am grateful for all of the time and effort David Socolow has put into the legislation as Director of HESAA; these important reforms are essential.”

One bill, S-3125, would establish two income based repayment options under the NJCLASS loan program, a repayment assistance program (RAP) and a household income affordable repayment plan (HAIRP) for borrowers. These programs would assist borrowers facing economic hardships.

“Defaulting on a student loan can upend someone’s life, it makes them responsible for the balance of the loan immediately, and wrecks their credit score,” said Senator Ruiz (D-Essex). “Allowing borrowers to rehabilitate their loan will provide them with the opportunity to make manageable payments and improve their credit score.”

Under RAP, eligible borrowers could have their payments reduced to 10 percent of the household income of all parties on the loan. A borrower could pay the reduced payments for up to two years, during which time the authority would pay the interest and the payments made by the borrower would be applied to the principal. After the two year period the new monthly payments would be recalculated based on the balance of the loan and the remaining length of repayment.

HAIRP would be available to eligible borrowers still in need of assistance following their participation in the repayment assistance program. They could make loan payments equal to 15 percent of the total household income of all parties on the loan, and the repayment term would be extended to 25 years. Under the bill, any remaining balance at the end of 25 years would be forgiven.

Another bill, S-3149, would establish a process for NJCLASS loans to be declared in default or rehabilitated. Under the bill, the Higher Education Student Assistance Authority could declare a loan in default when the borrowers have failed to meet certain terms of the loan and it is reasonable to determine they no longer intend to repay the loan. They could also declare a loan in default when the borrower has failed to make payments for six months, when payments are due monthly, or eight months, when payments are due less frequently.

The bill would provide that upon default, the borrower could become liable for the entire balance of the loan but would have the ability to rehabilitate the loan if they meet certain requirements. The defaulted borrower would have to demonstrate their ability and willingness to repay the loan by making nine on-time monthly payments over the course of ten months.

The bills were released from the Senate by votes of 39-0 and 38-0, respectively.