NJCLASS Collections & Loan Forgiveness

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

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New Jersey student loan debt
Bill's Answer: Answered by Mark Cappel

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.

More About Student Loans
Need a Student Loan? Start Here!
Student Loan Consolidation
Private Student Loan Default
Federal Student Loan Default
How to Pay Off a Student Loan
Help with Your Student Loan Debt
Settle a Private Student Loan
Public Service Loan Forgiveness

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

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Comments (19)


Ashley Z.
Silver Spring, MD  |  March 27, 2014
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?
Anna B.
City Of Trenton, NJ  |  March 10, 2014
I encourage you all to make a formal complaint about NJ Class if you have any issues.
Anna B.
City Of Trenton, NJ  |  March 10, 2014
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.
Tina M.
Roselle, NJ  |  March 04, 2014
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.
Patrick F.
Twp Of Brick, NJ  |  June 20, 2013
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.
Crystal H.
Morris Twp, NJ  |  February 11, 2013
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?
Bills.com
February 12, 2013
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.

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Aaron L.
C/o Bordentown, NJ  |  March 20, 2014
Did you have success negotiating a settlement with the collection attorney
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Aaron L.
C/o Bordentown, NJ  |  March 20, 2014
crystal how did you resolve this?
Daniel F.
Maple Shade, NJ  |  December 07, 2012
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.
Bills.com
December 09, 2012
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.
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TOM M.
Lacey, NJ  |  December 30, 2012
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.
Bills.com
December 31, 2012
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.

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Nikia C.
Twp Of Lakewood, NJ  |  January 07, 2013
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.
Bills.com
January 15, 2013
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?
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Ian W.
B/o Rutherford, NJ  |  April 03, 2013
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.
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Rachael A.
Readington Twp, NJ  |  November 12, 2013
I am in a similar situation. I was approved a loan for over $100,000 for an undergraduate degree. My co-signer was laid off due to the economy while I was in college and can not support me in any way in re-payment. HESAA just claimed to ask my co-signer for help or find a way to make my $1,034/per month payments. With the shift in the economy in the last few years, it is near impossible to make these payments. Has anyone found any sort of help beyond deferment or forbearance? These option only put you more into debt. A lower interest rate or longer time to pay off would alleviate having such a high payment per month right out of college in your early 20's.
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Marie G.
B/o Tinton Falls, NJ  |  November 27, 2013
I hope something can be done. I have over $100,000 with NJ CLASS alone (my parents are borrowers and cosigners) but I am expected to pay it back because my parents cannot afford it. I regret ever going to school.
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Rebecca S.
City Of Linden, NJ  |  December 09, 2013
Rachel, You can try to "consolidate" your loan to stretch it out over 30 years instead of 10; however they raise the interest so much that it doesn't really help much. My current payment is $692 a month for $75k in loans; when I tried to consolidate my payment only dropped to $550 and at the end of the 30 years I would've paid close to $150k in interest alone. I decided it wasn't worth it for me as I was able to make the payments each month (although it often meant stretching my paycheck to the last cent), but maybe you could get a lower interest rate and reduce your payment some more. Try looking into it, best of luck!
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