Condolences HESAA-style
By Albert B. Kelly
With July 4th activities in full swing, I don’t
know how many saw last Monday’s NY Times story by Ann Waldman about NJ’s Higher
Education Student Assistance Authority (HESAA), but it was one that will curl
your toes- especially if you have a college age student you’re trying to help.
Apparently, according to the piece, a New Jersey family took
out a student loan with HESAA somewhere in the neighborhood of $20k to combine
with scholarships and other resources to enable their son to go to an out of
state university. Tragically, the young man was murdered while away at school.
You would think that dying would be enough to cancel the
loan, but for HESAA, that’s not the case. While the good folks at HESAA offered
their condolences (similar to “thoughts and prayers” after mass shootings),
that’s all they offered. The grieving parents, who co-signed for the loan, will
have to pay it back –the bondholders come first.
I’m sure that someone will point out that technically or
contractually NJ-HESAA is well within their rights to require these parents to
pay back the loan intended for their murdered child’s college education.
So what- compassion and decency say the loan be discharged
as was done by the feds- give these people a break as they try and get on with
their lives.
But that’s just one edge of this spear. If you are a
college-bound student in New Jersey, there are a few things to keep in mind if
you’re thinking about taking a loan from NJ’s higher education authority. Interest
can go as high as 8% and as we’ve already seen, your dying is no excuse for not
paying- HESAA helpfully encourages students to buy life insurance in case they
do.
The Authority refuses to work out flexible payment plans if
your income changes or defer debt if you should become temporarily sick or
disabled. They absolutely will not discharge debt if you should be permanently
disabled. What they will do is go after you aggressively.
Because HESAA is the state- backed by the full power of the
State, “aggressive” translates into garnishing your wages, taking away any tax
refund you might have coming to you, plopping liens on your house, and whatever
else comes with the weight and power of the State.
It doesn’t have to be this way. They could provide flexible
repayment schedules, discharge debt under tragic or extreme circumstances,
charge more reasonable interest rates, provide amnesties to let borrowers get
caught up, or refinance debt. But they won’t.
If they can’t get anywhere with the student (the primary
borrower), they go after the parents. Reading the piece, you encounter families
having to declare bankruptcy, ruin their credit, and get sucked into a spiral
of higher interest and subprime borrowing all to ensure that the credit rating
agencies and bond holders are fat and happy. And after all, isn’t that the most
important thing?
The thing about it is that paying for college is hard
enough. Too many parents have to go into debt up to their eyeballs just to
ensure that their sons and daughters have a reasonable shot at something
approximating the American Dream.
Going after that dream shouldn’t be one big roll of the dice
as to whether families will face financial ruin because the parent or parents
have to co-sign for the student who does not yet have enough of a credit
history to get the loan. They have families in the Garden State over a barrel.
Yet at the same time, credit card companies peddle credit
cards to students, inviting them to take on even more debt as if tuition wasn’t
bad enough. Go figure.
The bottom line is that State leaders have the power to
intervene and bring some degree of balance and reasonableness to HESAA- the
products they offer and the policies that guide the agency. Whether that will
happen or not remains to be seen.
Families and college-bound students considering loans from HESAA
should think carefully about what awaits if life throws them a curveball.
Consider what powers rest with this lending source as opposed to private
lenders, the service you can expect, and the protections you will or won’t
have.
Making it through to a good education, and later on a decent
career, is hard enough; is it too much expect lenders, especially government
lenders, to build a little humanity and decency into the equation for the
families they serve?