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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By Bills.com Team
May 5, 2010

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

9 Comments

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  • 35x35
    Feb, 2013
    Crystal
    I have a $100,000 NJ Class loan. 1 year ago $10,000 went into default and is now in the hands of a debt collection lawyer. I paid $1,000 before my husband was laid off and now my job is in the process of laying people in my position off. They have changed the job requirements and so there is now less work so, there isn't any need for too many unit reps in my dept. I have fallen behind in payments and they are telling me there is nothing they can do about that. I have no problem with paying them but they are saying they have no other options for repayment. Should I contact a lawyer to see if an agreement can be reached?
    0 Votes

    • 35x35
      Feb, 2013
      Bill
      If I understand the facts you shared correctly, you have two issues:
      • An NJ Class loan in default: Try to negotiate a settlement. Consult with a New Jersey lawyer who has experience in this area if you do not make any headway on your own.
      • NJ Class loans not in default: See the links in the original article above to learn how to apply for a deferment.

      Let us know how you resolve your situation.

      0 Votes

  • 35x35
    Dec, 2012
    Daniel
    I'm a NJ Bankruptcy & Student Loan Lawyer and I hate to inform you but you are wrong in regards to the collection procedures of the NJCLASS loan program. The regulations allow for administrative wage garnishment, just the same as the federal loan program. Furthermore they can offset your state income tax, offset any lottery winnings, accelerate interest, suspend NJ professional licenses and the list of horror goes on. Just thought your readers should know.
    0 Votes

    • 35x35
      Dec, 2012
      Bill
      Thank you for the information. We corrected the article above. Readers, Daniel Frischberg is a New Jersey lawyer who has experience in bankruptcy law and student loan negotiations.
      0 Votes

    • 35x35
      Dec, 2012
      TOM
      What to do with a NJ Class Loan in default and collection. I went to school for 5 years, but they wanted money after 4 years. It's been all downhill from there and there's been no help from New Jersey.
      0 Votes

    • 35x35
      Dec, 2012
      Bill
      It would be helpful to know a few details about your NJ Class Loan and your financial situation:
      • What is the balance due?
      • When was the last time you made a payment?
      • What have been the results of your contacts with the New Jersey Higher Education Student Assistance Authority, and has HESSA offered any payment plans you can afford?
      • Are you employed or otherwise receiving income?

      Knowing a little more about your situation may help us and fellow readers come up with solutions.

      0 Votes

    • 35x35
      Jan, 2013
      Nikia
      I need assistance with NJCLASS as well. These loans went into repayment prior to finishing my degree and any information on how to get them back in good standing or what my options are would be helpful.
      0 Votes

    • 35x35
      Jan, 2013
      Bill
      What response did you receive from HESSA if or when you called it to discuss an NJCLASS deferment or forbearance? Were the offers helpful? What other options did HESSA present to you, if any?
      0 Votes

    • 35x35
      Apr, 2013
      Ian
      I too have defaulted on a New Jersey Class Loan. I have been diligently paying it back for over 2 years now. I have been denied for almost everything that you would need credit for. This is a nightmare and I wish there was a way to get it back into a repayment status.

      The reason I got into trouble in the first place is that my father took the loans out for me when I was 18. I didn't understand anything about student loans and I don't really think my father did either. He chose the option to pay the interest while I was in school. My father stated that he would pay the interest for me. He did not do this and later stated that he never said he would. I was stuck having to pay it. By the time I was a senior in college the bill was $585.00 every three months. I made $120.00 every two weeks working as a part time student. I was just barely making it before I had to buy books for classes, supplies, clothes and food. I was unable to pay the interest. I went on to graduate school because I had an offer from the college I was working at to let me attend for free. They also gave me a small paycheck of $250.00 a month. As books got more expensive and car insurance rates increased I started to drown.

      When I called the Higher Education Student Assistance Authority I expressed my issues clearly. They then stated that I had to file for a hardship. I asked if I could just defer the interest until I was out of school and they said no as it was not the initial option chosen for the loan. I explained that the cost was too high and it was becoming unbearable as I had other loans and bills to pay back as well. They stated that nothing could be done. I then asked to speak to a supervisor and they told me to file for a hardship. I said, "Ok what does that entail." I wrote his answer down and I still have it with me today. "Looking at your account, you do not qualify for a hardship deferment." I then asked, "Why not?" The man then stated, "You have a balance past due of 860 dollars. You need to be current to qualify for a hardship deferment." My response was, "If I was current, why would I need a hardship deferement? The program seems silly." He laughed and said, "Well its for people who know they may lose their job soon." I then asked, "Well what about someone in my situation?" He stated, "You'll just have to find some way to pay. Dont you have a relative you can ask for it?" When I stated that I did not he chuckled again and stated that there was nothing that could be done then. I let him know that I was very unsatisfied with the conversation and by the way I was treated on the phone.

      I thought that perhaps this was maybe just a case of one specific person giving a customer a hard time. I called back several times and got the same response. Not only is this organization unbending in assisting students, they are rude to their customers.

      I have resigned myself to the fact that for the next 8 or 9 years I will be paying 500 dollars a month to the state of New Jersey and not have any credit to purchase. I will be 40 years old before my wife and I can start our family in a home.

      Something must be done. I find that it was pretty easy to pay back the loan and the interest once I graduated and got a job. It was impossible as a student. I do realize my fault in not knowing what I was getting into and my fathers fault for not explaining it but I tried to make good with them many times and to no avail.

      I would not recommend a New Jersey Class Loan unless you are desperate.
      0 Votes