ASSEMBLY, No. 1119
STATE OF NEW JERSEY
Introduced Pending Technical Review by Legislative Counsel
PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION
By Assemblymen LANCE and ROCCO
An Act concerning lottery prizes and the repayment of student loans and supplementing Title 5 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Director of the Division of the State Lottery in the Department of the Treasury and the Executive Director of the Office of Student Assistance in, but not of, the Department of Treasury shall initiate an ongoing data exchange in the Office of Telecommunications and Information Systems in the Department of the Treasury before a payment is made of a State lottery prize in excess of $1,000.
2. The Executive Director of the Office of Student Assistance shall periodically supply the Office of Telecommunications and Information Systems with a list of those individuals in default of student loan repayments to the Office of Student Assistance.
3. The Director of the Division of the State Lottery shall promptly provide the Office of Telecommunications and Information Systems with a prize winners list, which shall include the prize claimant's name, address and social security number and the amount of the pending payment.
4. The Office of Telecommunications and Information Systems shall cross check the lottery list with the data supplied by the Executive Director of the Office of Student Assistance for a social security number match. If a match is made, the Office of Telecommunications and Information Systems shall notify the Office of Student Assistance.
5. If a lottery prize claimant is on the list of individuals in default of a student loan as reported pursuant to section 2 of P.L. ,c. (C. ) (now pending before the Legislature as this bill), the Office of Student Assistance shall promptly notify the Department of the Treasury and the Division of the State Lottery of the claimant's name, address, social security number and the outstanding amount of the student loan. The Department of the Treasury shall withhold this amount from the pending lottery payment and transmit same to the Office of Student Assistance. If the amount of the student loan outstanding is greater than the amount available from the lottery payment, the entire amount available shall be transmitted to the Office of Student Assistance.
6. Any of the claimant's lottery prize funds remaining after withholding pursuant to section 5 of P.L. ,c. (C. )(now pending before the Legislature as this bill) shall be paid to the claimant in accordance with lottery procedures.
7. The State Treasurer, in consultation with the Office of Student Assistance, shall promulgate, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), such rules and regulations as may be necessary to effectuate the purposes of this act including, but not limited to, regulations providing for prompt notice to any prize winner from whose award the Department of the Treasury seeks to withhold funds, of the amount to be withheld and the reason therefor and providing the prize winners with the opportunity for a hearing upon request prior to the disposition of any funds. For the purposes of this act, "prompt notice" shall mean notice within 14 days or less.
The State Treasurer shall also provide by regulation, safeguards against the disclosure or inappropriate use of any personally identifiable information regarding any person obtained pursuant to this act.
8. This act shall take effect on the 90th day after enactment.
STATEMENT
This bill establishes procedures to ensure that persons who win State lottery prizes in excess of $1,000 and who have failed to make scheduled payments to the Office of Student Assistance on any note held by the Office of Student Assistance will have the proceeds of their lottery winnings automatically applied against the outstanding balance of their defaulted student loan.
The bill directs the State Lottery and the Office of Student Assistance to institute an ongoing computer data exchange to identify these lottery prize claimants and withhold the amount of the student loan repayment in default.
Currently, defaults on repayment of student loans nationally continue to be a cause for concern. Nationally, the default rate on federally guaranteed student loans is 15% for FY92 (the most recent statistic available). In New Jersey, the Office of Student Assistance and financial institutions that have lent money in cooperation with the Office of Student Assistance have loaned over $5 billion to students since the inception of the Office of Student Assistance in the 1960s. Although the net default rate in New Jersey for federal guaranteed student loans is 6.4% and for State student loans (the NJCLASS program) is .34%, defaults on these loans do have an impact when they occur. The State loan program will have less to lend to students if it has to use bond proceeds to cover the costs of defaults. The federal government has to budget greater amounts to cover loan defaults, thus increasing federal spending. The federal government has also recently attempted to burden States by requiring them to share the costs of student loan defaults.
The national trend on both federal and State levels is to reduce the cost of collecting defaulted student loans by promoting such alternatives to litigation as wage garnishment, federal and State income tax refund offset (e.g., SOIL), and lottery offset. This State has endorsed this trend. Rather than have one State agency incur costs to collect on amounts another State agency is paying out, New Jersey collects $2 million annually by offsetting State income tax refunds to cover student loan defaults. Also, since 1992, New Jersey has a lottery offset program to address overdue child support payments.
The bill seeks to expand the State lottery offset program to minimize the debt created by defaulted student loans.
Provides that State lottery prizes over $1,000 will be used to offset defaulted guaranteed student loans.