It’s a nightmarish scenario — grieving parents struggling to cope with the loss of their sons and daughters while being dunned to pay back the student loans they co-signed to further their now-deceased children’s educations.
Finally, New Jersey state lawmakers made a bold move. Last November, the legislature passed a law mandating that student loan lenders discharge these debts if the student dies or becomes disabled.
The Higher Education Student Assistance Authority, the private loan agency that oversees almost $2 billion in outstanding student loans had been deploying some heavy-handed tactics to get these parents to pay up. Couples were forced to file bankruptcy, had judgments entered against them and their wages garnished.
In a single year, HESAA filed over 1,600 lawsuits against borrowers in New Jersey courts. Meanwhile, the agency actually had policies in place that dealt with situations where loan forgiveness was possible. However, the agency sent staff emails instructing them not to disclose the existence of those policies unless they were asked specifically about them.
All that ends. Going forth, the same standards that apply to disability and death forgiveness of federal student loans will be applied to the private New Jersey loans. In other words, the debt dies when the original debtor dies.
Although this is one important obstacle removed for consumers who are concerned about getting and keeping their credit on track, there are plenty of others that can become problematic.
If you are struggling with debt management from any source, it may be time to consult a professional and discuss the bankruptcy options that are available to you.
Source: The Trentonian, “New Jersey paves way for student debt discharge after death,” Drew Cloud, The Student Loan Report, Jan. 05, 2017