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NJCLASS Collections & Loan Forgiveness

I have $47,000 in New Jersey private student loans. Are there any loan forgiveness programs available for me?

My private student loan (NJ Class) went into collection, but I got them to agree to a payment agreement and have since made 12 consecutive payment on time. I've been waiting for some kind of improvement to show up on my credit report, but so far the balance hasn't even changed, even though I've been paying more than just the monthly interest. Is there any way to get the loan out of collection entirely without paying the balance ($47k) or improve my situation?

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Bill's Answer
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New Jersey student loan debt
Highlights

  • Offered by HESAA, NJCLASS student loans are state-backed loans.
  • HESAA allows cancellation of NJCLASS loans on a limited basis.
  • HESAA has broad powers to collect delinquent NJCLASS loans.

Editor’s Note: An earlier version of this answer categorized NJCLASS loans as private loans incorrectly.

NJCLASS loans are backed by the state of New Jersey, and are offered by the New Jersey Higher Education Student Assistance Authority (HESAA). As such, NJCLASS loans are not federal nor private.

Student Loan Collections Basics

When a borrower defaults, or ceases to pay a federal student loan, the federal government reserves the right to administratively garnish your wages and seize your tax return. By administratively, this means the Dept. of Education does not need to ask a court for the right to take these actions — it can take these actions on its own authority.

Private student loans are handled differently. Regarding collections, private student loans are similar to unsecured debt. If you default on a private loan, the creditor or collection agency must sue you in civil court. If a judgment is won, the creditor or collection agency can ask to have wages garnished and/or liens placed against properties or financial accounts. The only thing that separates a private student loan from an unsecured debt is the fact that private student loans are not dischargeable in a bankruptcy filing, generally speaking.

NJCLASS Student Loan Collections

The New Jersey legislature gave HESAA broad administrative powers to collect delinquent NJCLASS student loans. These include:

  • Expedited increase of interest rate
  • Loss of State income tax refunds or State tax rebates
  • Legal action
  • Assessment of collection charges including attorney fees of up to 30 percent of the debt collected
  • Loss of eligibility for other student aid
  • Negative credit reports
  • Administrative wage garnishment
  • Offset of lottery prize winnings
  • Suspension of New Jersey occupational and professional license (N.J.A.C. 9A:10-6.16)

In effect, HESAA has broader powers than Congress gave the Dept. of Education to collect delinquent federal loans.

You mentioned loan forgiveness. Because you have an NJCLASS loan, I will assume you reside in New Jersey. The New Jersey Higher Education Student Assistance Authority offers Loan Deferment and Forbearance Programs and loan cancellation for former students working as teachers, dentists, physicians, and people working in the social services field with public or non-profit social service agencies. Review the HESAA resource I mentioned to learn if you qualify for a loan forgiveness.

Credit Score

A bit about your credit score. As you discovered, your FICO score will suffer if you default on your student loan.

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.

Some debts have a reporting period longer than 7 years, including:

  • Tax liens: 10 years if unpaid, or 7 years from the payment date
  • Bankruptcy: 10 years from the date of filing (15 U.S.C. §1681c)
  • Perkins student loans: Until paid in full (20 U.S.C. §1087cc(c)(3))
  • Direct and FFEL loans: 7 years from default or rehabilitation date (20 U.S.C. §1080a(f)(1) and 20 U.S.C. §1087e(a)(1))
  • Judgments: 7 years or the debtor’s state statute of limitations on judgments, whichever is longer

The FCRA 7-year rule is separate from state statutes of limitations for debt issues. Just because a debt is removed from a credit report does not mean the statute of limitations has passed or that the debt is no longer collectible.

A student loan falling off a credit report will not cancel the debt. See the Bills.com resource FICO score to learn more about how credit scores are calculated.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

19 Comments

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  • AZ
    Mar, 2014
    Ashley
    I too fell into the horrible tar pit that is NJCLASS loans when I was fresh out of high school not knowing any better. I currently have about 29K with them and payments of approximately $300 a month. My rate says that it is 7% but even when I pay the same time every month the MOST that goes to principle is around $150. Part of the issue is apparently that this compounds daily. My question is if I should cut my losses and try to get a personal loan through a credit union with a better rate to pay this off. The tax breaks I receive are considerably less compared to what I have actually paid in interest.

    To give some more background, I graduated in 2010 and have barely made a dent with making my payments on time. NJ Class already ruined my credit ( since fixed) when they put all of my payments into the wrong account for months when I first graduated -this was before you could view payments and pay online so I spent hours and hours on the phone with them before figuring out the problem - all the while getting increasingly high payments over $1,000. Once this was discoverd I never got so much as an apology and certainly never saw any of that money that was applied to excessive interest again.

    I complained to NJ Class, wrote a letter to the Governor's office when that didn't work, and they are still just a giant pain in my ass. Anyone else here take out private loans to pay off NJ Class loans?
    0 Votes

  • AB
    Mar, 2014
    Anna
    I encourage you all to make a formal complaint about NJ Class if you have any issues.
    0 Votes

  • AB
    Mar, 2014
    Anna
    NJ Class has one of the least flexible repayment options of any loan program available to NJ residents. Please stay away from them for your own good. It's a better option to take a year or two off from college to save enough money for tuition than to be indebted to them. They make it nearly impossible for you to get in touch with them, then they report you to the credit bureau if they don't get their payment in 30 days even if you've left several messages and no one returned your call! I also suggest filing a complaint with the Consumer Financial Protection Bureau if you have complaints.
    0 Votes

  • TM
    Mar, 2014
    Tina
    I too made the uninformed decision to go with NJCLASS. I wish I could give my diploma back for this debt to go away. I owe over $100,000. My monthly payments are over $800 after I consolidated. I'll be well into my 50's by the time I'm done paying. I can't afford to live on my own even with a decent job. By the time I'm done I will be paying triple my initial loan amount with interest included. I wish I could declare bankruptcy or do something. This is no way to live. I hope future college students see these comments and choose cheaper schools or not go at all. It's not worth it in this economy.
    0 Votes

  • PF
    Jun, 2013
    Patrick
    I just got off the phone today with HESAA regarding my son's and nephew's NJCLASS Loans. I made a comment about the interest rates being so high, and the person I spoke with (which they have said to me several times) is that the loans are backed by PRIVATE BONDS, and as such neither the State nor HESAA has any control over the interest rates. You article says the Bonds are not Private, but everyone at HESAA tells people they are. They should be a little more honest about the source of the funding, but this is New Jersey, so I guess they say what they are told to say.
    0 Votes