When Kevin Daniel DeOliveira, 23, was murdered in January, 2015, his mother was suddenly faced with nearly $20,000 in student loans.
At first, Marcia DeOliveira-Longinetti thought the loans would be written off. But after making inquiries with a New Jersey state agency, she received a letter informing her otherwise.
“Please accept our condolences on your loss,” said a letter from the Higher Education Student Assistance Authority. “After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly statements will continue to be sent to you.”
DeOliveira-Longinetti, who co-signed her son’s loans, was shocked and confused. The federal government had quickly written off her son’s loans, but New Jersey continued to demand its monthly payments of $180, totaling nearly $20,000 over the span of nine years.
“We’re not going to be poor because of this,” she told The New York Times. “But every time I have to pay this thing, I think in my head, this is so unfair.”
New Jersey’s loan program, which currently totals $1.9 billion, is designed to provide students with the stepping stone to a higher education. Students use loans to pay for expensive tuition costs and then later pay back the state through small monthly payments.
But an investigation by ProPublica, in collaboration with The New York Times, found that New Jersey runs a particularly stringent loan program that can lead to financial ruin. Endowed with the power of the state—unlike other for-profit loan programs—New Jersey can employ all sorts of forceful tactics to recover the loan without any court approval of its actions.
New Jersey can rescind state income tax refunds, revoke professional licenses, and even nab lottery winnings, and it has very little sympathy for financial hardships like extreme poverty, job loss, illness, and death.
ProPublica interviewed dozens of borrowers whose say their loans have ruined their lives. Take the case of non-Hodgkin’s lymphoma survivor Chris Gonzalez: after Goldman Sachs laid him off and Gonzalez sought relief from his loan payments, New Jersey sued him for nearly $266,000 and snapped up a state tax refund he was waiting for. The federal government, on the other hand, responded to his request by suspending his federal student loan payments.
“It’s state-sanctioned loan sharking,” Daniel Frischberg, a bankruptcy lawyer, told the Times. “The New Jersey program is set up so that you fail.
One reason why the state employs such aggressive tactics is that it relies heavily on the loan program’s revenue, which covers about half of the administrative budget.
Adding to that, Wall Street investors finance the loans through tax-exempt bonds, and losses must be minimized in order to “satisfy” investors. This leads to little financial wiggle room when it comes to loan suspension or forgiveness.
Other states, like Massachusetts, automatically cancel debt if the borrower dies or becomes disabled, according to Alternet. New Jersey has chosen a different strategy, encouraging its borrowers to purchase life insurance to cover their debt in the case of tragedy.
To give it some credit, the loan brochure issued by the Higher Education Student Assistance Authority is very clear about what happens should a borrower die. The front of the pamphlet features a blurry image of a college graduate, stamped with a giant question mark and the words: “Are you prepared for the unthinkable?”
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