ASSEMBLY HIGHER EDUCATION COMMITTEE

STATEMENT TO

ASSEMBLY, No. 4623

STATE OF NEW JERSEY

DATED:  JANUARY 17, 2019

      The Assembly Higher Education Committee reports favorably Assembly Bill No. 4623.

     This bill establishes a process for the Higher Education Student Assistance Authority to declare a loan under the New Jersey College Loans to Assist State Students (NJCLASS) Loan Program as in default or rehabilitated.  Under the bill, the authority may declare an NJCLASS loan program loan to be in default when the parties to the loan fail to meet the terms of the promissory note under circumstances where it is reasonable for the authority to determine that the parties no longer intend to honor the obligation to repay the loan or when the parties fail to make installment payments when due, provided failure to repay persists for:

     (1)   at least 180 days when payments are due monthly; or

     (2)   at least 240 days when payments are due less frequently than monthly.

     The bill further provides that upon default, parties may become liable for the entire balance of the loan.  To facilitate recovery on a defaulted NJCLASS loan program loan, the authority must offer parties to the defaulted loan the opportunity to enter into a settlement agreement, either pre- or post- judgement, based on the terms of the loan and the ability of all parties to the loan to make payments.  For an NJCLASS loan program loan financed in whole or in part by bonds issued by the authority, the terms of the settlement agreement cannot violate the terms of the applicable bond indentures. 

     Under the bill, if parties to a defaulted NJCLASS loan program loan demonstrate to the authority an ability and willingness to repay the loan by making nine on-time monthly payments over the course of ten consecutive months pursuant to the settlement agreement, the loan will be considered rehabilitated for the limited purposes of meeting the requirements of Title VI of the federal “Economic Growth, Regulatory Relief, and Consumer Protection Act.” 

     The bill also provides that if subsequent to rehabilitating the loan the parties fail to continue to honor the obligations of the settlement agreement for at least 180 days, the loan will no longer be considered rehabilitated.  Under the bill, a defaulted NJCLASS loan program loan may only be rehabilitated once.

      Finally, the bill provides that the authority must accurately report the status of defaulted loans to the credit bureaus pursuant to the  federal “Fair Credit Reporting Act” and Title VI of the federal “Economic Growth, Regulatory Relief, and Consumer Protection Act.”