NJCLASS and HESAA Loans Just Absolutely Suck. Have a Nice Day.

I received the following statement from a reader:

“NJ CLASS/HESSA gave my loans to a “Law Firm” -collection Agency, that sent bullies to my brother-in-law’s house. They were yelling outside his apartment building that he needed to pay his bills and he was a thief!!! They came to my home, and served my minor child court papers! They left him in tears.

All due to the fact that I mistakingly did not put loan numbers on my checks, and payments were put on one account. We had four accounts. Currently, two accounts are with the “law firm”- $800.00 a month- current. Two accounts with NJ CLass- $700.00 a month- current-until the virus, and a deduction from payroll- $400.00 a month. We never see a bill or total amount left from “law firm”. I have no idea what our balance is at NJ CLASS, but I do know that with my husband at a 40 % pay decrease…and 2 kids in college currently…we are making monthly payments..I’d never get loans again…we can’t afford $2000.00 a month!! I can’t find this “Ombudsman” that was supposed to help…I received a letter stating forgiveness due to being current..$559.00!! We need help!!”

I’m Sympathetic But…

I’m entirely sympathetic about the many issues facing consumers with NJCLASS loans. These loans are from the State of New Jersey Higher Education Student Assistance Authority (HESAA). And the agency proclaims “HESAA, the Higher Education Student Assistance Authority, is the only New Jersey state agency with the sole mission of providing students and families with financial and informational resources for students to pursue their education beyond high school.” – Source

In my experience dealing with consumers with NJCLASS loans, they are a nightmare. You see, unlike federal student loans which have specific relief programs, NJCLASS loans are neither federal or state-funded. They are funded by bondholders and operate without consideration of affordable repayment.

Here is one experience of a borrower, Feds offer student loan relief, but some N.J. borrowers are left behind.

Temporary relief is being provided to NJCLASS loan holders as a result of the COVID-19 CARES Act. Relief options include:

  • Providing a minimum of 90 days of forbearance relief for borrowers;
  • Waiving late payment fees for borrowers;
  • Ensuring no borrower is subject to negative credit reporting; and
  • Ceasing debt collection lawsuits for 90 days;

But those temporary options will go soon and NJCLASS loan holders will be back to the very limited options they had before the coronavirus arrived.

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“As New Jersey’s state financial aid agency, we remain committed to supporting student loan borrowers,” said David J. Socolow, executive director of HESAA. “We are providing relief for NJCLASS borrowers experiencing illness, unemployment, or financial hardship. During the pandemic emergency, we are protecting borrowers’ credit and suspending involuntary collection activities.” – Source

NJCLASS loans have no real affordable repayment options. But then again, they never did. It wasn’t until 2016 that loans were forgiven when someone died.

Even now most people can hope for is really a postponement of payments that will inflate the total balance due and the remaining monthly payments. As NJCLASS loans state, “NJCLASS loans carry fixed-repayment terms that begin when the loan is first disbursed. Relief periods do not extend the repayment term. A higher monthly payment is usually required after a relief period, since the NJCLASS loans must be repaid in full by their maturity date.” – Source

A temporary two-year program exists but it’s just that, temporary. For some loans after June 1, 2018, there is the HIARP program. “HIARP is available for Standard NJCLASS loans with applications that were received on or after June 1, 2018. NJCLASS Graduate/Professional loans, Refi+ and Consolidation loans are not eligible for HIARP. Standard NJCLASS loans made prior to June 1, 2018 cannot participate in the HIARP program.”

“Through the HIARP program, monthly payments on eligible Standard NJCLASS loans shall be reduced to 15% of the total of the household income of all of the parties to the loan that exceeds 150% of the federal poverty guideline for their family size, with a minimum monthly payment of $25 (“Reduced Payments”). The repayment term for loans in the HIARP program will be extended to 25 years from the date of origination and any remaining balance at the end of 25 years will be forgiven. During the HIARP period interest continues to accrue on the loan. Payments received while in HIARP will be applied to directly to principal. Amounts forgiven after 25 years may be taxable to the borrower. If an amount forgiven is in excess of $600, HESAA is required by the IRS to issue a 1099-C.”

HIARP participants must first go through two-years of RAP (Repayment Assistance Program) before being eligible for HIARP. “The Household Income Affordable Repayment Plan (HIARP) is designed to provide additional payment relief when all parties to the loan still continue to face financial hardship after exhausting of their two (2) years of RAP eligibility.”

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The RAP program has some serious limitations as well. “Loans that are deferred for both principal and interest payments are not eligible for RAP. Loans that have reached default status are also not eligible for this program. All parties to the loan must complete the application and provide the required documentation so that eligibility for the program can be evaluated. HESAA reserves the right to make a final determination on eligibility. Enrollment in RAP is subject to the availability of funds.”

And if you noticed the date problem, only some loans after June 1, 2018, would eventually be eligible for HIARP but we have not even reached the first eligible enrollment for loans in that program since it has not been two years yet for consumers to enroll in RAP and even be potentially qualified for HIARP.

The solution for the HESAA and NJCLASS loan problem rests squarely with the State of New Jersey and lawmakers. All of the problems with these loans can be dealt with through a legislative solution. I would urge loan holders to find their political representatives here and contact them to lobby for change.

Until then, you are basically screwed. Have a nice day.

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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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