Being murdered is no reason to forgive student loan, New Jersey agency says

[Theinquisition]

http://www.miamiherald.com/news/nati...e87576072.html

Hmm mph, the gov't acting like a loan shark, why am I not surprised. Shit like this is EXACTLY why gov't should stay out of the student loan industry.


Amid a haze of grief after her son’s murder last year, Marcia DeOliveira-Longinetti faced an endless list of tasks – helping the police gain access to Kevin’s phone and email; canceling his subscriptions, credit cards and bank accounts; and arranging his burial in New Jersey.

And then there were the college loans.



When DeOliveira-Longinetti called about his federal loans, an administrator offered condolences and assured her the remaining balance would be written off.

But she got a far different response from a New Jersey state agency that had also lent her son money.

“Please accept our condolences on your loss,” a letter from that agency, the Higher Education Student Assistance Authority, said. “After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.”




DeOliveira-Longinetti, who co-signed on the loans, was shocked and confused. But her experience with the authority, which runs by far the largest state-based student loan program in the country, is hardly an isolated one, an investigation by ProPublica, in collaboration with The New York Times, found.

New Jersey’s loans, which currently total $1.9 billion, are unlike those of any other government lending program for students in the country. They come with extraordinarily stringent rules that can easily lead to financial ruin. Repayments cannot be adjusted based on income, and borrowers who are unemployed or facing other financial hardships are given few breaks.

The loans also carry higher interest rates than similar federal programs. Most significant, New Jersey’s loans come with a cudgel that even the most predatory for-profit players cannot wield: the power of the state. New Jersey can garnish wages, rescind state income tax refunds, revoke professional licenses, even take away lottery winnings – all without having to get court approval.

“It’s state-sanctioned loan-sharking,” Daniel Frischberg, a bankruptcy lawyer, said. “The New Jersey program is set up so that you fail.”




The authority, which boasts in brochures that its “singular focus has always been to benefit the students we serve,” has become even more aggressive in recent years. Interviews with dozens of borrowers, who were among the tens of thousands who have turned to the program, show how the loans have unraveled lives.

“
Please accept our condolences on your loss. After careful consideration of the information you provided, the authority has determined that your request does not meet the threshold for loan forgiveness. Monthly bill statements will continue to be sent to you.
Higher Education Student Assistance Authority

The program’s regulations have destroyed families’ credit and forced them to forfeit their salaries. One college graduate declared bankruptcy at age 26 after struggling to repay his debt. The agency filed four simultaneous lawsuits against a 31-year-old paralegal after she fell behind on her payments.




Another borrower, Chris Gonzalez, could not keep up with his loans after he got non-Hodgkin’s lymphoma and was laid off by Goldman Sachs. While the federal government allowed him to suspend his payments because of hardship, New Jersey sued him, seeking $266,000 in payments, and seized a state tax refund he was owed.

One reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds and needs to satisfy those investors by keeping losses to a minimum.

Loan revenues also cover about half of the agency’s administrative budget.

In 2010, the agency filed less than 100 suits against borrowers and their families. Last year, it filed more than 1,600. (Some could result from federal loans handled by New Jersey, though such loans make up just 4 percent of the agency’s portfolio.)

The cases are handled by debt collectors, who can tack on another 30 percent in fees on top of the outstanding debt.

Marcia Karrow, the authority’s chief of staff, said that “the vast majority of these borrowers are happy with the program.” She added that New Jersey’s loans had “some of the lowest default rates” in the country. But when asked to produce the annual default rates, the agency sent ProPublica and The Times data only for students with strong credit scores, making it impossible to calculate the overall rate.

A spokesman for Gov. Chris Christie said the governor did not control the authority and declined to respond to questions about the loan program. But Christie, a Republican, appointed its executive director, Gabrielle Charette; he also has the power to appoint at least 12 of the agency’s 18 board members and can veto any action taken by the board.

Besides administering the loan program, the authority provides financial aid counseling, conducting hundreds of financial aid nights at New Jersey high schools, where it offers advice about paying for college, including pitching its own loans.

DeOliveira-Longinetti, who emigrated from Brazil and had long worked as a nanny while raising her son as a single mother, always knew that paying for his college education would be a challenge. Even after marrying her husband when Kevin DeOliveira was in middle school, she knew that their combined income would not be enough to cover the costs. A friend told her about New Jersey’s program. That, along with a combination of scholarships, grants and other loans, allowed DeOliveira to enroll at the University of Vermont.

Since her son’s murder, DeOliveira-Longinetti has made 18 payments to New Jersey. Paying $180 per month, she has about 92 to go.

“We’re not going to be poor because of this,” she said. “But every time I have to pay this thing, I think in my head, this is so unfair.”

A different path

For decades, states served as middlemen for federal student loans. Most of the loans were made by banks and were handled and backed by regional and state-based agencies as well as by the federal government. The arrangement was unwieldy, expensive and marked by scandal.

After Pennsylvania’s student loan agency lost a public records lawsuit in 2007, documents revealed that the agency had spent nearly $1 million on things like fly-fishing, facials and falconry lessons.

That same year, New Jersey’s agency was caught in what amounted to a kickback scheme. The state attorney general found that the agency had improperly pushed one company’s loans in exchange for annual payments of $2.2 million. A subsequent investigation by the state’s inspector general found that the agency was in “disarray.”

In 2010, Congress and the Obama administration decided to effectively eliminate the role of state agencies by having only the federal government lend directly to students.

Some states, like California, decided to downsize and transferred their federal loan portfolios. Others, such as Pennsylvania, won contracts from the federal government to service debt from the federal loan program.

New Jersey chose a different path. In the years leading up to the end of the federal program, New Jersey sharply expanded its loan program, slowly replacing the federal loans it once handled with state loans. From 2005 to 2010, loans from the agency nearly tripled, to $343 million per year. Since then, the agency has reduced its loans by half, but its outstanding portfolio has remained roughly the same, about $2 billion.

Karrow said the growth of New Jersey’s program was simply a result of both the increasing number of students and the rising cost of tuition. But in fact, college enrollment and tuition have not grown as rapidly as the program’s size.

While other states have similar loan programs, New Jersey’s stands apart, for both its size and its onerous terms.

“
I never thought that sending my daughter to college would ruin our lives.
Tracey Timony, who struggled to help pay off her daughter’s loans

Massachusetts, running the next-largest program, with $1.3 billion in outstanding loans, automatically cancels debt if a borrower dies or becomes disabled, something many other states also do. The program of the third-largest state lender, Texas, is half the size of New Jersey’s. And Texas offers a flat interest rate, a modest 4.5 percent, while New Jersey’s rates can reach nearly 8 percent. Some other state loan programs have more flexible repayment options – Rhode Island, for example, offers income-based repayment.

New Jersey, meanwhile, encourages students to buy life insurance in case they die to help co-signers repay. As an agency pamphlet cautions, “Are you prepared for the unthinkable?”

The agency, Karrow said, treats each instance of a deceased borrower case by case and tries to be compassionate, but, she added, “we must also meet our fiduciary duty to our bondholders.”

When consumer lawyers protested the program’s onerous conditions at a 2014 agency meeting, the agency, according to minutes from the session, said that giving borrowers a break would make the bonds sold to finance loans “less attractive to the ratings agencies and investors.”

Indeed, in a recent bond assessment, the credit rating agency Moody’s cited the authority’s “administrative wage garnishing, which it uses aggressively,” for “significantly higher collections” compared with other programs.

A New Jersey rule adopted in 1998 allows the authority to give borrowers in default a second chance by allowing them to become current on their account through on-time payments. But the agency has never granted a reprieve and instead cuts off contact with borrowers, leaving them at the mercy of collection firms.

Karrow said federal regulations prohibited the agency from offering such relief, but student loan experts disputed that assertion.

“There is nothing in the federal law or regulations that prohibits them from offering private loan rehabilitation, “ Mark Kantrowitz, a financial-aid expert, said.

The combination of a lack of flexibility, an unwillingness to discharge loans and the state’s power to seize wages has resulted in even “more intractable problems for our clients than predatory mortgages, deceptive car loans or illegal internet payday lending,” said David McMillin, a lawyer with Legal Services of New Jersey, a nonprofit that provides free legal assistance to low-income state residents. “Many borrowers and co-signers find themselves facing a lifetime of debt problems.”

‘As aggressive as possible’

Given the lack of options, some New Jersey borrowers have resorted to declaring bankruptcy, even though, as is true of all student loans, their debt is rarely canceled. Declaring bankruptcy also makes it virtually impossible to secure a mortgage, lease a car or even use credit cards for years. But for New Jersey borrowers, such an extreme step at least offers a way to gain manageable monthly payment terms.

As a co-signer, Tracey Timony struggled to help pay off her daughter’s $140,000 in loans. Though the Higher Education Student Assistance Authority can seize wages or tax returns without court approval, it must secure a judgment to dip into borrowers’ bank accounts or place liens on their property. Instead of garnishing Timony’s wages, New Jersey sued her after her daughter defaulted.

“The agency is looking to put as much pressure on the borrower and be as aggressive as possible, and the way that you do that is you go after everybody that is liable,” Jennifer Weil, a New Jersey student debt lawyer, said. “In case the garnishment doesn’t work, a judgment will help put pressure on the parents.”

Timony declared bankruptcy and got monthly debt payments that will rise no higher than about $1,000 a month, far less than what the agency had demanded.

“I never thought that sending my daughter to college would ruin our lives,” Timony said.

Few have felt the weight of the agency’s powers more than Gonzalez, the college graduate who was sued after receiving a diagnosis of cancer and losing his job.

He had borrowed the maximum he could in federal loans – a total of about $30,000 for five years – and paid for most of his tuition with loans from New Jersey.

“I felt so comfortable because it was the state of New Jersey,” Gonzalez said. “It’s the state, my government, trying to help me out and achieve my American dream. It turns out they were the worst ones.”

Over five years, he took out more than $180,000 in state loans. Unlike most other states, New Jersey does not impose a strict cap on loans to discourage overborrowing. One family, according to a recent state audit of the agency, took out more than $800,000 in loans, more than five times the value of its home.

“
It’s state-sanctioned loan-sharking. The New Jersey program is set up so that you fail.
Daniel Frischberg, a bankruptcy lawyer

Gonzalez’s loans had a relatively high interest rate – on average about 7.5 percent. At the time it seemed like a good investment. He graduated with an engineering degree from Embry-Riddle Aeronautical University in Florida and landed a job on Wall Street working as a programmer for Goldman Sachs.

But a few months after he started, unusual rashes began to appear on his legs and underarms. He learned he had non-Hodgkin’s lymphoma and started radiation therapy.

After three years of cancer treatments, Gonzalez was also laid off.

He needed to take care of his student loans. The federal government and his private lenders all deferred his debt for at least six months.

Gonzalez expected New Jersey to do the same, but the agency refused, requiring him to pay at least $500 a month. With unemployment checks as his only income and burdened by continuing health expenses, it was too much for him.

He made no payments while the agency reviewed his case. In June 2014, Gonzalez moved to Florida to lower his cost of living. His health slowly improved and he started his own company, developing technology for small businesses. In his first year, he made just $26,000, but he started to pay back his federal and private bank loans.

On May 8, 2015, after months of hearing nothing, he received an email from New Jersey: His deferral request had been denied and his loan was being sent to a collection agency.

“Unfortunately, because of how the loan originated, the authority is not in a position to offer forbearance or relief,” Robert Laird, a program officer at the loan agency, said in the email.

Terrified by what a default would mean for his credit rating, Gonzalez told the agency that he would stop paying for health insurance and use the money – $200 per month – to repay the loans.

The agency rejected the offer. “In the event that your doctor declares you total and permanently disabled, please keep me posted,” Laird told Gonzalez in an email.

One day in April, a stranger rang Gonzalez’s doorbell.

“Chris Gonzalez?” he asked. Gonzalez nodded. “You’ve been served with a lawsuit from the New Jersey Higher Education Student Assistance Authority.”

The suit demanded more than $260,000 – about $188,000 for the original loans, $34,000 in interest and $44,000 to cover the fees of a collection agency’s lawyer.

Even if his business improves, Gonzalez has no idea how he will afford his ballooning payments.

“I don’t have money,” he said. “I am spending it all on my debt.”

(Annie Waldman is a reporter for ProPublica, an independent, nonprofit newsroom that produces investigative journalism in the public interest.)

[vindicatorx]

Why even bother linking the article when you fucking quoted the whole thing? Yeah read this 3 days ago when it was posted on Yahoo or whatever site. It sucks for the parent there is not much they can do. What else is there to say? I mean you take out a loan to buy a house you don't have insurance and the house burns down you think they just say oh that sucks for us you totally don't have to pay us back? School loans are an investment just like any other loan.

[Aeluron Lightsong]

And the Loan Agency was appointed by Gov Chris Christie. So.....blame him to.

[Gemini Soul]

Why even bother linking the article when you fucking quoted the whole thing?

Took the words right out of my mouth lol.

[Garnier Fructis]

DeOliveira-Longinetti, who co-signed on the loans

Well, there's your problem.

It would be bullshit if she hadn't co-signed and they were just going after next of kin for the money, but that's not what's going on here.

[Theinquisition]

Why even bother linking the article when you fucking quoted the whole thing? Yeah read this 3 days ago when it was posted on Yahoo or whatever site. It sucks for the parent there is not much they can do. What else is there to say? I mean you take out a loan to buy a house you don't have insurance and the house burns down you think they just say oh that sucks for us you totally don't have to pay us back? School loans are an investment just like any other loan.

Sucks that she co-signed on it, but common sense would say that if the person is dead, that you should cut them a bit of a break.

wow, who'da thought id be the compassionate one on MMOC today.

[Berengil]

Well, she co-signed on the loan. That's what co-signing means, you're liable if the primary defaults for any reason.

Sure, the whole "son got murdered" thing adds an emotional angle to it, but again: she co-signed the loan. That's what that entire concept is built around.

There you go. Never, AND THE ROCK MEANS EVER, co-sign a loan. For anybody. It means you're responsible for the loan if the primary signer can't pay for whatever reason.

Now if you advocate there should be a death forgiveness clause as pertains to the primary signer, that's a change in the law I would support.

[A dot Ham]

Well, she co-signed on the loan. That's what co-signing means, you're liable if the primary defaults for any reason.

Sure, the whole "son got murdered" thing adds an emotional angle to it, but again: she co-signed the loan. That's what that entire concept is built around.

Before you start spouting off acting like any expert.

School loans are completely different than any other loan. In every case, death of the debtor results in writing off of said loan.

School loans are constructed in such a way that students who have little or no credit, and no collateral can receive them. The whole idea behind it being that a person who obtains a college education is likely to pay off said loan.

Private loans are something else entirely. While in most cases subject to the same rules and regulations, you will almost always needs a bankruptcy court to make a ruling on the debt. You, the person they are trying to collect from, will need to take the time, energy, and money to take the bank to court to get the loan absolved.

Private loans almost always use something as collateral, you are typically borrowing against your house. So while yes "education loan" or education is its purpose, but it is no different than a home equity loan.

But the signer/cosigner really has nothing to do with it, its the type of loan.


All in all... student loans are the latest bubble.

Most students can apply for any amount they want as long as they remain a full time student. Personally that's just poor business practice on behalf of the banks. Your loans and the amount you qualify for should have some sort of statistical backing based on job market, major, cost of school etc. Instead whether you are a fine arts major, a human studies major, religion major, or pre-med... if your school offers those programs, you are going to be allowed to loan out the same amount of money, and the ability of the student/professional to pay that back is going to be very different based on career choice, which is typically reflective of their major choice.

[Hotmail]

Sad about her son. This is why you never co-sign for someone; even your kids. I got my student loans by myself. Life insurance is also a good thing.
Like · Reply · 102 · 22 hrs

[GennGreymane]

When DeOliveira-Longinetti called about his federal loans, an administrator offered condolences and assured her the remaining balance would be written off.

But she got a far different response from a New Jersey state agency that had also lent her son money.

But mah local state guberment!

[Crissi]

Never ever co sign. EVER. If you have to, take out a life insurance policy to the amount of the loan so you can cover the payments if needed.

I did read the article on this a few days ago. Quite a few states have death forgiveness / allow a few months break if you get super sick. Basically, blame NJ for having the most draconian loan law in the U.S.

[Serpha]

Moral of the story, don't co-sign anything if you don't want to take responsibility later on. Sad about the son but reality is a bitch, wake up.

[Independent voter]

If they're government loans, we tax payers cosigned and we'll wind up paying the loans off.

[A dot Ham]

Ok, except that's clearly NOT the case, since the death of the debtor is the event that this entire case revolves around.

So, um...I don't really know what else to say there.

Actually it is the case. She just needs to take them to court.

The private education loan companies are brutal and efficient and they expect the majority not to understand the laws, or expect them not to take action because of time, energy, money... etc.

A judge will rule in her favor. In fact she could probably spend $50 to get a lawyer to draft a cease and desist letter informing the bank that she is aware of the laws, has a lawyer, and is prepared to act if they continue to pursue... and the bank would probably just write off the loan right then and there.

[Auxora]

Yeah the co-signer part kind of shoots the whole OP title down. Co-signing means you're liable for the loan if the other person can't pay for any reason (including death). I'm kind of surprised they'd ask for a co-signer for a student loan, that seems odd.

Also, generally with co-signing it's not so much that they figure the credit of A+B (original and co-signer) is enough to approve the loan. It's more a matter of they don't count the credit of the original person too much because their rating is too low, and the loan is essentially in the co-signers name but the money is given to the other person. So person A not being able to pay doesn't change it much, in fact it's almost assumed because otherwise they wouldn't require a co-signer at all. Granted she could probably fight it and maybe get a judge to demand it be written off for compassion reasons, but legally she's definitely liable.

[I Push Buttons]

Lol wtf is with everyone going on about "never ever ever cosign a loan!" It was for her kid's fucking student loan... Its not like she cosigned a loan on some deadbeat debtor who can't get a loan on their own because they're a deadbeat debtor.

Jesus people.

Not only that but what this state agency is doing is atypical since MOST state agencies and federal lending policy forgives student loans if you die or become permanently totally disabled... So she has every right to be upset about this and it doesn't serve as an example of why you shouldn't cosign your kid's student loan... All it serves as an example of is this agency have a shit policy that will probably be changed given this bad press.

[Rotted]

Im not exactly sure what I think on this.

Obv its beyond imagination what she's been through,

But if it was vis versa, the child would inherit the debts of the parents no? Should a student loan be different? I'm pretty glad I don't have to be the person to decide this

[Crissi]

Lol wtf is with everyone going on about "never ever ever cosign a loan!" It was for her kid's fucking student loan... Its not like she cosigned a loan on some deadbeat debtor who can't get a loan on their own because they're a deadbeat debtor.

Jesus people.

Not only that but what this state agency is doing is atypical since MOST state agencies and federal lending policy forgives student loans if you die or become permanently totally disabled... So she has every right to be upset about this and it doesn't serve as an example of why you shouldn't cosign your kid's student loan... All it serves as an example of is this agency have a shit policy that will probably be changed given this bad press.

which is why if you have to, take out life insurance on your kid for an amount that will cover the loan payments. Otherwise you can get stuck with stuff like this because life happens. A person should always cover their bases with regards to important financial decisions.

and yeah, this is pretty atypical. Which is why I hope NJ will change its laws, as its currently structured in such a way they cant really forgive the loans regardless of circumstances. something something wall street investors.

[Tinykong]

You mean she's still responsible for the debt she co-signed for? That's how it works.

If your spouse dies, and you both have a mortgage, you don't get to write off the debt and keep the house.

[Rotted]

You don't generally "inherit" debts like that, no. That's not what happened here, either.

I could be wrong, I've just asked my folks and they've given me two examples

One, if they popped their clogs tonight, and I inherited this house, I'd have the responsibility to clear the remaining payments,
Two, If they owed a personal debt to someone, they think I'd have to pay it, but they aren't completely sure.

I'll just stress here, I'm by no means an expert and could (or we could) be completely wrong, oh and should probably add, we're talking about the UK here