New Jersey Student Loan Forgiveness

Student loans can be federal or private. You mentioned your loans are private (NJCLASS) and offered by the New Jersey Higher Education Student Assistance Authority (HESAA). Some basic student loan information will help readers understand the types of student loans available today.

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, I mean 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.

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. This law is known as 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 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7½ years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

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. Federal credit report laws and a state statute of limitations laws are separate and independent from each other.

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