New Jersey Higher Education Student Assistance Authority – Hell Just Froze Over

New Jersey Higher Education Student Assistance Authority (NJHESAA) has been ruthless in collecting on student loans even when challenged by the State of New Jersey for being unreasonable.

NJHESAA has been less than accommodating when it comes to debtors underwater with student loans. But attorney Edward Hanratty of Tomes & Hanratty managed to secure a huge bankruptcy discharge of NJHESAA loans for his client, Sarah Hunter.

Hunter was attempting to discharge $288,911 in NJHESAA student loan debt. Hunter claimed that repayment of that level of debt for a public interest sector employee would constitute an unfair hardship. Hunter is married, expecting a second child and he husband earns $74,000 a year while she earns $50,000.

Her student loan payment is $2,609 a month and their joint income is unable to maintain a minimum standard of living for her family with that payment.

Hunter filed her Chapter 13 bankruptcy in April of 2015. She then filed an adversary complaint against NJHESSA. Guess what, NJHESSA fought back. The trial for this case eventually took place in February of 2018.

In addition to the NJHESSA loans, Hunter also has $66,000 in federal student loans. Why lenders allow people to borrow themselves into these holes of obvious financial slavery, is beyond any sound explanation.

NJHESSA claimed a number of Hunter’s New Jersey loans were actually New Jersey College Loans to Assist State Students (NJCLASS).

Now the family income may sound like a lot in some parts of the country, it’s not in New York Coty where Hunter is employed whiles she lives in neighboring New Jersey which has a high cost of living.

At the time the original bankruptcy was filed, Hunter owed the following amounts.

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Hunter had made $21,690 in payments on her NJCLASS loans in the past.

The court found that to qualify for the undue hardship standard of the Brunner test to be considered for a discharge of student loans that “a debtor is not required to live in poverty to satisfy the first prong.” Rather, “the proper inquiry is whether it would be ‘unconscionable’ to require [the debtor] to take any available steps to earn more income or to reduce her expenses.”

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Because of changes in their life, like the arrival of the new baby, the court found that after reasonable expenses the couple could afford to pay $450 a month towards the student loan debt.

While the court said, “Ms. Hunter incurred a massive amount of student loan debt to finance her education. It is fair to request her to repay this debt to the fullest extent possible, even if it means that she will have to endure financial hardship.” The court ultimately determined that Hunter would continue to be responsible for some of her loans but would be granted a discharge of $231,017 of her New Jersey student loans.

You can read the court ruling here.

While it is not a total discharge of her student loan debt, the court took a partial discharge approach.

“Having determined that Ms. Hunter has proven that repayment of all her loans would constitute an undue hardship, the Court now turns to the dischargeability of the debt. The Third Circuit has not addressed whether section 523(a)(8) requires complete discharge of student loan debt or permits partial discharge. Other circuits are divided on this issue. Some courts hold that section 523(a)(8) requires either a complete discharge or no discharge at all. Others justify partial discharge of either the aggregate debt or of individual loans on various grounds. Courts adhering to the so-called “hybrid approach” construe section 523(a)(8) as allowing the discharge of individual student loans on a loan-by-loan basis, thereby harmonizing the statute’s language with its intent to relieve hardship and the Code’s objective of providing a fresh start. “Partial dischargeability or other modification of a student loan debt accomplishes Congress’ purpose of providing debtors with a ‘fresh start’ while maximizing the repayment of the debt . . . . Financial hardship is not all-or-nothing, but is more or less. The load may be made more bearable by reducing, rather than eliminating it.” At least one court within the Third Circuit has adopted this approach and this Court agrees. Ms. Hunter incurred a massive amount of student loan debt to finance her education. It is fair to request her to repay this debt to the fullest extent possible, even if it means that she will have to endure financial hardship.”

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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