Zwicker Bill Forgiving Student Loan Debt in Event of Borrower’s Death or Permanent Disability Signed into Law
Legislation sponsored by Assemblyman Andrew Zwicker that forgives certain student loan debt in the event of a borrower’s death or total permanent disability has been signed into law. Gov. Chris Christie signed the bill into law on Monday.
Last July, an investigation by ProPublica and The New York Times showed how New Jersey’s student loan agency aggressively sought repayment of loans with already burdensome terms, even after some of the recipients had died. The collection efforts traumatized grieving families, and placed overwhelming financial burdens on some.
“To expect a student’s family or other survivors to pay their college loan debt in the event of their death is cruel and unacceptable. We can do better than that,” said Zwicker (D-South Brunswick).
The new law brings the state’s program closer in line with federal student loans, which are forgiven when students die or become permanently disabled. The law directs the state Higher Education Student Assistance Authority to forgive certain student loans in the event of a student borrower’s death or total and permanent disability and grant deferment for temporary total disability.
The law applies to loans issued under the New Jersey College Loans to Assist State Students Program, which helps cover college costs not already covered by other sources of grants, scholarships and loans. The program offers low-cost rates on supplemental loans to New Jersey residents attending an eligible in-state or out-of-state school, as well as out-of-state students attending a school in New Jersey.
In the event of the death of an eligible student borrower under the program, the authority will fully discharge the obligation of the student borrower and a parent or guardian who co-signed the loan. The executor or administrator of the student borrower’s estate must provide written notification to the authority of the student borrower’s death along with a certified copy of the death certificate within 120 days of the student borrower’s death.
In the event that an eligible student borrower becomes totally and permanently disabled, the authority will fully discharge the obligation of the student borrower and a parent or guardian who co-signed the loan. To qualify for the loan discharge the student borrower must provide the authority with a written statement from a physician certifying that the student borrower is totally and permanently disabled.
In the event that an eligible student borrower becomes temporarily totally disabled, the authority will grant a deferment of payment of loan principal and interest. To qualify for the loan deferment, the student borrower must provide the authority with a written statement from a physician certifying that the student borrower is temporarily totally disabled. Interest on the loan would not accrue during the period of deferment.
Like many politicians who think that when there’s a problem, government should “fix” it, Mr Zwicker may not fully be aware of all the unintended consequences of his proposal.
Now the cost of assessing the risk and covering the borrower for life and disability insurance will be added to the cost of getting a student loan. Since “disability” can be a somewhat flexible label (see the retired LIRR workers), the insurance, even for 20 year olds, can get quite expensive, especially over a the life of a loan that may get paid back over 10+ years.
In short, Andrew Zwicker, while intending for the best and pandering to all our good feelings, may make qualifying and paying for student loans even more difficult. TINSTAAFL
Excellent comment. Much of the liberal agenda could be critiqued in similar fashion. The unintended consequences of one deadly combination – good intentions & stupidity.
I am guessing that the number of actual cases is rather small, and in the majority of them the money is hard or impossible to collect, as it is simply not there or protected in some way. So it is quite possible that the measure saves the taxpayers some money in avoiding time-consuming fruitless attempts at recouping the loans. I tend to think that the risks of death and disability are small enough so that nobody will try to determine them for a particular student. Sometimes the humane approach is also the sensible one.
The overall effect of student loans on college costs is a far more complicated and important topic, but I don’t consider myself sufficiently knowledgeable to discuss it.
Good point. Thanks.
Alternatively, the lending organizations can refuse to underwrite loans to those college students who choose to study themselves; e.g., gender studies, women studies, African-American studies, etc. Tough to get a job when you major in something like that. To then insist on loan forgiveness is the height of self absorption.
How is your comment relevant to the loan forgiveness in case of death or disability? As far as I know, student loans are not forgiven in bankruptcy.
And yeah, ROI for many majors is low, perhaps negative. On the other hand, humanities major of any kind teaches communication skills and self-awareness skills and ability to function outside of parents’ home. It does help people find and keep jobs, which will likely not be related to the major. In practical terms, there is not much difference between history major vs African-American studies major, apart from some employers being irked by the latter for some reason.
No matter how you may view the subject, or objective, of the legislation, it interferes with the arms length transactions between the borrowers and the lenders. That’s just wrong, especially where most college loans are made on favorable terms, including very accommodating repayment schedules.
My wife and I took loans for college and graduate school and, knowing we had a moral obligation to pay them back, made decisions to best position ourselves to achieve that objective. This included our selection of fields of study and career paths. And also, our consumption patterns early in our marriage when the obligations came due.
I have not looked at the actual legislation. The article above seemed to indicate that the loans affected were the ones from the State of NJ, not private lenders. If it affects private lenders, then I would agree with you that this is an overreach.
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