Murphy Signs Legislation To Make Student Loans More Affordable

The laws will help borrowers of loans manage debt and repair credit scores

NJBIZ — April 25, 2019


Gov. Phil Murphy signed two pieces of legislation Thursday to assist student loan borrowers who are struggling with repayment.

One of the two bills signed Thursday, Senate Bill 3125/Assembly Bill 4475, offers alternate payment options for borrowers who experience financial hardship in repaying loans made through the New Jersey College Loans to Assist State Students program.

This legislation makes the Repayment Assistance Program (RAP) and the Household Income Assistance Repayment Plans (HIARP) permanent features of the NJCLASS program, building on the initial creation of these programs as part of the past two NJCLASS bond indentures. No state appropriation is used to finance NJCLASS loans, which are funded entirely through private activity revenue bonds issued by the New Jersey Higher Education Student Assistance Authority (HESAA).

"Addressing student loan debt not only makes a crucial difference in individuals' lives and careers, but it also helps boost New Jersey's economy as a whole," Murphy said. "By making more affordable repayment options available through the new programs that HESAA has launched that are now codified into law, we will enable college graduates to live and thrive here in the Garden State."

RAP and HIARP work to help struggling borrowers avoid defaulting on their loans. When all parties to an eligible NJCLASS loan face financial hardship, RAP and HIARP offer reduced monthly payments calculated to be affordable based on the combined household income of all of the parties to the loan. During RAP, all payments are applied to the outstanding principal balance, so borrowers can pay down their balance without accruing additional interest. HIARP provides additional payment relief when all parties to the loan continue to face financial hardship after exhausting two years of RAP eligibility, starting with standard NJCLASS loans originated on or after June 1, 2018. HIARP extends the repayment term to 25 years from the date of origination. During the HIARP period, borrowers' payments will be applied directly to principal, interest will continue to accrue on the loan, and any remaining balance at the end of 25 years will be forgiven.

The second bill signed Thursday, Senate Bill 3149/Assembly Bill 4623, enables borrowers and co-signers to repay defaulted loans through reasonable installment plans that ensure NJCLASS loans are repaid. The law codifies HESAA's process for settlements allowing borrowers to repay defaulted loans through more affordable monthly payments, and enabling HESAA to repair the credit ratings of borrowers who consistently comply with such payment plans.

"Higher education should provide an affordable pathway to a better life," said Secretary of Higher Education Zakiya Smith Ellis. "That's why the recently released state plan focuses on strategies to enhance college affordability, including ensuring students have manageable options to repay their student loans. The bills the Governor signs into law today will be an important step in fulfilling this promise of affordable options as outlined in the state plan for higher education."

Beverly Brown Ruggia, financial justice organizer for New Jersey Citizen Action, applauded Murphy for signing these bills into law.

"Too many New Jerseyans are trapped in a vicious cycle of crushing payments, damaged credit and dwindling economic opportunities because of overwhelming student debt," Brown Ruggia said. "These bills demonstrate the desire and intent of HESAA's new leadership to implement meaningful reforms that restore the mission of the agency to help, not hinder, students in paying for their education. We have a lot more work to do, but we thank Gov. Murphy, HESAA Director David Socolow, the bills' sponsors and the state Legislature for making these reforms the law."

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