NJ Senate to Probe State Student Loan Authority

MICHAEL ZHANG

New Jersey lawmakers have called a hearing next week to grill the state’s student loan authority about its collection practices and lending terms.  

The Senate Higher Education Committee and Senate Legislative Oversight Committee have invited Gabrielle Charlette, executive director of the Higher Education Student Assistance Authority, which oversees state grants and private student loans, to appear in Trenton Aug. 8.  

The joint hearing was called in response reports published by the New York Times in conjunction with ProPublica detailing the agency’s onerous lending terms and aggressive collection tactics.

“The news reports were very troubling, and if true, a dramatic overhaul of our state loan process should be considered,” Senator Bob Gordon, chair of the Senate Legislative Oversight Committee, said in an Aug. 1 press release.

HESAA has unique, statutorily-authorized powers that allow it to use aggressive collection tools, according to Moody’s Investors Service, which rates bonds backed by agency’s loans. These tools include administrative wage garnishment starting at 90 days of delinquency; offset of state property tax rebates, state income tax refunds and other state payments to individuals; ability to revoke licenses of professionals and lawyers who default and fail to enter into satisfactory repayment agreements with HESAA; and withholding of tuition aid grant awards of delinquent borrowers.

In a presale report for the most recent HESAA bond offering, completed in May, Moody’s said that these practices result in higher recoveries on defaulted loans, relative to other student loan servicers.

A July 3 New York Times article profiled a mother who co-signed her son’s HESAA loans and was denied loan forgiveness following his murder. After this initial story, more victims of the lender’s aggressive terms have stepped forward to testify.

And on July 28 ProPublica article cites internal emails instructing HESAA staffers not to tell families they may qualify for loan assistance unless they specifically asked. 

“Our focus as a state must be on assisting students in obtaining higher education and succeeding in the workforce,” Senator Sandra Bolden Cunningham, chair of the Senate Higher Education Committtee, said in the press release. “The kind of tactics allegedly employed by this agency are counter to that mission.”

In addition to the HESAA, she said lawmakers would hear from affected families and organizations that help guide students through the borrowing process.