Two new laws signed today by New Jersey Governor Phil Murphy will help borrowers of some loans who are struggling to repay them manage their debts and repair their credit scores.
One of the bills offers alternate payment options for borrowers who experience financial hardship when repaying loans made through the New Jersey College Loans to Assist State Students program. The legislation makes the repayment assistance program and the household income assistance repayment plan permanent features, building on the initial creation of these programs as part of the past two New Jersey College Loans to Assist State Students bond indentures. Officials said no state appropriations are used to finance the loans, which are funded through private activity revenue bonds issued by the New Jersey Higher Education Student Assistance Authority.
The repayment assistance program and the household income assistance repayment plans work in tandem to help struggling borrowers avoid defaulting on their loans. The repayment assistance program offers reduced monthly payments calculated to be affordable based on the combined household income of all of the parties to the loan. All payments are applied to the outstanding principal balance so borrowers can pay down the balance without accruing additional interest. The household income assistance repayment plans provides additional payment relief when all parties to the loan continue to face financial hardship after exhausting two years of repayment assistance program eligibility, starting with standard New Jersey College Loans to Assist State Students loans that originated on or after June 1 of 2018. The household income assistance repayment plan extends the repayment term to 25 years. During the household income assistance repayment plan period, borrowers’ payments will be applied directly to principal, interest will continue to accrue on the loan, and any remaining balance at the end of 25 years will be forgiven.
The second bill signed today enables borrowers and co-signers to repay defaulted loans through reasonable installment plans that ensure that New Jersey College Loans to Assist State Students loans are repaid. The law codifies the process for settlements allowing borrowers to repay defaulted loans through more affordable monthly payments, enabling the New Jersey Higher Education Student Assistance Authority to repair the credit ratings of borrowers who consistently comply with such payment plans.
“The average student in New Jersey graduates from college with more than $30,000 in debt. It can take years for graduates to fully pay off their debt, which can haunt them for years as they try to navigate the expenses of adulthood,” said Assemblyman Ralph Caputo, who said borrowers previously lacked a path to loan rehabilitation if they struggle to make payments.
“A college degree is an essential tool to overcoming economic challenges,” said Assemblyman Dan Benson (D-Hamilton). “However, the student must be able to afford college in the first place. Establishing a pathway for students from disadvantaged backgrounds to repay their loans in a fair, manageable way will improve access to college and expand their career opportunities.”