Bill Text: NJ A3903 | 2018-2019 | Regular Session | Introduced
Bill Title: Establishes Loan Modification and Consolidation Program for certain borrowers in New Jersey College Loans to Assist State Students (NJCLASS) Loan Program.
Spectrum: Moderate Partisan Bill (Democrat 16-2)
Status: (Introduced - Dead) 2018-05-07 - Introduced, Referred to Assembly Higher Education Committee [A3903 Detail]
Download: New_Jersey-2018-A3903-Introduced.html
Sponsored by:
Assemblyman RALPH R. CAPUTO
District 28 (Essex)
SYNOPSIS
Establishes Loan Modification and Consolidation Program for certain borrowers in New Jersey College Loans to Assist State Students (NJCLASS) Loan Program.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing the Loan Modification and Consolidation Program in the Higher Education Student Assistance Authority and supplementing chapter 71C of Title 18A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Co-borrower" means an additional borrower whose income contributes to qualifying for the loan and whose name appears on the loan documents with equal legal obligations to repay the debt. A co-borrower's obligations are the same as those of the borrower's. Co-borrowers are responsible for the entire amount of the loan debt.
"Co-signer" means an additional applicant to the loan, required by the authority when an applicant or joint applicant does not meet the authority's income or creditworthiness criteria for granting an NJCLASS loan. A cosigner's obligations are the same as those of the borrower. If the borrower does not repay the loan, the cosigner accepts responsibility for repaying the debt.
"Tradeline" means entries by a credit grantor to a consumer's credit history maintained by a credit reporting agency. A tradeline describes the consumer's account status and activity. "Voluntary payments" mean those payments made directly by the borrower and do not include payments obtained by income tax offset, garnishment, or income or asset execution.
2. a. The Higher Education Student Assistance Authority shall establish a Loan Modification and Consolidation Program for eligible student borrowers of the NJCLASS Loan Program who are in default, or who have previously been in default on NJCLASS loans. Under the program, the authority shall consolidate a borrower's defaulted NJCLASS loans into one loan with a fixed interest rate.
The Loan Modification and Consolidation Program shall be made available to all student borrowers currently in default on two or more NJCLASS loans, which shall include loans in which the authority or a collection attorney obtained a judgment lien against the borrower. The authority shall notify all eligible borrowers of the program and shall make a consolidation loan application readily available and accessible to defaulted borrowers. An eligible borrower includes:
(1) any borrower who defaulted on an NJCLASS loan within the last 10 years and, who has been employed full-time for at least three consecutive years, earning a minimum annual salary of $40,000. The authority shall consolidate all defaulted NJCLASS loans into a single consolidated loan with a fixed monthly payment. The authority shall not require a co-borrower or co-signer on the consolidation loan, and the loan shall be in the student borrower's name only. The authority shall set the fixed interest rate in accordance with the lowest NJCLASS loan interest rate in effect at the time the original loan was disbursed. Under no circumstances shall the authority utilize any step-up interest that may have applied to the original loan bearing the lowest interest rate. A borrower shall choose one of the following four payment terms: 10 years, 15 years, 20 years, or 25 years; and
(2) any borrower employed less than three consecutive years, either full-time or part-time, or any borrower earning an annual salary of less than $40,000. The authority shall determine a fixed interest rate based upon the weighted average of all eligible defaulted NJCLASS loans in effect at the time the original loans were first disbursed, plus 0.25%. The interest rate shall be a fixed rate for the life of the loan. The authority may require a co-borrower or co-signer on the consolidation loan; except that under no circumstances shall the authority condition the requirement for a co-borrower or co-signer solely on any adverse reporting of the borrower's NJCLASS loans prior to default. A borrower shall have the option of choosing one of four payment terms: 10 years, 15 years, 20 years, or 25 years.
b. Upon the authority's receipt of the borrower's loan application, the authority shall have 30 days to provide the borrower with a summary sheet that lists all loans included in the consolidation loan. The sheet shall also list the expected monthly payment amounts for each of the different terms of 10, 15, 20 and 25 years. The authority shall include the current principal balance plus any interest accrued from the date the authority placed the loans in default, less any payments made after default. The authority shall vacate any collection fee or late fees added to the loan balance. In the event that the authority obtained a judgment lien, the authority shall calculate interest pursuant to the court rule for post-judgment interest. A borrower shall have 20 days to accept or reject the terms contained in the summary sheet by executing a copy of the summary sheet and returning it to the authority along with the first monthly payment. The authority shall apply this payment directly to the principal balance.
c. The authority shall not charge any origination fees for the consolidation loan under the program.
d. The authority shall make a Loan Modification and Consolidation Program application available and easily accessible on its website.
3. a. The authority shall have 45 days from the date of receipt of the borrower's written acceptance of the summary sheet to finalize loan consolidation.
b. The borrower shall be required to execute a new promissory note and the authority shall report to the credit agencies future loan consolidation payments on a new tradeline. The authority shall take all necessary steps with the credit reporting agencies to add a notation in the special comment code section of the tradeline where the default was first reported that an original loan is no longer in default and is being paid as agreed. In the event a defaulted loan included a co-borrower or co-signer, the authority shall also take all necessary steps to update the co-borrower's or co-signer's credit report. The authority shall establish a new tradeline in the co-borrower's or co-signer's credit report for the consolidated loan.
In the event the authority fails to complete the loan consolidation within 45 days of the receipt of the signed summary sheet, the authority shall place the consolidated loan in a non-capitalizing and non-interest accruing administrative forbearance which shall continue until the authority finalizes the loan consolidation. The borrower may choose to make regular monthly payments during this period, and the authority shall apply the payments to the outstanding principal balance. The authority shall report all payments received during this period to credit reporting agencies as "paid as agreed." The authority shall be prohibited from reporting any adverse information to the credit bureaus during this period.
c. A defaulted loan may be subject to loan modification and consolidation under the program only once. A borrower may not modify the loan again if the loan returns to default status following the loan modification and consolidation.
d. If a defaulted loan is being paid through a collection attorney, the authority shall immediately notify the collection attorney of the loan modification and consolidation and all payments to the collection attorney shall cease. Any payment made during this period shall be applied to the outstanding principal balance.
e. The authority shall have 30 days from the receipt of the borrower's signed summary sheet and first payment to vacate the judgment lien and shall provide the borrower with proof the lien was vacated within 15 days thereafter.
f. The authority shall cease any wage garnishment immediately upon the receipt of the borrower's signed summary sheet and first payment. Any monies received by the authority after the authority's receipt of the signed summary sheet and first payment shall be credited toward the outstanding principal balance.
g. A borrower paying a defaulted loan through a bankruptcy trustee shall immediately notify the trustee of the impending loan consolidation. Any payments received by the authority during this period shall be applied to the outstanding principal balance.
4. The Higher Education Student Assistance Authority shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L. 1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act, including a definition of discretionary income for the purposes of the Loan Modification and Consolidation Program, which shall be based on the federal guidelines for federal student loans.
5. This act shall take effect on the first day of the sixth month following enactment, except that the authority shall notify all defaulted borrowers of the availability of a Loan Modification and Consolidation Program within 30 days of the bill's enactment.
STATEMENT
This bill directs the Higher Education Student Assistance Authority to establish a Loan Modification and Consolidation Program for eligible student borrowers of the NJCLASS Loan Program who are in default, or who have previously been in default on NJCLASS loans. Under the program, the authority will consolidate a borrower's defaulted NJCLASS loans into one loan with a fixed interest rate.
The Loan Modification and Consolidation Program will be made available to all borrowers currently in default on two or more NJCLASS loans, which includes loans in which the authority or a collection attorney obtained a judgment lien against the borrower. The authority is required to notify all eligible borrowers of the program and to make a consolidation loan application readily available and accessible to defaulted borrowers.
Under the bill, an eligible student borrower includes:
(1) any borrower who defaulted on an NJCLASS loan within the last 10 years and, who has been employed full-time for at least three consecutive years, earning a minimum annual salary of $40,000. The authority will consolidate all defaulted NJCLASS loans into a single consolidated loan with a fixed monthly payment. The authority will not require a co-borrower or co-signer on the consolidation loan, and the loan will be in the student borrower's name only. The authority is directed to set the fixed interest rate in accordance with the lowest NJCLASS loan interest rate in effect at the time the original loan was disbursed; and
(2) any borrower employed less than three consecutive years, either full-time or part-time, or any borrower earning an annual salary of less than $40,000. The authority will determine a fixed interest rate based upon the weighted average of all eligible defaulted NJCLASS loans in effect at the time the original loans were first disbursed, plus 0.25%. The interest rate will be a fixed rate for the life of the loan. The authority may require a co-borrower or co-signer on the consolidation loan; except that under no circumstances may the authority condition the requirement for a co-borrower or co-signer solely on any adverse reporting of the borrower's NJCLASS loans prior to default.
The bill provides that upon the authority's receipt of the borrower's loan application, the authority has 30 days to provide the borrower with a summary sheet that lists all loans included in the consolidation loan. The authority is directed to vacate any collection fee or late fees added to the loan balance. In the event that the authority obtained a judgment lien, the authority must calculate interest pursuant to the court rule for post-judgment interest. A borrower has 20 days to accept or reject the terms contained in the summary sheet by executing a copy of the summary sheet and returning it to the authority along with the first monthly payment. The bill prohibits the authority from charging any origination fees for the consolidation loan under the program.
Under the bill, the authority has 45 days from the date of receipt of the borrower's written acceptance of the summary sheet to finalize loan consolidation. The borrower is required to execute a new promissory note and the authority must report to the credit agencies future loan consolidation payments on a new tradeline. The authority must take all necessary steps with the credit reporting agencies to add a notation in the special comment code section of the tradeline where the default was first reported that an original loan is no longer in default and is being paid as agreed. In the event a defaulted loan included a co-borrower or co-signer, the authority must also take all necessary steps to update the co-borrower's or co-signer's credit report. The authority must establish a new tradeline in the co-borrower's or co-signer's credit report for the consolidated loan.
A defaulted loan may be subject to loan modification and consolidation under the program only once.
Under the bill, if a defaulted loan is being paid through a collection attorney, the authority must immediately notify the collection attorney of the loan modification and consolidation and all payments to the collection attorney must cease. The authority has 30 days from the receipt of borrower's signed summary sheet and first payment to vacate the judgment lien and must provide the borrower with proof the lien was vacated within 15 days thereafter. The bill directs the authority to cease any wage garnishment immediately upon the receipt of the borrower's signed summary sheet and first payment.
